HT-2023-BHM-000003 - [2024] EWHC 1089 (TCC)

The Defendant's case is that, if the Contract was executed, it was conditional on the Defendant securing finance to undertake the development of the site over and above its clearance, that any contract for development would have to be approved by a finance company, that the Claimant knew such approval was necessary and the Contract was conditional upon approval by the finance company and that no contract would come into effect unless and until such approval had been provided, for which purposes it was necessary that solicitors for the Claimant, the Defendant and the finance company be engaged. Its case is that at no time was such consent forthcoming; nor did the Defendant inform the Claimant that consent had been forthcoming or that there had been approval. Its case is that, no approval having been obtained from a finance company, the condition necessary for the Contract to come into effect was not fulfilled and there was therefore no contract made between the parties other than an oral contract to clear the site.

There was little evidence before me as to whether funding had actually been obtained or whether it could have been obtained so as to fulfil the condition, whether from the proposed funders, Oblix, or any other funders. Some documents suggested that funding had at one point been withdrawn but was subject to an appeal. I assume that funding must have been forthcoming at some point, since the project was built.

In opening submissions, Mr. Clegg confirmed that it was the Defendant’s case that, if the contract was conditional, the condition was not met and the Defendant was free to continue with negotiations with other contractors and to enter into a contract with another contractor. The Claimant has not pleaded that the Defendant was under any obligation to take steps to obtain funding or that funding was actually obtained, its case being that the Contract was not conditional.

As a result, the simple question before me is whether the Contract was conditional on funding.

The first point with regard to the allegation that the Contract was conditional is that it is not stated to be conditional. It is an executed JCT contract. If it was conditional, I would expect that it would be expressed to be so, on its face.

Secondly, there is no reference in the contemporaneous correspondence to the Contract being conditional. The Defendant relies on certain documents as being consistent with it being conditional, which I shall consider below, but there is no document expressly stating that it is. I am asked to find that, notwithstanding the existence of an executed contract, the parties had agreed it was to be of no effect unless funding was in place, yet that condition was not anywhere recorded in writing. That seems to me to be unlikely.

Thirdly, if the Contract was conditional, in the absence of any duty on the part of the Defendant to seek to obtain funding, the Contract would be, effectively, unenforceable by the Claimant and would not provide it with any protection at all. All the Defendant needed to do to avoid its obligations under the Contract would be not to seek funding or to refuse to accept a funder’s offer. It is not clear why the Claimant would enter into a Contract which bound it to perform the Contract if the condition was fulfilled but did not provide it with any protection and would leave the Defendant free (as it contends it was) to enter into a contract with another contractor. It lacks commercial common sense.

Fourthly, the Defendant’s pleaded case is not that the parties expressly agreed that the Contract was conditional, in the sense that they discussed and agreed that it should be, or that anyone used any words to that effect. Its pleaded case is that it was conditional, that it was necessary for any contract to be approved by a finance company, and that the Claimant knew that approval was necessary. The Defendant pleads that the Defendant had contracted with Millenium and that parties agreed that any contract made by Millenium was conditional upon approval of finance and that Mr Dhanda had informed the Claimant of the need for consent and that the Claimant therefore knew that approval was necessary for the Willenhall project. It is noteworthy that, although the Defendant pleads that Mr Dhanda had expressly informed the Claimant that the Ironbridge Contract was conditional, it has not pleaded that he did so in relation to the Contract.

The witness statements of Mr Dhanda, Mr Bajwa and Mr Singh do not state that any of them expressly discussed with the Claimant that the Contract was conditional on funding or that there was an express agreement to that effect. The principal evidence was given by Mr Dhanda, with Mr Bajwa and Mr Singh confirming their agreement with his witness statement. Mr Dhanda gave evidence in his witness statement of the way that he contends “building project work throughout the industry works”. His evidence was that “you come to a provisional arrangement with a builder to carry out works that you want to have undertaking at a provisional price. Plans are drawn up and basic terms initially agreed. We then approach financiers to finance that project.” The Defendant’s case appears to rely on assertions as to the way developers generally contract and the way it contends the parties had contracted at Ironbridge.

It was put to Mr Ubhi that he was aware that the Defendant needed funding. He responded that the Claimant had not known for what stage of the project the Defendant needed funding, and that the Defendant may have had money for the start and needed funding for the back end of the project. It was also put to Mr Ubhi that projects of this type are generally funded, and that he would expect a company to require finance. He responded that he would not always expect that and that some clients have their own money and do not always require finance. He said that he was aware at Ironbridge that some money came from Mr Dhanda’s personal accounts, but generally he would not know the source of Millenium’s payments, as they came from Millenium not any finance company. It was put to him that he was aware that the works at Ironbridge had to be certified by a QS. He said that they were paid against invoices, and they dealt with Mr Dhanda who would come to site, see what work had been done and pay the invoice.

