McCabe Builders (Dublin) Ltd v Sagamu Developments Ltd and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy,Mr Justice Fennelly
• Judgment Date: 01 April 2009
• Neutral Citation: [2009] IESC 31
• Court: Supreme Court
• Docket Number: [S.C. No. 2 of 2008]
• Date: 01 April 2009

McCabe Builders (Dublin) Ltd v Sagamu Developments Ltd & Ors

Between:

McCabe Builders (Dublin) Limited

Plaintiff/Respondent

-and-

Sagamu Developments Limited, Laragan Developments Limited and Lanley Group Limited

Sagamu Developments Limited, Laragan Developments Limited and Hanley Group LTD.

Defendants/Appellants

[2009] IESC 31

Hardiman J.

Fennelly J.

Murphy J.

Record No. 002/2008

THE SUPREME COURT

CONTRACT

Terms

Intention of parties - Non-contractual documentation - Construction contract - R.I.A.I. standard form contract - Description of works - Tender conducted by reference to bill of quantities - Standard form contract precluded reliance on bill of quantities - Other contractual documents inadequate - Quantum meruit - Whether concluded contract - Whether bill of quantities remained a contractual document once R.I.A.I. contract signed - Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 followed; Clare Taverns v Gill [2001] 1 IR 286, Leo Laboratories Ltd v Crompton BV [2005] IESC 31, [2005] 2 IR 225, Collen v Dublin Co Council [1908] 1 IR 503 and English Industrial Estates Corporation v George Wimpey & Co Ltd (1972) 7 BLR 122 considered - Defendants' appeal allowed (2/2008 - SC - 1/4/2009) [2009] IESC 31

McCabe Builders (Dublin) Ltd v Sagamu Developments Ltd

Facts: The parties in the appeal were a building contractor and developer that were in dispute regarding the terms of a contract under which the plaintiff / respondent agreed to carry out a large building project for the defendant/ respondent. The appellant brought the appeal from the judgment of the High Court, where the Court held that no contract existed as the parties were not ad idem. A tender price was proposed and negotiations followed and then an exchange of letters followed.

Held by the Supreme Court per Fennelly J (Hardiman J concurring; Murphy J dissenting). that the signing and countersigning of a letter demonstrated a clear intention of both parties to enter an agreement for a fixed sum for the carrying out of works. The parties intended the agreement to be expressed in the RIAI form. The clear intention of the parties had to prevail. The agreement significantly differentiated the case from other cases where there might be discrepancies between tender documents and the RIAI form. The agreement was a step away from the tender procedure. The appeal would be allowed and a declaration would be granted that there existed a binding contract.

Reporter: E. F.

MCDERMOTT CONTRACT LAW 2001 171

WN HILLAS & CO LTD v ARCOS LTD 1932 147 LT 503 1932 43 LLOYDS 359

EEC REG 44/2001

CLARE TAVERNS T/A DURTY NELLYS v GILL T/A UNIVERSAL BUSINESS SYSTEMS 2000 1 IR 286 2000 2 ILRM 98 1999/5/1030

LEO LABORATORIES LTD v CROMPTON BV (ORSE WITCO BV) 2005 2 IR 225 2005/36/7495 2005 IESC 31

KEANE THE RIAI CONTRACTS - A WORKING GUIDE 4ED 2001

COLLEN BROS v DUBLIN CO COUNCIL & ORS 1908 1 IR 503

ENGLISH INDUSTRIAL ESTATES CORP v GEORGE WIMPEY & CO LTD 1972 7 BLR 122 1973 1 LLOYDS 118

1 Judgment delivered the 1st day of April, 2009 by Mr Justice Fennelly

2 Judgments delivered by Fennelly J. & Murphy J. Hardiman J. concurred with Fennelly

3 1. The parties to this appeal are a building contractor and a developer. They are in dispute regarding the terms of the contract under which the plaintiff/respondent agreed to carry out a large building project for the defendants/respondents. Each party puts forward a set of documents said to comprise the terms of the contract between them. The appellants (whom I will describe as "the Hanly Group") bring this appeal from the judgment of Charleton J in the High Court, in which that learned judge held that there was no contract because the parties were not ad idem. Consequently, the respondent (which I will describe as "McCabes") is to be remunerated on the basis of quantum meruit.

4 2. McCabes proposed a tender price for works described in tender documents provided by the appellants. Negotiations followed. There was an exchange of letters, said by the appellants to comprise a contract. The respondents say that the contract basically consists of the standard-form contract later signed. There are inconsistencies between that document and some, at least of the tender documents.

