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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Harrow Green Ltd v DDG Group Ltd [2010] EWHC 421 (QB) (04 March 2010) URL: http://www.bailii.org/ew/cases/EWHC/QB/2010/421.html Cite as: [2010] EWHC 421 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		4 March 2010

HH Judge Anthony Thornton QC:

A. Introduction

1. The Olympic Games 2012 is being held in London. This has necessitated the redevelopment of a large part of East London by the London Development Agency ("LDA"). The LDA has acquired many properties for this purpose with the use of its compulsory purchase powers. The LDA is responsible for finalising, agreeing and then paying statutory compensation to those with relevant interests in the acquired properties. This compensation includes relocation costs and the value of the acquired property.
2. In 2006, the LDA acquired the claimant's ("DDG") premises in Manor Park, London, E12. DDG carries on business as a manufacturer, supplier and installer of double-glazing. As a consequence of having its factory and offices compulsorily acquired, DDG found, acquired and moved to relocated premises in Wantz Road, Dagenham, . This relocation involved the refurbishment of these premises, the moving of DDG's machinery, stock and possessions and the installation of its fixed plant and machinery into this new location.
3. Much of the necessary work was carried out for DDG by the claimant ("HG") who specialise in commercial removals and the relocation of factory businesses. As part of the service it provides, HG undertakes mechanical and electrical services in connection with the relocation of the plant and machinery of the business being relocated. HG carried out these services for DDG between November 2006 and February 2007.
4. The parties are now in dispute as to the final cost of HG's work and services and as to the sum that remains due for payment. HG contends that a balance of £200,207.23 remains unpaid, DDG contends that it has paid HG all that it is currently liable to pay. The sum that has already been paid is £170,326.00.
5. At the start of the hearing, the parties agreed that I should try two preliminary issues concerned with the terms of the contract and as to whether the dispute has already been compromised or concluded by an agreed variation of the contract. All other issues would be determined, if necessary, at a subsequent hearing. These two issues were as follows:

(1) What was the nature of the parties' contract; and

(2) Was the dispute compromised or was the contract varied on 13 February 2008 as alleged by the defendant?

6. At the trial, each party adduced witness statements from a number of witnesses and five of these witnesses gave oral evidence. HG's witnesses were Mr Stewart Purves, Mr Simon Purcell and Ms Sarah Hartwell. Mr Stewart Purves was HG's general manage. He had prepared HG's quotations, had been in charge of HG's work as it proceeded and had represented HG in all relevant discussions and negotiations. Ms Hartwell was HG's credit controller. Mr Purcell had, until the end of 2008, been employed by CB Richard Ellis ("CBRE") who had been engaged by the LDA to value compensation claims arising out of compulsory purchase orders made by the LDA in connection with the Olympic Games procurement programme. Mr Purcell was concerned with the valuation of DDG's on account interim compensation claim and that claim included HG's estimated costs that it would incur when carrying out its work for DDG.
7. DDG's witnesses were Mr Hirji Bhudia and Mr Charles Norman. Mr Bhudia was the managing director of DDG and Mr Norman was, at the material time, an associate director of Jones Lang LaSalle ("JLL"). JLL, through Mr Norman, had been appointed to act for DDG in negotiations with CBRE on behalf of the LDA as to the purchase price of their existing premises and as to the other elements of DDG's recoverable compensation.
8. Witness statements were also adduced from Mr Paul Middlemas, HG's project manager; Mr David Urry and Mr Darren Kilvington who worked for HG in the relocation work that was carried out; Ms Lalji Kanbi and Mr Karshan Kerai, both of whom were directors of DDG and Ms Jeya Lachani, an employee of DDG and Mr Bhudia's daughter and personal assistant.

B. Contract Factual Matrix

1. LDA compensation projects

9. It is helpful to have in mind how the assessment and payment of compensation for relocation and other recoverable items operated for Olympic Games site acquisitions since this compensation structure governed DDG's relocation. Moreover, it was always DDG's wish that the relocation of its business should be undertaken at the LDA's cost without any, or only minimal, additional cost to itself. Therefore, as DDG saw the situation, as much of the expenditure as possible that it would incur or expend on the relocation would need to be covered by, and agreed to as being recoverable under, the statutory provisions relating to compensation. In order to ensure maximum recovery, and to guide and assist DDG through the arcane niceties of compensation recovery for the compulsory acquisition of its premises, DDG had engaged the assistance of JLL and it was intended that that firm would take the lead in both advising on how to achieve maximum recovery and in undertaking the necessary negotiations with the LDA's valuer,
10. Compensation is provided for by the Land Compensation Act 1961. There is no single compensation code as such, although reference is often made to such a code, as a shorthand reference to an amalgam of different statutory provisions arising from various Acts going back to the Nineteenth Century and to relevant decisions of the Lands Tribunal and appellate courts. It is clear from the evidence of Mr Norman that there are four relevant core principles of the compensation code. Mr Purcell accepted this evidence as being an accurate summary of these core principles.
11. These core compensation code principles are:

(1) The relocating party must have acted reasonably to mitigate his loss by reference to the alternative premises. The burden of proof is on the acquiring authority to show that the relocating party has not mitigated his losses.

(2) The expenditure claimed must have been the natural, direct and reasonable consequence of the compensated party's dispossession from the land taken and must not be too remote. The burden of proof is on the relocating party.

