AN OFFER IS NOT AN ADMISSION: HIGH COURT REJECTS APPLICATION FOR JUDGMENT ON ADMISSIONS

The previous post looked at the decision Mr Justice Coulson in The Dorchester Group Ltd -v- Kier Construction Limited [2015] EWHC 3051 (TCC) in relation to disclosure.  Here we look at the decision in relation to the claimant’s application for judgment on admissions.

  1. “Courts must always encourage parties to make offers, in whatever form is appropriate. That is in accordance with the overriding objective. It would be contrary to that policy if the recipient of an offer like this could pick over its terms, accept parts and reject others, and thereby ensure that the litigation continues. That is not the purpose of an offer of this sort.”

THE CASE

The claimant is seeking declarations, accounts and determinations in relation to undeclared discounts. An adjudication took place prior to the issue of proceedings. The action represented a further claim for undisclosed discounts.

KEY POINTS

  • The open offer that the defendant made could not be construed as an admission.
  • It was not open to the claimant to pick certain elements of an offer and assert that these represented an admission.
  • The claimant’s application for judgment on admissions was dismissed.
2. APPLICATION FOR JUDGMENT ON AN ADMISSION
  1. In their defence to the claims in these proceedings, summarised at paragraph 2 above, Kier say as follows:
Dorchester’s Claims in relation the Undeclared Discount.
53. Kier admit that, as between Kier and Mitie, there was a discount of £686,575.00 which was not disclosed to Dorchester. Kier, however, deny that this discount amounted to a breach of their obligations under the Building Contract or of any other obligation owed by Kier to Dorchester:

(1) Kier aver that Item A13/120 was not applicable and/or was waived, for the reasons set out above;

(2) Further, or alternatively, Kier deny that this discount amounted to a change to the terms, conditions, scope and price agreed with Dorchester sufficient to amount to a renegotiation of the work package.

54. Alternatively, for the purposes of these proceedings only, and subject to the matters set out above and below, Kier admit that Dorchester are entitled to the benefit of an “undeclared discount” in the sum of £431,639.00.
55. Kier, however, aver that they are, in any event, entitled to retain £254,936.00 of the discount of £686,575.00.

(1) This sum of £254,936.00 represented a discount granted by Mitie for early payment in advance of Kier’s Standard Terms of Payment of 60 days.

(2) Such a discount was not, in any event, in breach of the provisions of Item A13/120 if, which is denied, that item was applicable to Kier. The early payment discount did not amount to a renegotiation of the work package, but was a purely“domestic” matter as between Kier and their sub-contractor.

(3) Dorchester have, in any event, suffered no loss in relation to any breach of Item A13/120 if, which is denied, the same has occurred. Kier and Mitie have agreed, for their mutual benefit, an arrangement as to early payment. This was not in any way to the prejudice of Dorchester.

(4) In any event, Edge, on behalf of Dorchester, have agreed that Kier should retain any undeclared discounts which relate to the securing of discounts from sub-contractors for early payments. Full particulars of this averment are set out at paragraphs 14 to 20 of the witness statement of Malcolm Fitzjohn (at Tab. 10 to the Particulars of Claim).

