Liberty Mercian Ltd v Cuddy Civil Engineering Ltd & Anor

The Technology and Construction Court held that the NEC3 contract was formed when the parties signed and dated the Form of Agreement on 6 July 2010. The contract on its face named Cuddy Civil Engineering Limited (CCEL) as the Contractor and, applying principles of contractual construction and the authorities in Chartbrook and related misnomer cases, the court refused to treat that name as a misnomer for Cuddy Demolition and Dismantling Limited (CDDL).

The court also rejected claims for rectification (both mutual and unilateral mistake) and for estoppel by convention: the court found no continuing common intention that the contracting party should be CDDL and no evidence of the Defendant’s knowledge or deliberate blindness sufficient to justify rectification for unilateral mistake.

On termination issues the court held that certain collateral, procedural obligations survive termination. Applying the principles in Heyman/Yasuda and related authorities, the Contractor remained obliged to provide the performance bond and the two outstanding subcontractor warranties (from Quantum (GB) Limited), but there was no parent company guarantee enforceable from CDDL because CCEL had no parent company identifiable for that purpose. The claimant was therefore entitled to pursue those outstanding documents and remedies (including, in principle, specific performance), subject to further submissions on relief.

Background and relief sought

The claimant, Liberty Mercian, brought Part 8 proceedings after a development contract for earthworks and a retail plateau at Bath House, Cardigan. It sought declaratory relief, specific performance, rectification of the contract, and/or damages to secure an outstanding parent company guarantee, a performance bond and subcontractor warranties under an amended NEC3 Option A contract.

Procedural and factual background

• The tender and pre-contract exchanges used the trading name "Cuddy Group" (the trading entity of CDDL); invoices, payments and site performance were undertaken by CDDL. Liberty Mercian’s solicitors, following company searches, instructed changes to the tender/contract documents so that the contracting party would be shown as CCEL (a dormant company owned by the Cuddy brothers). The Form of Agreement was executed and dated 6 July 2010 naming CCEL as Contractor.
• Performance difficulties led to notices and termination in early January 2012. Liberty Mercian thereafter sought by Part 8 declaration and equitable relief to treat CDDL as the Contractor or otherwise to obtain the parent company guarantee, performance bond and warranties.

Issues for decision

1. Whether the contract arose in May 2010 or when signed on 6 July 2010;
2. The identity of the contracting party (CCEL or CDDL) and whether references to CCEL were a misnomer for CDDL;
3. Whether there was mutual or unilateral mistake warranting rectification;
4. Whether CDDL was estopped from denying it was contracting party;
5. Whether the Contractor remained obliged after termination to deliver the parent company guarantee, performance bond and warranties and, if so, whether those obligations were breached and whether specific performance should be ordered.

Court’s reasoning and conclusions

• Formation: the judge held that the contract was not formed in May 2010 because documents signed by the parties constituted an offer and counter-offer process; the parties agreed the final terms and signed a deed on 6 July 2010, thus forming the contract on that date.
• Identity and misnomer: applying Chartbrook and the misnomer authorities, the court found the relevant background showed an express and objective request in late May 2010 that the name in the contract be changed to CCEL and that CCEL was a real, existing company. On an objective reading of the contract with its background the reference to CCEL could not be characterised as a clear mistake or misnomer for CDDL.
• Rectification (mutual mistake): the court applied the Chartbrook/Daventry framework. Although there was earlier intent to contract with the trading entity (Cuddy Group/CDDL), Liberty Mercian’s own objective communications in May 2010 manifested an intention to contract with CCEL; the court therefore found no continuing common intention to support rectification.
• Rectification (unilateral mistake): the judge applied the established Baden/Thomas Bates/George Wimpey tests (knowledge, wilful blindness or wilful failure to inquire) and concluded there was no evidence that the Defendants had the requisite dishonest or deliberately blind state of mind to justify rectification for unilateral mistake.
• Estoppel by convention: no common convention was proved that CCEL references were to be treated as CDDL, so estoppel by convention failed.
• Survival of collateral obligations on termination: the court followed the Heyman/Yasuda line of authority and held that certain collateral, procedural obligations (such as obtaining a performance bond and certain subcontractor warranties) are ancillary to the contract and survive termination; accordingly CCEL remained obliged to provide the bond and the two outstanding warranties. There was no parent company of CCEL identifiable for the purpose of the parent company guarantee, so that obligation could not be enforced from CDDL.
• Remedies: the judge found CCEL in breach for failure to supply the bond and the two warranties and that Liberty Mercian retained available remedies (including, in principle, specific performance), but directed further submissions and evidence on whether specific performance should be ordered.

This first-instance judgment determined that the NEC3 contract was formed on 6 July 2010 and that the parties to the contract were Liberty Mercian and Cuddy Civil Engineering Limited (CCEL). The court refused Liberty Mercian’s arguments that CCEL was a misnomer for Cuddy Demolition and Dismantling Limited (CDDL) and denied rectification (both mutual and unilateral) and estoppel by convention. Applying the contractual matrix and authorities on survival of collateral obligations, the court held that CCEL remains obliged to provide the performance bond and two outstanding warranties (from Quantum (GB) Limited) despite termination but that CCEL had no parent company guarantee from CDDL because CCEL had no parent company; the court found CCEL in breach for failing to provide those documents and left the question of specific performance to further submissions.