(3) There must be no double compensation and no breach of the principle of equivalence. The loss claimed must not be claimed under another head of loss. The burden of proof is on the relocating party.

(4) The relocating party must not have received value for money for his expenditure. The compensated party must rebut the presumption in law that he has received value for money.

Mr Norman explained that a party receives value for money if he receives a compensation payment which includes an element representing payment for something over and above the business or property being compulsorily acquired.

12. It is clear that the assessment of DDG's compensation would be a difficult and inexact process. This was because it would be difficult to apply the compensation code to the unusual facts of DDG's relocation. Included in these difficulties that the valuation of the claim would need to be overcome were these: the new premises were appreciably larger than the old and they needed extensive refurbishment; adaptation of the layout and significant internal rebuilding of the premises would be needed, recently introduced health and safety legislation required the plant and equipment being moved and reinstalled to be modernised, adapted and improved when reinstalled and the full extent of work that would be needed would not be capable of being ascertained until after the stripping out of the premises had been undertaken and their subsequent reinstatement had been completed. These assessment difficulties would be compounded by the absence of any drawings, specification or quantities since the professional fees involved in the preparation of such documents are not ordinarily recoverable under the compensation code and, in any case, there was insufficient time available before DDG would have to relocate to allow for their preparation.
13. There were also two practical difficulties to be faced with regard to the assessment of DDG's payable compensation prior to the completion of all work. The first was that, as with most relocations, no survey, pre-contract drawings or detailing of the work to be carried out had been undertaken by anybody. Thus, no accurate assessment of the work that would be needed could be undertaken before the work started. The second was that the necessary work was to be undertaken partly by DDG and partly by HG. Furthermore, DDG had not fully decided what further necessary work it would carry out when HG prepared a pre-contract estimate.
14. In relation to the process of identifying, assessing and agreeing compensation to be paid by the acquiring authority to the relocating party, the following was the usual procedure that was adopted:

(1) The relocating party would obtain an estimate or quotation for the necessary costs of removal, relocation, refurbishment and installation which would be submitted to the acquiring authority for its consideration.

(2) Negotiation would then take place between professional representatives on both sides based on both the submitted estimate or quotation and all other relevant evidence in an attempt to agree a "full and final" figure to be paid by the acquiring authority as compensation for disturbance. That negotiation would seek to apply the principles of the compensation code already summarized.

(3) Failing agreement on a "full and final" figure, the acquiring authority would make a payment on account to the relocating party.

(4) In cases where a payment on account is made, the relocating party would agree, or seek to agree, a "full and final" figure with the acquiring authority once the relocation and all associated works had been completed. That figure would not necessarily be greater than the payment on account and, if it was smaller than that payment, the relocating party would have to repay the balance to the acquiring authority.

