MANSION PLACE LIMITED v FOX INDUSTRIAL SERVICES LIMITED

A binding agreement may arise from a short and imperfectly recalled conversation where the court can determine its gist on the balance of probabilities and, viewed objectively in its surrounding circumstances, the parties’ exchange amounted to offer and acceptance intended to create legal relations. Undisclosed subjective intentions do not prevent formation.

Under a JCT contract, the original Completion Date remains operative until a new date is actually fixed. A failure to determine an extension of time may be a breach, but does not automatically prevent service of a non-completion notice or a liquidated damages notice.

Liquidated damages provisions are enforceable where they are not out of all proportion to the innocent party’s legitimate interest and contain a workable mechanism for calculation.

The claimant property developer engaged the defendant contractor under an amended JCT Design and Build Contract (2016 edition) for student accommodation works. Delay disputes arose concerning possession of the site, the effects of Covid-19, extensions of time and liquidated damages.

The defendant alleged that a telephone conversation between the parties’ representatives created a binding agreement under which the claimant abandoned liquidated damages in return for the defendant abandoning loss and expense claims. An adjudicator had accepted that case, and the claimant commenced proceedings seeking declarations that no such agreement existed. The defendant counterclaimed for declarations giving effect to the alleged agreement and advanced alternative contractual and penalty arguments.

The central issues were whether the conversation created a binding agreement and, alternatively, whether the claimant was precluded from claiming liquidated damages by the contract’s extension-of-time machinery, the penalty rule or uncertainty.

1. Binding agreement. The claimant’s claim was dismissed. The defendant was entitled to a declaration that the parties had reached a binding agreement under which the claimant abandoned its entitlement to liquidated damages in exchange for the defendant abandoning any claim for loss and expense arising from an extension of time.
2. The court need not identify the precise words used in a short conversation where no reliable contemporaneous record exists. It must determine the gist of the conversation on the balance of probabilities and then assess its objective legal effect. The relevant question was whether, viewed objectively in the surrounding circumstances and without reference to undisclosed intentions, there was correspondence of offer and acceptance with an intention to create legal relations.
3. The conversation objectively amounted to a final, rather than provisional, abandonment of the competing claims. The claimant’s subjective intention to press for completion and resolve legal issues later did not prevent the agreement arising.
4. Contractual notices. As an alternative conclusion, clauses 2.28 and 2.29 permitted non-completion and liquidated damages notices to be served even where a valid clause 2.24 delay notice had been given and the claimant had not yet fixed an extension of time. The original Completion Date remained operative until a new date was actually fixed. A failure to fix a new date timeously might constitute a breach and support declaratory or adjudication relief, but did not replace the contractual date retrospectively.
5. Penalty and operability arguments. Applying Cavendish Square Holding v Makdessi [2015] UKSC 67, the liquidated damages provisions were not out of all proportion to the claimant’s legitimate interest in timely completion and were not penalties. Applying the approach explained in Eco World-Ballymore Embassy Gardens Co Ltd v Dobler UK Ltd [2021] EWHC 2207 (TCC), the provisions were sufficiently clear and workable. Bramall & Ogden v Sheffield City Council (1983) 29 BLR 73 and Taylor Woodrow Holdings Ltd v Barnes & Elliot Ltd [2004] EWHC 3319 (TCC) turned on drafting defects in their own contractual provisions and did not establish an automatically applicable rule.