Liberty Mercian Ltd v Cuddy Civil Engineering Ltd & Anor

A contract naming an existing company will not be treated as a contract with another company merely because the latter performed the work or was intended commercially to do so. Misnomer requires a clear mistake, assessed against the contractual background, and a clear correction. Rectification for common mistake requires a continuing common intention which the document fails to express. Rectification for unilateral mistake requires the other party’s actual knowledge, wilful blindness or equivalent dishonest conduct.

Contractual obligations which are collateral or ancillary to the main obligation to perform works may survive termination. Performance bonds and collateral warranties therefore continued after termination where the contract required them independently of the obligation to provide the works. A parent-company guarantee could not be required where no parent company existed.

Liberty Mercian engaged the Cuddy Group for development works at Bath House, Cardigan. The works were tendered for and performed by Cuddy Demolition and Dismantling Ltd (CDDL), trading as the Cuddy Group. The final NEC3 contract, executed as a deed on 6 July 2010, named Cuddy Civil Engineering Ltd (CCEL), a dormant company, as the Contractor.

Following termination-related disputes, Liberty Mercian sought declarations, rectification and specific performance concerning the identity of the contracting party, a parent-company guarantee, a performance bond and collateral warranties. The central issues were whether CCEL was a misnomer for CDDL, whether the contract could be rectified or treated as subject to an estoppel, and whether the security and warranty obligations survived termination.

1. Formation and identity. The contract was formed when it was signed and dated as a deed on 6 July 2010. The parties were Liberty Mercian and CCEL. The reference to CCEL was not a misnomer for CDDL. Applying Chartbrook v Persimmon Homes Ltd [2009] 1 AC 1101, there was no clear mistake in the document when read against the background known to both parties. The express request to replace “Cuddy Group” with CCEL objectively indicated a change of intention.
2. Rectification and estoppel. There was an earlier common intention to contract with CDDL, but that intention did not continue after the objectively communicated change to CCEL. The claim therefore failed under the fourth scenario identified in Daventry District Council v Daventry and District Housing Ltd [2012] 1 WLR 1333. The evidence did establish a unilateral mistake by Liberty Mercian’s representatives, but the defendants had neither actual knowledge nor the dishonest state of mind required for unilateral rectification. No estoppel by convention arose because the parties did not share or adopt an assumption that CCEL was to be treated as CDDL.
3. Survival after termination. The obligations to provide a performance bond and the two Quantum warranties were independent, procedural, collateral or ancillary obligations. They did not form part of the further work necessary to provide the works under clause 90.5. Applying the principles in Heyman v Darwins Ltd [1942] AC 356 and Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174, those obligations survived termination.
4. Outstanding documents. CDDL was not CCEL’s parent company, and CCEL had no parent company. The Companies Act 2006 definition was not incorporated into the contract, but the companies did not in any event have the requisite parent-and-subsidiary relationship. CCEL remained obliged to provide the performance bond and the warranties in favour of Liberty Mercian and Waterman. It was in breach by failing to do so. The question whether specific performance should be ordered was reserved for further submissions and evidence.