2. Negotiations

15. Initial period. DDG carried on business as a manufacturer, supplier and installer of double-glazing in one premises. The company's managing director was Mr Hirji Bhudia and he and three other directors ran the company. It is a relatively small company. In late 2004, the company was first contacted and informed that its premises were to be compulsorily acquired by the LDA for purposes associated with the Olympic Games construction work. This led to LDA serving DDG with formal notification that a Compulsory Purchase Order ("CPO") had been made for DDG's property in a notice dated 16 November 2005.
16. DDG was provided with detailed information as to what would be involved and what assistance would be available to the company in relation to the acquisition of the existing premises and the finding, renovating, moving and reinstatement into new premises. As part of that assistance, DDG was informed of a consortium of professionals, including solicitors, loss assessors and valuers. This consortium included JLL who were engaged by DDG to provide advice and negotiation skills in relation to DDG's claims for relocation and disturbance. That advice included valuation advice and advice as to what could be claimed for and recovered in relation to fitting out, adaptation of the relocated premises, loss of profits and similar claims for compensation.
17. DDG engaged JLL to act for it in connection with the relocation and, in particular in relation to the assessment and negotiation of compensation including compensation for the value of the acquired property. Ordinarily, compensation is negotiated on a global basis so as to include, in one figure, the recovery for the value of the property acquired and all reimbursable recovery for disturbance and relocation. That figure is ordinarily negotiated by a valuer. Mr Norman, who is a professional valuer and member of the Royal Institute of Chartered Surveyors, was nominated by JLL to act for DDG and he was first instructed to act in this capacity in early 2006. He initially acted for them in connection with an objection lodged by DDG to the CPO but this was not pursued since DDG themselves found suitable premises to be relocated to, in Wantz Road, Dagenham, Essex. These premises were purchased on 18 April 2006.
18. The premises in Wantz Road had been used as a factory for making hard boiled sweets for a period of at least ten years. As a result, the floors were permanently sticky and they contained dug out channels for the disposal of liquids arising during the manufacturing process. The building had been empty for some time and was derelict but it still contained old gas burners, low level trunking and heaters. The building was significantly larger than DDG had previously occupied. DDG, before moving its plant, machinery and offices into Wantz Road, would therefore have to undertake significant refurbishment work involving the stripping out of the existing premises, refurbishing the shell, erecting partitions, trunking, wiring and bases for the machinery to be installed and then moving in, setting up and starting up DDG's machinery and it business in its new location.
19. DDG planned to undertake much of the necessary building and construction work itself using its own expertise and employees or others it engaged for this purpose. The bulk of this work was undertaken between May and August 2006 and the work included the demolition and rebuilding of walls, the removal of the mezzanine floor and other structures, the construction of new offices and other facilities, trunking and a disabled toilet and other refurbishment and repainting work. Much, if not all, of this work would be reimbursable as part of the statutory compensation that LDA would have to pay.
20. The relocation and associated mechanical and electrical work was to be carried out by a company that specialized in such work. The work would have to be undertaken at considerable speed since the LDA intended to enter by early 2007. Mr Bhudia had had previous contact with HG when he had sought a quotation from them as part of an earlier projected move which had come to nothing. He consulted with Mr Norman who had had recent experience working with HG on another LDA compulsory acquisition and relocation and he had found HG to be both efficient and knowledgeable about the intricacies of relocation work and as to what was and was not capable of being recovered within the compensation code applicable to such claims. As a result, Mr Bhudia arranged for HG to provide an estimate and, in August 2006, Mr Purves met Mr Bhudia at DDG's existing premises before they both went to the Wantz Road premises.
21. Production of the estimate. Mr Purves joined HG in 2005 having had fourteen years' experience in the relocation industry. HG itself had undertaken several relocation contracts for companies who had relocated following an LDA compulsory purchase and LDA had placed it on its list of approved companies that was provided to companies who were about to relocated following an LDA compulsory purchase. Mr Purves dealt throughout with Mr Bhudia and a colleague, Mr Karsan Kanbi. As managing director, Mr Bhudia took the lead role in the discussions with Mr Purves but his English is not good and his knowledge of compulsory purchase procedures and the basis upon which compensation for his company was to be assessed was non-existent. His sole concern was that his company should be compensated in full but he never seemed to understand that that could not be guaranteed and that if the total sum to be paid was not agreed with the LDA in advance and HG's payment out of that sum was also not agreed in advance, there was a real prospect of DDG's liability to HG being greater than the corresponding payment it received from the LDA.
22. Mr Bhudia outlined DDG's requirements to Mr Purves at their first meeting at the Wantz Road premises. These premises had already been stripped by the DDG operatives and the two men discussed DDG's requirements in an empty and derelict shell. Mr Purves advised Mr Bhudia that DDG would be well advised to employ one company to undertake all the relocation work and that that company should prepare one set of costings or estimates for the relocation since the LDA required one document setting out all the requirements of a relocating company. Mr Bhudia accepted that advice but made it clear that his own operatives would carry out some of that work and that it would be agreed as work proceeded which work items would be undertaken by HG and which by DDG. Mr Bhudia also informed Mr Purves that DDG would pay HG once it had been paid by the LDA. Mr Purves did not disagree with this proposal since, in his experience, the LDA settled any outstanding claims promptly after relocation had been successfully completed. It was agreed that all compensation work items would be set out and costed in the estimate to be prepared by HG and that this would, if acceptable to DDG, be forwarded to the LDA for approval.
23. Mr Purves then arranged for an estimate document to be drawn up. Those items of work which related to work to be carried out on site, including the mechanical and electrical specialist work and the more general construction and redecoration work were costed using Mr Purves's assessment of the number of operatives and the time that would be needed. These were costed using HG's weekly cost for the type of operative concerned. The cost of the work already carried out by DDG was included in the general construction item in the estimate. Mr Purves considered that all the outstanding work should take no more than eighteen weeks and the costings in the estimate were based on this assessment. The completed estimate, dated 18 September 2006, totaled £547,561.77. Included in this estimate were items for the costs of a variety of items covering the various projected mechanical and electrical services, the completed and projected construction, refurbishment and redecoration works, operational relocation, business transfers, the project management costs to be incurred by DDG and HG, mortgage repayments and the insurance premiums of insurances related to the work.
24. Thus, the estimate was of the total disturbance and relocation costs, except business interruption and similar costs and the value of the acquired premises. It included for work that HG was obviously going to undertake, work which either DDG or HG would undertake, work which DDG had undertaken and would undertake and additional items such as mortgage repayments which were to be claimed as part of the compensation but which were not work items at all. The estimate did not identify which work or what parts of the estimate related to DDG's work and which to HG's work. This was understandable given the uncertainties as to how the remaining work was to be shared between DDG and HG and given that this was the document to be used by DDG to negotiate the total compensation payment by the LDA to DDG to cover the entirety of its relocation costs..
