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CONTRACTS – CIVIL EVIDENCE – CONSTRUCTION LAW CONSTRUCTION CONTRACTS : MISTAKE : RECTIFIATION : KNOWLEDGE : UNCONSCIONABILITY : CONTRACT TERMS : AUTHORITY : UNCONSCIONABLE TO RELY ON CONTRACT

The claimant was entitled to a declaration rectifying an agreement contained in a document since it had been clear that its representative had been mistaken as to the contents of the document and that the defendant’s construction manager had knowledge of the mistake and had acted upon it unconscionably. The defendant (D) appealed a decision that the claimant (H) had been entitled to declarations in a contractual dispute. D was a corporate vehicle used for the development of a site. The professional team assembled by D for the project included Mace Ltd (Mace) as the construction manager. Mace had acted as the leader and co-ordinator of all the trade contracts and carried out all administrative functions in respect of the trade contracts. H had contracted to undertake extensive toilet fit-out works and had entered in a trade contract (the trade contract). The trade contract envisaged a fixed trade contract price, which was adjustable by measured variations, or by extensions of time in respect of delays that affected the progress of the works. As to variations, Mace issued formal contract instructions (CMIs), under the terms of the trade contract. A considerable number of CMIs were issued, many of which did not affect the contractual price. Further, H, through its project manager (M) issued documents that were headed “Final Account”, which effectively detailed the CMIs that were said to have added to the contract price. However, the CMIs listed in those documents listed costs in terms of labour, plant and material only. The proceedings concerned a document issued by Mace in April 2001, which had been accepted and signed by M, and which stated that the sum therein stated represented the final payment in full and final settlement of all claims arising out of or in connection with the trade contract that had accrued up to and including the date of the document (the April document). The dispute was essentially whether the signing of that document by M had precluded H from claiming sums that had arisen but had not been included in final accounts issued up to that date, in particular variations for delays that had affected the progress of the works. The trial judge granted a declaration sought by H that the April document be rectified so as to remove the disputed words, and that in any event M had not held authority to enter into an agreement of that nature. This was D’s appeal seeking to challenge those declarations. D argued that the evidence did not support a finding, as reached by the judge, that M had been mistaken as to the nature of the document that he had signed and that there was evidence to show that M had authority to enter agreements of the nature of the April document. HELD: (1) Whether the judge was entitled to rectify the terms of the April document turned essentially on whether M had been mistaken as to the terms of the document that he signed. There was ample evidence before the judge for him to reach his conclusion that M had been mistaken. Further, given the lack of evidence put before the judge by D, there was nothing to show that he was wrong to reach his conclusion that Mace had knowledge of that mistaken belief. On that basis, it was open to him to find that Mace’s actions had been unconscionable. Accordingly, the judge was entitled to rectify the April document on the grounds of that mistake. (2) That was sufficient to dispose of the appeal. However, the judge was entitled from the evidence to find that, in any event, M had had no authorisation to make an undertaking that effectively wrote off large sums due under the terms of the trade contract.

Appeal dismissed. HURST STORES AND INTERIORS LTD v M L EUROPE PROPERTY LTD (2004) CA (Civ Div) (Buxton LJ, Arden LJ, Pumfrey J) 1/4/2004

Lawtel 01.04.2004