5 3. It is necessary to recount the contractual history and to recall the applicable principles of the law of contract in order to reach a conclusion as to whether there was a concluded agreement and, if so, on what terms.

Contractual history

6 4. The Hanly Group is an established group of builders and developers. In the year 2005, it proposed to build 32 houses and 14 apartments at a site known as Rocky Valley, Kilmacanogue, County Wicklow. They had obtained planning permission for the development. They engaged Nolan Ryan, a leading firm of Quantity Surveyors, to conduct an initial tendering process. Tender documents were sent out by Nolan Ryan on behalf the Hanly Group under cover of a letter of 24 ^th June 2005 to a number of builders, including McCabes. The tender documents comprised:

7 (i) The Bill of Approximate Quantities in four volumes;

8 (ii) A Form of Tender for completion;

9 (iii) Architectural Drawings and Landscape Architect's Drawings;

10 (iv) A specification.

11 5. The core of the dispute between the parties is whether the Bill of Approximate Quantities remained a contractual document once the standard-form contract had been signed. McCabes contend that the version of standard-form contract signed by the parties excluded it from having any contractual effect insofar as it described the works to be carried out. The learned trial judge agreed. The Hanly Group contend that the description of the works is "partly definitive" of the contractor's obligations under the contract partly because the tender drawings and specification were quite inadequate for that purpose and partly because of the exchange of correspondence between the parties after tender but before signature of the contract.

12 6. It is necessary, in order to discern the precise nature of the contractual dispute, to refer to some of the documents generated during the process in some detail.

13 7. The Bill of Approximate Quantities is central to the case for the Hanly Group. It contained the following material provisions:

14 · Under the heading, "Project Particulars," there appeared a subheading "Contract" as follows:

"The form of contract will be the Articles of Agreement and Conditions of Contract 2002 (Revision 1, Print 4) as issued by the R.I.A.I. in agreement with the C.I.F. and S.C.S. where quantities do not form part of the contract. The Appendix to the Contract will be filled in as shown in the Preliminaries Section of the Bill of Approximate Quantities." This is known as the Blue form. I will refer to it as the R.I.A.I. form.

15 · A slightly varied version of the foregoing provision appeared in the schedule to the Bill of Approximate Quantities, once more emphasising the expression "where quantities DO NOT form part of the Contract" but followed by a large number of references to provisions of the R.I.A.I. form. Opposite a reference to "(36) Wage and Price Variations" there appeared: "(Clause Deleted)." There was a large list of items for inclusion in the completion of the Appendix to the Articles of Agreement (the R.I.A.I. form).

16 · In the Bill of Approximate Quantities under the heading "General Conditions" at GC 2 and GC 4 and the sub-heading "Documents" there at two places appeared the following:

"The Contractor shall carefully examine the drawings and other Contract documents and satisfy himself as to their accuracy and ensure that they cover and embody the proposed works.

The Contractor shall properly execute the Works whether or not shown on the drawings or described in the Bill of Approximate Quantities, provided that same may reasonably be inferred therefrom."

17 · GC 5 of the General Conditions provided:

"The "Works" shall mean the whole of the works envisaged by this Contract..."

18 · The notes to the form of tender included: "The Contractor's attention is drawn to the fact that Quantities do not form part of the Contract for this Project."

19 · There was also a "Specification for Materials," which contained no material provision. However, it seems to have been common case that it was quite inadequate to its stated purpose. The learned trial judge noted that it had "been described in evidence as one of the worst, meaning lacking in detail, ever issued as part of a tender process in a job of this size."

20 8. The tenders were received on 19 ^th July, 2005. The VAT exclusive tender prices for the works varied between approximately a high of €21.2 million and a low of €15.7 million. McCabes' tender was the second lowest at €17,222,620. Negotiations took place between the Hanly Group and McCabes resulting in a reduction of their tender price of almost €2 million bringing it to a level below the next lowest competitive tender.

21 9. On 5 ^th August 2005 Mr John Hanly of the Hanly Group commenced to write a letter to Mr Richard McCarthy of McCabes referring to conversations that had taken place between them. The letter includes the following sentence:

"As per our conversation, we will be entering into a Fixed Price Contract with the Contractor to carry out the works at Kilmacanogue; there will however be 6 No. PC Sums, 3 of which will be nominated suppliers and the other 3 will be at the Contractors discretion. In all cases, should there be an extra overspend on the 6 PC Sums, it will be the Developers responsibility to pay the difference."

22 10. The writing of the letter was interrupted by a telephone conversation between Mr Hanly and Mr McCarthy. The learned trial judge found as a fact that, in that conversation, "a...