25. Soon after this estimate was delivered to DDG, Mr Purves recalls that he met with Mr Bhudia and went through the estimate with him. Mr Bhudia had no clear recollection of this meeting but I accept that an informal meeting between the two men did take place. Mr Purves explained that Mr Bhudia appeared to accept the figures and work item descriptions set out in the estimate and that he informed Mr Bhudia that he considered that the sums being claimed were, as he put it, CPO compliant. However, he also informed Mr Bhudia that HG would require to be paid their full costs for carrying out all the work that HG actually carried out including any part of those costs which DDG was unable to recover from the LDA.
26. Mr Bhudia did not challenge that but he did state that DDG would only pay HG whatever would be due to HG once the LDA had settled and paid DDG its recoverable compensation in full. Mr Purves accepted that in principle but made it clear that although the timing of payment to HG would be linked to the timing of equivalent payment to DDG, the amount that HG would be paid would not be confined to the amount the LDA paid by way of compensation for the work in question. HG would be paid the cost it had incurred for carrying out the work even if this was more than HG received for that work. Mr Bhudia appeared to accept that important qualification of HG's acceptance of an informal pay when paid arrangement.
27. Mr Bhudia's evidence was inconsistent and, at times, almost impossible to follow. This was, in part, because of his evident language difficulties and, in part, because he had clearly not understood the basis on which DDG was to be compensated or the other complexities related to the relocation and the relocation works. Indeed, he only seemed to have one fixed and unshakable belief, namely that DDG would not itself be funding any aspect the relocation even if the cost related to betterment, improvements or other non-recoverable expenditure. Thus, in his mind, it was HG's responsibility to ensure that DDG achieved this objective so that HG would only be paid what DDG was actually paid for any work item HG was involved in. Thus, it is difficult to accept any part of his evidence which was not corroborated or supported by independent evidence. All the other evidence is inconsistent with this absolutist stance. In particular, Mr Purves' evidence of the content of what was said at the meeting is consistent with what, objectively, the parties agreed to even though that agreement was not written down. I therefore accept Mr Purves' evidence about this meeting and reject Mr Bhudia's contrary evidence.
28. Soon after this meeting had taken place, there was a discussion between Mr Purves and Mr Purcell which was the prelude to three-way discussions involving Mr Purves, Mr Purcell and Mr Norman. Mr Purcell explained to Mr Purves that he was not a quantity surveyor and that DDG wanted Mr Purves to be involved in the discussions with the PLA about HG's recovery from PLA for its compensation claim since these would necessitate detailed discussions about the content and valuation of the refurbishment and relocation work. Mr Purves willingly agreed to this request, particularly since he had participated in similar discussions with the LDA's valuer in previous compensation work that he had been involved in. In agreeing to get involved in this way, it is clear that Mr Purves was not agreeing to act as DDG's agent in those discussions nor was he agreeing to take over from DDG any part of its role as DDG's agent in relation to the presentation and negotiation of DDG's overall compensation package with the LDA. It is clear that DDG never agreed with JLL that HG should take over any part of DDG's agency role in relation to DDG's compensation claim that JLL had contracted to perform. All that Mr Purves was doing was the important subsidiary role of than providing Mr Norman with information and costs to assist Mr Norman to progress DDG's compensation claim with the LDA.
29. Initial Discussions. On 2 October 2006, at Mr Norman's request, Mr Purves forwarded a copy of the estimate to Mr Purcell which, again at Mr Norman's request, he marked "without prejudice". Mr Norman also sent another copy this document to Mr Purcell on 5 October 2006. Mr Purcell asked to be sent copies of supporting documents and quotations which Mr Purves forwarded. Mr Purcell then asked for the estimate to be reformatted into a spreadsheet and he provided Mr Purves with an informal template for that purpose. This was done and a meeting was arranged to discuss the spreadsheet.
30. Meeting on 27 October 2006. The meeting was held on 27 October 2006. Mr Purcell, Mr Norman and Mr Purves were present and the draft spreadsheet was tabled at that meeting by Mr Purves. The three participants then went through the spreadsheet and Mr Norman explained in detail how he wanted the claim to be presented on the spreadsheet. This retabulation exercise was completed by Mr Purves and he emailed the resulting spreadsheet to Mr Purcell on 1 November 2006. Mr Purves naturally emailed a further copy to Mr Norman and Mr Bhudia. Mr Norman was not happy with that document and informed Mr Purves that he had not followed the format that Mr Norman had asked for. Mr Purves revised the spreadsheet yet again and forwarded it to Mr Purcell with copies to Mr Norman and Mr Bhudia. Mr Purcell's response was to indicate that he was not prepared to recommend an overall lump sum final payment for the relocation because he had so many issues with regard to the component parts of the estimate. In particular, he regarded significant parts of the claim to represent, on the basis of the evidence currently available, unrecoverable betterment and uncompetitive quotations or costings. Mr Purves responded, particularly to the suggestion that HG's prices were not competitive and Mr Norman appeared to accept that but was still unpersuaded that the estimate did not contain significant elements of betterment. He therefore offered an on account payment of £275,000 as an advance payment for the relocation. At that time, HG's work had only just started.
31. Meanwhile, HG started work on site. The first day of site working was 13 November 2006. This start up was at Mr Bhadia's express request because he was concerned that the work would not be finished before HG had to move out of its existing premises.
32. Meeting on 27 November 2006. Mr Bhudia, Mr Purcell and Mr Purves were extremely dissatisfied that a final payment in what they would consider to be a reasonable sum had not been offered and that, instead, what had been offered was an on account payment of a significantly lower sum than that being claimed in the claim spreadsheet document. This would mean, if accepted, that the work would have to be carried out with only a proportion of the costs paid for as the work proceeded and that any post-relocation claim would start from the basis that much of the work was considered to be betterment and irrecoverable under the compensation code. Indeed, over £200,000 was removed from the estimate as being possible betterment.
33. This led to a round-table meeting at Canary Wharf on 27 November 2006. This meeting was attended by Mr Purcell who was accompanying Mr Mike Hodge who was an LDA executive, Mr Norman who was accompanying Mr Bhudia and Ms Lachani and Mr Purves. There were a number of meetings held during the day. The DDG and HG representatives held a pre-meeting and this led into a full meeting. Initially, the full meeting discussed the sum to be paid as compensation for the acquisition of DDG's existing premises but this was not productive and an on account payment was agreed since the valuers were significantly apart on their respective final values. The meeting then went on to discuss the relocation spreadsheet. It became clear that little progress could be made towards the agreement of a final figure and Mr Hodge suggested that the meeting would be unable to proceed further at that time in relation to agreeing a final figure. He also suggested that the meeting should, instead, concentrate on agreeing an on account figure.
