Mears Ltd v Shoreline Housing Partnership Ltd

Estoppel by convention may arise where parties to a contract communicate and act upon a shared assumption about fact or law, even without a further concluded agreement. The claimant must have been materially influenced by the assumption, and it must be unjust or unconscionable for the other party to assert the true position. Detrimental reliance is not an exhaustive requirement. The fact that estoppel is invoked by a claimant is not decisive: it may prevent a contractual deduction and enable an existing claim to succeed. A common assumption may cease to govern future dealings once its error is revealed. An entire agreement clause does not, without clear words, exclude an established estoppel. Contractual duties of mutual trust and co-operation do not generally prevent reliance on express terms or justify a broader partnership obligation.

Mears, a contractor, claimed repayment of £300,522.03 deducted by Shoreline, its employer, from payments made under a repair and maintenance contract. The deduction related to composite rates used for thousands of repair orders instead of the payment mechanism stated in the NEC3 contract.

The claim relied principally on estoppel by convention and estoppel by representation, with alternative claims in misrepresentation and breach of contractual duties of trust and co-operation. An earlier application for summary judgment or strike-out was dismissed, and the Court of Appeal dismissed Shoreline’s appeal in [2013] EWCA Civ 639. The central issues at trial were whether the composite-rate arrangement had been agreed, whether Mears had relied on it to its detriment, and whether Shoreline was estopped from retaining the deduction.

1. Disposition. Judgment was entered for Mears in the sum of £300,522.03. The court found an effective estoppel, principally by convention and also by representation. It was unnecessary to determine the separate misrepresentation claim.
2. Applicable principles. The modern law of estoppel by convention was taken from Republic of India v India Steamship Co Ltd No 2 [1998] AC 878 and Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd 1982 1 QB 84. A concluded agreement is unnecessary. There must be a communicated assumption shared by the parties, or made by one and acquiesced in by the other. The claimant must have relied upon, acted upon or been materially influenced by it. The controlling consideration is whether it would be unjust or unconscionable to assert the true position. Detrimental reliance is not an exhaustive requirement.
3. The fact that estoppel is relied upon by a claimant does not make it impermissibly a sword. Although estoppel cannot itself be pleaded as a cause of action, it may enable a party to succeed on an existing claim which would otherwise fail. An entire agreement clause did not exclude or limit an established estoppel.
4. The meetings and contemporaneous documents showed a clear agreement to use the Composite Codes and the CRED. Shoreline knew that the Initial Ordering Rates would remain on the system and would be invoiced and paid. Both parties acted on that shared assumption for about six months. It would therefore be unjust and unconscionable for Shoreline to deny the arrangement. Shoreline’s notice in January 2010 ended the convention prospectively but did not justify retaining the earlier deduction.
5. National Westminster Bank plc v Somer International (UK) Ltd [2002] 1 All ER 198 was distinguished. Shoreline had not established that the larger deduction represented duplicated payment, and the case was not comparable to a windfall created by a mistaken payment.
6. The mutual trust and co-operation provision did not impose the wider implied partnership obligation pleaded by Mears. The alternative argument concerning the Service Manager was also unsound because the dispute-resolution clause gave the court power to review the Service Manager’s action or inaction, and no recoverable loss would result if the sums were not otherwise due.

1. Court of Appeal. Shoreline’s appeal from the interlocutory refusal of summary judgment or strike-out was dismissed in [2013] EWCA Civ 639 .
2. High Court (Technology and Construction Court). Following trial, judgment was entered for Mears for £300,522.03.