Landmark Limited and another v American International Bank

A supplier’s performance of services under a management agreement does not, without the relevant party’s agreement, novate the existing contract. A contractual power to engage another service provider ordinarily authorises subcontracting rather than partial novation. Silence, acceptance of supplies and failure to challenge invoices are insufficient alone to infer novation. However, a contract may be established by an agreement reached through counsel and confirmed by subsequent correspondence and payment. A contractual liability to one entity cannot be set off against alleged debts owed by separate entities.

Woods Development Ltd developed a shopping centre in Antigua. Epicurean Limited owned the anchor unit and leased its mezzanine to American International Bank (AIB). AIB had an earlier contractual relationship with Woods Development concerning electricity and other services.

Landmark Limited began supplying those services under an arrangement with Woods Development and invoiced AIB. AIB disputed that it had contracted with Landmark, asserted that its contract remained with Woods Development, and claimed a right of set-off. Harris J found contracts with Woods Development and Landmark acting as its agent, and awarded Landmark payment. On 4 July 2011, the Court of Appeal of Antigua and Barbuda, by majority, allowed AIB’s appeal. Thomas JA dissented. The central issue before the Board was whether AIB became contractually liable to Landmark acting as principal.

1. Disposition. The appeal was allowed. The orders of the High Court and the Court of Appeal were set aside. It was declared that AIB had a contract with Landmark, acting as principal, for electricity and other services from 1 February 2005. The case was remitted to the High Court to determine the sums due, with interest and costs.
2. Prior management arrangement. The Board assumed that AIB had previously contracted with Woods Development by inference from the parties’ conduct. Landmark’s performance of Woods Development’s obligations under the management agreement was, in the absence of an agreed novation, subcontracting. The power to engage another entity to perform services did not authorise a partial novation. There was no evidence that Epicurean agreed to novation.
3. Contract with Landmark. An agreement was reached between counsel on 28 November 2005 that AIB would pay Landmark’s monthly invoices and discharge arrears by instalments. The January 2006 correspondence and AIB’s payment of EC $10,000 confirmed that agreement. The correspondence evidenced an agreement, not merely an agreement to negotiate. It was inconsistent with AIB retaining the invoiced sums for set-off. Thomas JA’s analysis of the correspondence as establishing a contract with Landmark acting as principal was correct.
4. Conduct and consequences. Acceptance of Landmark’s supplies and silence in response to invoices would not alone have established a contract or novation, although those matters formed part of the factual matrix of the agreement. AIB failed to establish duress and was not entitled to set off its liability to Landmark against alleged debts owed by Woods Development, WEHL or Epicurean. Once the contract with Landmark was established, the unjust-enrichment issue did not arise.
5. The Board could not finally quantify the sums because Landmark’s supplies and related charges continued after the period covered by the trial award. Quantification was therefore remitted.

• Privy Council: Appeal allowed. The orders below were set aside, a contract between AIB and Landmark acting as principal was declared, and the case was remitted to the High Court for quantification.
• Court of Appeal of Antigua and Barbuda: On 4 July 2011, the majority allowed AIB’s appeal and refused Landmark’s cross-appeal. Thomas JA dissented, holding that the January 2006 correspondence established a contract with Landmark as principal.
• High Court of Antigua and Barbuda: Harris J, on 22 December 2009, dismissed AIB’s claims, found a continuing contract with Woods Development and a contract with Landmark acting as agent, and awarded Landmark EC $1,734,378.93 plus continuing charges.