34. Since much of the disagreement related to suggested betterment and other costing points, it was suggested by Mr Norman that Mr Purcell and Mr Purves should have a side meeting to go through the items in the spreadsheet in detail. This side meeting took place and after a line by line discussion, Mr Purcell had increased his proposed on account payment to £380,000. At that point, Mr Hodge asked for a progress report and, on being informed of the present position, informed the meeting that LDA would be prepared to make an on account payment of £380,000 in a way that indicated that this was as far as LDA would go at that stage. Mr Hodge informed the meeting that DDG would have an opportunity to have "a second bite of the cherry" once the relocation work had been completed. The proposed way of proceeding was then explained to Mr Bhudia and Ms Lachani. In summary, it was explained that the LDA would pay a total sum of just over £1 million as an on account payment for all elements of DDG's claim for compensation. Included in this sum was a sum of £380,000 for the relocation elements of the claim. These were advance or on account payments and would enable DDG to start with its relocation as soon as possible. Once the relocation had been completed, DDG would be able to make a full claim for all items so as to recover the balance of their compensation for the recoverable costs of relocation. Ms Lachani explained to her father what was being said and he appeared to agree to this proposal.
35. The DDG and HG representatives then had a further meeting to discuss the day's previous meetings. Mr Bhudia was understandably concerned to learn whether the proposed way of proceeding, by way of an interim payment with significant elements of the estimate not being agreed, could adversely affect DDG. Mr Norman explained to Mr Bhudia that these unagreed costs would be the subject of a second and final claim once the relocation had taken place. Mr Norman also made it clear that there was no certainty that all outstanding and unagreed costs would be recovered as part of this final claim. He asked Mr Purves whether the estimate was reasonable and whether HG's costs would be recovered in full from the total figure of £380,000 to be paid on account if the LDA refused to pay anything more towards the final claim. Mr Purves explained that the difference between the estimate and the on account figures was largely betterment and Mr Purcell's misunderstandings relating to the relative sizes of the two premises. For example, Mr Purcell kept overlooking the fact that their relative sizes were similar if account was taken of the mezzanine floor in the existing premises. Mr Purves also made the point that questions of betterment were for Mr Norman to address as the valuer and the negotiator of DDG's claim. He expressed the view that there was a profit element in the estimate, or "fat" as he put it, but that he could give no guarantee that the balance of the unpaid elements of the estimate would be recovered. In conclusion, he stressed that HG would look to DDG to settle its final account in full irrespective of whether it was recovered in full from the LDA. Mr Norman advised Mr Bhudia to proceed and did not express any reservations about the possible elements of betterment or about there being a risk that HG's entitlement to payment would not be recovered in full by DDG from the LDA.
36. The final topic discussed at this meeting was raised by Mr Purves. He asked Mr Norman how HG should present for DDG the necessary documentation that would be needed to enable DDG to present its claim for final payment given that it would be necessary for HG's claim against DDG, which would be payable in full, would have to be separately presented from DDG's global claim to the LDC. It was agreed that HG would raise a final invoice against DDG backed with all necessary supporting paperwork and this would be delivered to Mr Norman.
37. The summaries of the various meetings that were held on 27 November 2006 are my findings and conclusions as to what was said and agreed taken from the evidence of four witnesses who gave evidence and who were present on 27 November 2006. This evidence was based on their respective recollections since no contemporary note or minute was kept by anyone present at the meetings. It would appear that all LDA compensation negotiations and meetings are held in an informal manner and that the emphasis is on reaching an agreed final or on account figure as rapidly and as informally as possible. The evidence of all save for Mr Bhudia about these meetings was broadly consistent and my summary is an amalgam of those three's evidence. Mr Bhudia clearly had not followed much of the discussions that he was present for and had not understood much of what had been said and had not fully appreciated the content and effect of those discussions. He was, as I have already found, also acting on the unshakable assumption that DDG would not be out of pocket as a result of the move and clearly was participating in the discussions with that assumption acting as a filter in his own mind for anything being said that might suggest otherwise. I cannot, for those reasons, accept Mr Bhudia's contrary evidence that all agreed at the meeting that HG would carry out all work and services required of it in connection with the relocation for a lump sum being that part of the on account payment which reflected HG's work.
38. The spread sheet allocating the on-account payment. Following the meeting, it was necessary for HG and DDG to agree which work HG was to carry out and how the advance payments would be divided up between those two companies. Two payments were expected since the LDC had stated that it would be paid in two equal payments. The allocation of work was agreed first. A meeting took place between Mr Purves and Mr Bhudia in early December which was also attended by Mr Kanbi, one of Mr Bhudia's fellow-directors. when Mr Bhudia identified in general terms what work his operatives would carry out. Mr Bhudia also instructed Mr Purves that HG should complete the work shown in the estimate that DDG was not going to carry out itself. There is no clear evidence as to the date on which this oral instruction was given and accepted but it was said by both to have been in early December and I infer that it was at this work allocation meeting since it would have been the natural way to end that meeting for Mr Bhudia to tell Mr Purves that his company was now the appointed contractor to carry out and complete the remaining relocation work. In fact, HG had started work on 13 November 2006, some three and a half weeks previously so the effect of Mr Bhudia's instruction was to continue with and complete those work items in the estimate that it had now been agreed would be completed by HG.
39. At the same meeting, or in a telephone call, Mr Bhudia also asked Mr Purves to prepare a spreadsheet which made a suggested allocation of the £380,000 between the two companies. Mr Purves was able to do this without difficulty. He effectively divided up the individual items into three categories. The first category consisted of those items which DDG was to carry out or was entitled to full payment for, the second consisted of those items which HG was to carry out and the third consisted of the grey areas which were to be carried out partly by both companies. The allocation of the parts of the on account payments for the first two categories was straightforward, DDG was allocated the first and HG the second. As for the third category, Mr Purves allocated this to DDG on the basis that the interim payment would be paid to DDG and HG would await its payment for that part of the work it carried out until it submitted and was paid the sum arising from its final account. Mr Purves' attitude was that he was not bothered that DDG was receiving an interim payment which included payment for work carried out by HG since DDG would be paying HG's entire entitlement to be paid before long and, moreover, HG was not going to be confined to the sum that DDG had been paid by LDC but would be receiving the full reasonable cost that HG had incurred in completing the work it had carried out.
40. These allocated payments were agreed with Mr Bhudia in a series of telephone calls and at least one meeting. At that meeting, Mr Bhudia made it clear to Mr Purves that HG was not to carry out any additional work, by which he was referring to work additional to that provided for in the estimate which had been allocated to HG, without HG's prior agreement and approval. Mr Purves accepted that obvious and reasonable requirement.
41. Mr Purves sent the spreadsheet that recorded this agreed split to Mr Bhudia on 2 January 2007 with a covering email which read:

"I have put together the attached spreadsheet which shows how I perceive the various sub-categories of the monies awarded by the LDA for your relocation should be allocated. I hope this is agreeable. I need to invoice 50% of this as soon as possible as Harrow Green have obviously incurred a considerable financial outlay in the fitting out of the premises to date, can you please raise a Purchase Order number to invoice against."

42. The reference to the "monies awarded by the LDA" is an obvious and clear reference to the award by the LDA of £380,000 as an interim on account payment and the further reference to these monies being allocated is to the agreed split of those monies between DDG and HG that Mr Purves had reached with Mr Bhudia.

C. Issue 1 – Contract Terms

1. Parties' Contentions - Contract

43. Notwithstanding the long history of discussions and negotiations resulting in an on account payment from the LDA to DDG coupled with a three-way agreement reached between the LDA, DDG and HG that a final claim by DDG that would be based on the final cost to DDG of the entire relocation that would be submitted to the LDA at the conclusion of the relocation, DDG contended that Mr Bhudia and Mr Purves had reached a clear agreement that all the work allocated to HG would be carried out for a lump sum of £170,326.00, being HG's share of the £380,000 on account payment received by DDG. The only direct evidence of this oral agreement, which Mr Bhudia contended had been reached at the meeting between them in early December or, possibly, in one of the telephone calls made at that time, was the evidence of Mr Bhudia himself. In his witness statement, he merely records that:

"It was agreed with Mr Purves that HG would carry out the works that we had identified and agreed for the fixed price of £170,326 … It was certainly not agreed that the £170,326 would only form an initial payment on account with further costs incurred by HG being paid by DDG."

Mr Kanbi's witness statement merely confirms that Mr Purves confirmed that HG would carry out these works at a price of £170,326."

44. The only support for this contention was provided by the wording of the first of the two invoices rendered by HG for its share of the LDA's payment on account. It had been agreed by Mr Bhudia that the payment to HG would be in two equal installments. This first installment was invoiced on 10 January 2007 as:

"50% of the agreed final costs for the M+E fit out and relocation of DDG manufacturing facility".

The second installment was invoiced on 15 February 2007 as:

"Sum invoiced for installment costs for the M+E fit out and relocation of DDG manufacturing facility".

Thus, so it was contended, the use of the words "agreed final" to describe the costs being claimed in the first invoice evidenced the earlier agreement that the sum to be paid for HG's work would be £170,326. This was so even though the second invoice merely referred to the second tranche of this payment as being "for installment costs", which is a clear reference to an interim and not a final payment. Mr Purves accepted that those two words were mistakenly added to the invoice by whoever prepared the invoice and it is clear, given their context and the background that I have set out that they do not evidence an underlying agreement. I find that the word "final" is a bookeeper's error for "installment" and that the first invoice, like the second, should have been worded "agreed installment costs".

45. DDG also relied on the evidence of Mr Norman who stated that he was given to understand by Mr Bhudia in early 2008 that at an earlier stage he thought that there was a fixed price agreement. None of his evidence save for this recollection of what Mr Bhudia reported to him some time after the alleged agreement supported the existence of such an agreement.
46. HG contended that it had been agreed that HG would carry out the works and that it would be paid interim payments on account amounting to £170,326 and a final sum that would be ascertained at the conclusion of the works by reference to the quotation or estimate for the different works identified in that document.