In cross examination, Mr Dhanda was asked about his statement that he had not been a director of the Defendant because of a CCJ against him. He said that the CCJ was entered in 2014 or 2015. He was asked why the CCJ had not prevented him from being a director of Millenium. He said “we did not require finance” and that part of the development did not require finance. Mr Dhanda’s confirmation that they had not needed finance for at least part of the Ironbridge Contract at the time he signed it is consistent with Mr Ubhi’s evidence that some employers have their own money and do not need funding, or do not need it for the entire project.

There is no evidence before me that it was the Defendant’s understanding that all developers always need funding or that contracts are conditional until funding is in place, or that that was its understanding in relation to contracts with companies associated with Mr Dhanda, Mr Bajwa or Mr Singh.

Fifthly, the Claimant’s case is that the sum of £30,000 paid by the Defendant was a payment towards the contract price, the Claimant having started work in early September 2016. The Defendant’s position is that the £30,000 it paid was a payment for a separate contract for site clearance made in November 2015. Mr Dhanda’s evidence was that the parties had entered into a separate oral contract that the Defendant would pay £30,000 for the Claimant to clear the site, including breaking up tarmac, putting up Heras fencing his evidence would was that this was agreed and paid before 19 August 2015. Although it was not the subject of any correction, I am assuming that the reference to 19 August 2015 is likely to be a typographical error and intended to mean 19 August 2016, that being the date of the Contract. In any event, Mr Dhanda’s evidence was that the contract for site clearance had been completed and paid for before that date. In cross examination, Mr Dhanda was shown a copy of the Defendant’s bank statement showing a payment of £30,000 to the Claimant on 10 October 2016. It is clear from that document that Mr Dhanda’s evidence that £30,000 was paid for site clearance before the date of the Contract was incorrect.

Mr Dhanda was asked when he expected to pay the £30,000 for clearing the site. He said when the Defendant had been invoiced. However, he accepted that the Defendant had in fact paid £30,000 without having been invoiced. A payment without an invoice is more consistent with the Claimant’s case that the £30,000 was an initial payment against the contract price than payment of the fixed price of a completed contract to clear the site. Both the timing of the payment and the fact the payment was made without an invoice are consistent with the Claimant’s case and contradict the Defendant’s.

In addition, if the Defendant's version of events were correct, and the £30,000 payment was payment of a fixed sum under separate contract, the Defendant’s later correspondence is inexplicable. In March 2017, the Defendant asked the Claimant for evidence as to how the £30,000 had been spent. On 1 March 2016, the Claimant sent to the Defendant notice of uplift of the plant and machinery due to “non payment of outstanding monies in line with the current JCT contract with hold with yourselves”. Although Mr Dhanda denied receipt of plant uplift notices, it was clear he received that email, since he responded to it shortly after receiving it, to say he was to have a meeting with all parties concerned over the weekend and would get back to Mr Matharu as soon as possible. On 2 March 2017, Mr Dhanda emailed Mr Matharu to ask “please provide a full break down of all outstanding costs and invoices so I may sit down with the other Directors.” He followed that up later with a further email “I need a full break down of the charges on Willenhall please. Itemise each cost separately please.” He then added, in a further email “also please quantify the £30,000 already paid on Willenhall”. In an email on 4 March, he said “Can you please supply this information with a full break down on the £30,000 already paid. Both Dave and Karl want to know what the money as (sic) gone towards and I need to be in a position to answer”. A further email followed on 6 March 2017: “Can you please forward the invoice relating to each cost. I have to explain and be in a position show the directors where the £30,000 as (sic) been spent”. It seems obvious that, if the £30,000 was the fixed price of a contract to clear the site, payable on receipt of an invoice, as the Defendant contends, there would be no need for the Claimant to provide a breakdown of the costs or an analysis of how it had been spent. It would be irrelevant. The request for a breakdown is inconsistent with the Defendant’s case.

Mr Dhanda was asked why this sum had been paid without an invoice. He responded that the Defendant had asked for an invoice but not received one. However, the documents do not show a request for an invoice from the Claimant to the Defendant so the Defendant could account properly for the £30,000 said to have been paid as payment for a fixed price contract. They do show requests for evidence of the Claimant’s incurred costs.

Mr Clegg pointed to certain documents which he submitted were consistent with the Defendant’s case. He pointed in particular to the following documents.

Mr Clegg submitted these documents showed that a contract had yet to be entered into.

It is clear from the evidence of Mrs Cooper and Mr. Cooper that, whilst they understood there was an executed JCT contract, they were working with the parties to replace it with one that would be acceptable to the bank. This correspondence must be read in that context. The Claimant’s witnesses accepted that it was in their interests to work with the Defendant and with Mr and Mrs Cooper to assist the Defendant obtain funding. The fact they considered they had a binding contract did not mean that it was not in their interests to consider varying it or even replacing it with one that was more acceptable to funders. The fact that they were willing to do that and the parties contemplated entering into a varied or new contract to replace the Contract does not mean that the Contract was conditional or unenforceable.