2. Discussion

47. Was there any contract? Neither party contended, even in their subsidiary cases, that there was no contract. On HG's case, it was to be paid a reasonable sum which was not defined in advance or in the contract but that basis of remuneration arose from an express or implied term of the contract. There is no doubt that the parties entered into a contract and that that contract was initially made when HG was asked to start work, and did start work, on 13 November 2006. That initial contract was either confirmed or replaced by the instruction to complete the work set out in the estimate communicated by Mr Bhudia to Mr Purves in early December that HG should complete the work shown on the estimate that DDG was not going to carry out itself.
48. Agreed final sum for payment? There was no agreed final sum that HG would be paid for the entirety of the relocation work it should carry out. The entirety of the evidence, save for that of Mr Bhudia which was repeated in Mr Kanbi's witness statement, points to an interim agreement having been reached that HG would receive as an interim on account payment part of the £380,000 to be paid to DDG as an interim on account payment on the same terms as DDG was receiving the larger sum from the LDA. In other words, that payment by DDG represented a provisional and on account payment by DDG to HG towards the costs incurred and to be incurred by HG in carrying out its contract with DDG. Those costs would only be ascertained once HG's relocation work had been completed. At that stage, HG's entire costs would be ascertained.
49. Nature of contract. The contract was, therefore, a simple contract whereby HG would carry out such relocation work and any further work at the site as would be agreed with or instructed by the defendant for a reasonable sum. That work would include those works described in the estimate as DDG instructed HG to carry out and any further work HG was instructed to carry out. Since there was no agreement as to what HG would be paid, it was of necessity an implied term of this contract that HG would be paid a reasonable sum.
50. Express and implied terms. Given the informality of the contract and the complexity of its factual matrix, it is very difficult to distinguish between terms that were agreed and those which are to be implied by necessity. Since there is no difference so far as the meaning and effect of an orally agreed express term and a term implied by necessity in this contract, it is not necessary to allocate the relevant terms into one or other category.
51. When reasonable sum to be ascertained. It is clear that the reasonable sum to be paid to HG by DDG for the contract work would be ascertained and agreed by HG and DDG once the claimant had concluded its work at the site.
52. Provision of details. It is also clear that once HG had completed its contract work, it would provide all details to DDG and Mr Norman that were reasonably needed to enable HG to establish what relocation work and any further work that HG had undertaken under the contract and what the reasonable sum was that HG was entitled to be paid by DDG for carrying out that work.
53. Assistance to DDG. Furthermore, HG would provide DDG with all reasonable assistance in relation to DDG's negotiations with the LDA for DDG's recovery of statutory compensation from the LDA. This assistance would include the provision of documents and spreadsheets which clearly identified and verified HG's costs incurred in its carrying out its work in a form required by the LDA when checking DDG's claim for its relocation costs. This was agreed at the meeting on 27 November 2006 when Mr Norman informed Mr Purves what would be needed from HG once it had completed its work.
54. Ascertainment of reasonable sum. The reasonable sum to be paid by the defendant to the claimant would take account of all relevant factors including, but not limited to, the sum that was paid or payable by the LDA to the defendant by the LDA as statutory compensation for the defendant's relocation. The basis of payment would be the cost to HG of carrying out its work and performing its services. Clearly, cost would include overheads and reasonable profit and VAT if payable and also the cost of management and supervision involved, whether provided on or off site. Throughout the discussions, the word "cost" was used and, in any event, the compensation code refers to "expenditure" incurred by DDG which is a clear reference to the cost of the work and not its value.
55. DDG's LDA payment not determinative of HG's entitlement. The reasonable sum paid or payable by the LDA to DDG as statutory compensation would not be determinative of the sum that would be payable to HG but it would provide guidance, along with all other relevant factors, as to what that reasonable sum should be. It is clear that Mr Purves throughout the discussions with Mr Norman and Mr Bhudia made it clear that HG would not be bound by the sum allocated to its work in any payment made by the LDA or any agreement as to the compensation to be paid by the LDA to DDG. There are two overriding reasons why such an understanding was reached and was also likely. The first is that the scope of the work was never clearly defined and the work to be carried out had been identified by Mr Bhudia, the details were supervised on site by Mr Kanbi and Mr Bhudia and what could be claimed by DDG from the LDA was under the overall direction of Mr Norman acting as DDG's agent. Thus, HG had agreed to carry out detailed and extensive work which was not defined with any precision, which would only be finally defined as work proceeded and whose content was under the day to day direction of DDG's personnel working to the advice of DDG's consultant, namely Mr Norman.
56. The second reason why the understanding that I have set out was reaches was that what was recoverable by DDG was subject to the vagaries of the compensation code. Particular difficulties in this relocation that would and were arising by the time HG started work related to the suggested increase in size of the relocated premises compared to the acquired premises, the significant suggested betterment element of the work instructed by DDG, the necessity on health and safety grounds, to provide improved manufacturing plant and machinery compared to the plant and machinery in its original location, the ill-defined work content of the works and the speed with which HG was required to perform and the informality of the contract which did not contain any of the usual checks and controls of costs usually associated with contracts involving elements of construction, refurbishment or installation. There was clearly a risk that some of the costs incurred by HG would turn out to be costs which those involved on the LDA's behalf would consider as not being covered by the compensation code. Under the terms of the informal and simple contract that DDG agreed with HG, the risk that some of the expenditure and cost that would arise in performing that contract would not be recoverable under the compensation code by DDG from the LDA lay with DDG. In other words, if costs were reasonably incurred by HG which were not recoverable from the LDA, DDG remained contractually liable to pay HG those irrecoverable costs
57. Time for payment to HG. The reasonable sum to be paid to HG by DDG would be ascertained by DDG and agreed by DDG with, and paid to, HG after DDG had had a reasonable opportunity to negotiate and agree with the LDA the statutory compensation that DDG was entitled to be paid by the LDA.
58. This contractual provision is a necessary corollary of the parties contracting within the framework of the compensation code and as part of the understanding communicated by Mr Bhudia to Mr Purves that HG would only be paid by DDG once it had been paid its equivalent entitlement by the LDA. This was not a strict pay when paid arrangement, such are not enforceable and, in any event, Mr Purves made it clear to Mr Bhudia that HG would not be bound by or limited to DDG's recovery for the same work from the LDA. The agreement as to payment, therefore, related only to timing and not to amounts. In consequence, it is necessarily to be implied that DDG would have a reasonable time to obtain payment from the LDA. Once it had had such an opportunity, HG was entitled to payment irrespective of whether DDG had by then been paid.
59. On-account payment. It was agreed that, pending completion of the work, HG would only be entitled to recover a maximum sum of £170,326. This was an interim and on account payment. The entire cost reasonably incurred by HG would be ascertained at the conclusion of the work and the sum paid on account would then be deducted from the final reckoning. In the unlikely event that it emerged that HG had been overpaid, the balance would be recoverable. The basis of valuing the on account payments would not be relevant, save as supporting evidence, when the final account came to be considered since, at that final stage, the entire cost incurred by HG would be considered and evaluated afresh.
60. As has already been found, HG agreed with DDG that it would be paid £170,326 in two equal installments and no further payment would be made until HG had completed the relocation work.

D. Issue 2 – Compromise or Contract Variation

1. Parties' contentions – Compromise or contract variation

61. This issue can be taken very shortly. DDG contended that HG agreed on 13 February 2008 to limit its recovery under the contract to the sum of £170,326. This agreement was allegedly reached at a meeting between Mr Purves and Mr Bhudia. The agreement was expressed in these terms in Mr Bhudia's witness statement:

"During the course of a further meeting with Mr Purves on 13 February 2008 to try and finalise the documentation for the compensation claim to the LDA. I made it clear to Mr Purves that I did not accept that DDG had any further liability to HG and Mr Purves agreed that HG would accept in settlement of its claim for the additional monies whatever sum may be agreed and paid to DDG by the LDA."

62. This passage of Mr Bhudia's witness statement, like the entirety of his witness statement, was clearly drafted by a solicitor. This was clear because Mr Bhudia's command of English, particularly formal and written English, is poor and the only way that he could produce a witness statement would be for the solicitor taking the statement, probably with the assistance of Ms Lachani's interpretation, carefully to record what Mr Bhudia appeared to be stating and then to arrange for Mr Bhudia, again with the assistance of Ms Lachani, to approve the statement and amend and correct it as necessary. This process was clearly faithfully and professionally undertaken by the statement maker but, given Mr Bhudia's overall limited understanding of the nature and extent of DDG's liability for payment to HG and of its potentially different entitlement to recovery from the LDC, the resulting statement was inherently unreliable in relation to its contentious passages.

2. Discussion

63. Mr Bhudia was unable to make good this evidence when giving evidence whilst he was extensively cross-examined and re-examined. In her closing submissions, Ms Vaughan-Neil on behalf of DDG, accepted that DDG's contention that HG's claim was compromised would only be cogent if it had been concluded that there was a fixed agreed price for the contract works in the sum of £170,326.

3. Conclusion – Compromise or contract variation

64. There was no evidence to support the case that the claim was compromised or that the contract was varied at the meeting held on 13 February 2008 so as to limit or eliminate HG's current claim. I am satisfied that there was no compromise or variation of any kind agreed at that meeting.

E. Overall Conclusion

65. HG is entitled to judgment by way of declarations in relation to both issues determined. The terms of the declarations are set out in the schedule to this judgment.

HH Judge Anthony Thornton QC

Schedule to Judgment

Issue 1: The nature of the parties' contract.

The parties entered into a simple contract whose express or implied terms were as follows:

(1) The claimant would carry out such relocation work and any further work at the site as would be agreed with or instructed by the defendant for a reasonable sum.

(2) The reasonable sum to be paid to the claimant by the defendant for the contract work would be ascertained and agreed by the claimant and the defendant once the claimant had concluded its work at the site.

(3) Once the claimant had completed its contract work, it would provide all details to the defendant that were reasonably needed to enable the defendant to establish what relocation work and any further work the claimant had undertaken under the contract and what the reasonable sum was that the claimant was entitled to be paid by the defendant for carrying out that work.

(4) The claimant would provide the defendant with all reasonable assistance in relation to the defendant's negotiations with the LDA for the defendant's recovery of statutory compensation from the LDA.

(5) The reasonable sum to be paid by the defendant to the claimant would take account of all relevant factors including, but not limited to, the sum that was paid or payable by the LDA to the defendant by the LDA as statutory compensation for the defendant's relocation.

(6) The reasonable sum paid or payable by the LDA to the defendant as statutory compensation would not be determinative of the sum that would be payable to the claimant but it would provide guidance, along with all other relevant factors, as to what that reasonable sum should be.

(7) The reasonable sum to be paid to the claimant by the defendant would be ascertained by the defendant and agreed by the defendant with, and paid to, the claimant after the defendant had had a reasonable opportunity to negotiate and agree with the LDA the statutory compensation that the defendant was entitled to be paid by the LDA.

(8) The claimant would be paid by the defendant, by way of a payment on account, a reasonable part of the sum that the defendant received by way of an interim payment of statutory compensation from the LDA.

Issue 2: The alleged compromise or variation of the contract.

The parties reached no agreement on 13 February 2008 to compromise the claimant's claim or to vary the contract or otherwise.