Mr Clegg also submitted that an e-mail dated 29 August 2017 from the Claimant to the Defendant in which the Claimant provided a new quotation was evidence that there was no enforceable contract. However, in that email stated as follows: “We would like to thank you for the opportunity of providing our estimate of works previously outlined in our JCT contract of 19 August 2016”. The email expressly acknowledges the existence of the Contract. Also, the quotation is not for the same work as that covered by the Contract. It was for a larger project. It includes additional work, including the foundations to DPC for the apartments that the Defendant was planning to build, but which were not included in the Contract. I do not consider that email is inconsistent with the Claimant’s case that it had a binding contract.

Mr Clegg also referred to an email from Mr Matharu to Mr Dhanda of 10 April 2017 in the following terms “I have asked for the plant on Stroud Ave to be removed. Because we initially took this on a 78 week hire, they’ve informed us that there will be early termination charges (to be notified to us, which I've also informed you at an earlier date verbally). The fencing will have to go at the same time unless you can pay for that up front and bring the account up to date in regards to the outstanding charges on the site.” Again, the email appears more consistent with the Claimant’s case than the Defendant’s. If the Claimant only had the benefit of a conditional contract, which they could only rely on when funding was in place, it is difficult to understand why they would have taken on a 78 week hire contract for fencing the site and for plant at the site. That is more consistent with the Claimant having understood that there was an enforceable contract that they were starting to perform.

Mr Clegg also submitted that the fact that, after 19 August 2016, the Claimant had sought quotations from suppliers for materials indicated that it did not consider it had a binding contract at that stage, as it would need those quotations to price its contract. The Claimant’s witnesses explained that they had quoted using a third party estimating service, and they relied on that, and would seek the best prices they could from suppliers when they had won the contract. I do not find that in any way surprising. If contractors did not issue quotations until they had themselves obtained quotations for all the materials and labour they would require, they and their suppliers would waste a vast amount of time pricing materials and labour for a work that might not proceed.

Mr Clegg also submitted that the fact that it emerged in the Claimant’s oral evidence that the parties had entered into an earlier contract for the larger project at Willenhall for which the Claimant had originally quoted (the houses and the apartments) showed that the way the parties contracted was flexible and/or that the Claimant’s evidence was incomplete. However, it is clear from the documents that the Claimant had previously quoted for a larger contract, and Mr Ubhi said that he had not mentioned the earlier contract because he did not think it relevant. It is clear from the documents that the parties had been negotiating for a contract for all the work at Willenhall, but that later the project had been split into two phases and the Claimant is claiming only to have an enforceable agreement for the first phase. Whilst this is an omission from the chronology of events, I understand that the Claimant considered it irrelevant to give evidence about what preceded the contract on which it relies. The Claimant’s witness statements are considerably more detailed and precise as to the chronology of events than the Defendant’s.

On 26 October 2016, Mr Dhanda emailed Mr Matharu and others saying “ Also attached is the pre-commencement report which needs to be completed. Have a look at the sections that apply to you as the contractor and please provide information.” When Mr Dhanda was asked about the use of the expression “the contractor” as indicating that a contract was in place with the Claimant, he said that the Defendant was also dealing with two other contractors at the time. However, no documents were in the trial bundle indicating the Defendant was negotiating with other contractors.

In addition, the Defendant asked for, and the Claimant provided, its insurance certificate as this needed to be provided for the funders. On 2 November 2016, Mr Dhanda sent to an email “I have attached the Contractors insurance for your reference…..” It is unlikely that funders would want a contractor’s insurance details. They would require the contractor’s insurance details.

In the Summer and Autumn of 2017, the parties began to correspond through solicitors. On 16 August 2017, the Claimant’s solicitors sent to the Defendant’s solicitors a copy of the Contract. Several chasing letters and threats to issue proceedings followed. The Defendant’s solicitors wrote on 6 October 2017 to say that they understood that the Claimant had confirmed they still wanted to work with the Defendant and they had agreed that no further action would be taken while they tried to come to an agreement. It is noteworthy that, at no time, whether following the meeting at the Belfry in March 2017 or when the Defendant’s solicitors reviewed the Contract between August and September of 2017, did the Defendant ever complain that the Claimant had forged Mr Dhanda’s signature or even that they denied the existence of the Contract. If Mr Dhanda genuinely believed the Claimant had forged his signature, it is inconceivable that he would not have made any complaint about it and would have continued to deal with the Defendant.

I find the contemporaneous documents are overwhelmingly consistent with the Claimant’s case that the parties entered into a binding and enforceable contract in August 2016 and inconsistent with the Defendant’s case that the Contract was conditional on obtaining funding and did not bind the Defendant until funding was in place.

The Claimant’s witnesses were entirely credible. With the exception of Mr and Mrs Cooper, who were independent witnesses for the Defendant, I did not find the Defendant’s witnesses to be credible. Their evidence was inconsistent with their own witness statements and the contemporaneous documents and I had the impression that Mr Dhanda was making his evidence up as he want along.

I find that the Contract was not conditional on funding. It follows, by agreement, that the Claimant is entitled to damages for the Defendant’s failure to perform the Contract.