59. Paragraphs 67 to 70 inclusive are denied. It is averred that the maximum sum to which Dorchester is entitled (if any, which is denied) in relation to undeclared discounts is that of £431,639.00 as set out in the witness statement of Mr. Fitzjohn.”
  1. By a letter dated 21 September 2015, Kier’s solicitor made an open offer in respect of these proceedings. The letter was in these terms:
In full and final settlement of the Proceedings we set out herein Kier’s open offer and the terms that relate to it.
For the purposes of the Proceedings only, and without making any admissions of liability save as set out below, Kier accepts that TDC is entitled to the following declarations (by reference to the prayer to TDC’s Particulars of Claim):
(1) As to the declaratory relief sought at (1) Kier accepts (and has admitted in its Defence served on 5 March 2015) that TDC is entitled to the relief sought;
(2) As to the declaratory relief sought at (2) Kier accepts that TDC is entitled to such a declaration and that the amount of the undeclared discount obtained by Kier from Mitie amounts to the sum of £686,575.00;
(3) As to the declaratory relief sought at (3) Kier accepts (and has admitted in its Defence served on 5 March 2015) that TDC is entitled to a declaration that the value of the mechanical and electrical measured works and associated variations, including tunnel variations, is in the amount of £7,484,865.00. For the avoidance of doubt, this sum is composed as follows:
Measured Works £5,080,871.00
Mechanical Variations £791,753.00
Electrical Variations £1,048,421.00
Tunnel Variations £563,820.00
Total £7,484,865.00
The total of £7,484,865.00 is exclusive of VAT. The said total is also exclusive of loss and expense, which is not part of the Proceedings. Finally, the said total is gross of the undeclared discount. Accordingly the net sum after deduction of the undeclared discount amounts to £6,798,290.60.
Kier’s offer remains open for acceptance at any point until such time as Kier notifies TDC that Kier’s open offer is withdrawn.
Finally, please note that:
(1) This open offer is not an offer to pay a sum of money. As with the Proceedings, this offer simply concerns the declarations sought: there is no monetary claim comprised within the Proceedings.
(2) As to costs, in the event TDC chooses to accept Kier’s offer at any point it is a condition of Kier’s offer that costs shall be in the discretion of the Court. There will be a number of matters upon which we wish to address the Court on the subject of costs.
(3) This offer is alternative to, and cannot be accepted in conjunction with, any other offer which Kier may have made in, or in connection with, the Proceedings.”
  1. It will be seen that the figure offered was, to all intents and purposes, the sum found by the adjudicator in the adjudications proceedings. Kier have made it clear that this was deliberate. They were saying that, if this offer was accepted by Dorchester, they would argue that Dorchester had achieved nothing by way of the litigation, and that they would consequently seek orders for costs in their favour. That is why the offer does not make any offer in respect of costs, but leaves that issue to be resolved by the court.
  2. In their response on 23 September 2015, Dorchester’s solicitors raised a series of queries:
“If we understand the Open Offer correctly, Kier now concedes: that it is liable to account to our client (the “Dorchester“) for the Undeclared Discounts which Kier obtained from Mitie; and that the quantum of the Undeclared Discounts is £686,575.
The term “Undeclared Discounts” is defined at paragraphs 63.1 to 63.7 of The Dorchester’s Particulars of Claim. Kier pleads to paragraph 63 of the Particulars of Claim at paragraphs 53 to 56 of its Amended Defence. Given the terms of those parts of the pleadings, we understand the concession made in your offer to mean that Kier concedes that it is liable to account to The Dorchester for any Undeclared Discount obtained from Mitie, howsoever obtained. In particular, we understand that Kier now concedes that it is liable to account for any discount granted by Mitie for early payment and all issues of waiver are no longer live.
If our understanding of Kier’s concession is mistaken then we ask you to tell us otherwise. However, if our understanding of Kier’s concession is correct, it appears to us that:
  • The only issue that remains to be determined in these Proceedings is as to the quantum of the Undeclared Discount (an issue which we address further below);
  • There is no witness evidence that The Dorchester can usefully call in respect of this issue; and
  • In order to fulfil its duty to account, the onus is on Kier to call documentary and witness evidence to demonstrate the quantum of the Undeclared Discount that it in fact obtained.
Please confirm that the above analysis is correct without delay because, if it is, it will curtail the costs that The Dorchester will need to incur going forward (In this regard, we note that witness statements are due to be exchanged on 16 October) and it might also reduce the length of the trial (due to commence on 30 November).”
  1. Kier’s solicitors answered these points in their letter of 30 September 2015. The relevant part of that letter was as follows:
“First and foremost there appears to be a misunderstanding on your part. In your second letter of 23 September you suggest that Kier has conceded that Kier is liable to account to TDC for the undeclared discount obtained from Mitie and that the quantum of the undeclared discount is £686,575.00. Our letter to you of 21 September 2015 does not make any such concession. Rather it constitutes an “open offer” which is available for acceptance by your client on the terms set out in the open offer. As stipulated in our clients open offer, the open offer remains open for acceptance at any point in time until such time as Kier notifies TDC that Kier’s open offer is withdrawn.
In the event that your client does not accept our client’s open offer then the proceedings will proceed to trial. In that case the issues that remain between the parties and which will need to be addressed at trial remain those in issue between the parties by reference to the parties’ respective pleaded cases culminating in your client’s reply.
We trust that the above clarification is sufficient for your purposes including your latest letter of 28 September 2015.”
  1. I am told that the open offer of 21 September was not accepted. I am also told that it has now been withdrawn. However, Dorchester say that they are entitled to judgment on the basis that “Kier now concede that it is liable to account for any discount granted by Mitie for early payment and all issues of waiver are no longer live.” For the reasons set out below, I do not accept that submission.
  2. First, the letter of 21 September 2015 was an open offer. It contained a package of terms which Dorchester could either accept or reject. It would be contrary to the whole basis of an offer if Dorchester were permitted to accept what they say was a part of it (by claiming that it was an admission), whilst rejecting other elements of the same package.
  3. Courts must always encourage parties to make offers, in whatever form is appropriate. That is in accordance with the overriding objective. It would be contrary to that policy if the recipient of an offer like this could pick over its terms, accept parts and reject others, and thereby ensure that the litigation continues. That is not the purpose of an offer of this sort.
  4. Secondly, CPR 14.1 entitled “Admissions made after Commencement of Proceedings” is in these terms:
Admissions made after commencement of proceedings
14.1
(1) A party may admit the truth of the whole or any part of another party’s case.
(2) The party may do this by giving notice in writing (such as in a statement of case or by letter).

(4) Where the defendant makes an admission as mentioned in paragraph (3), the claimant has a right to enter judgment except where–

(a) the defendant is a child or protected party; or

(b) the claimant is a child or protected party and the admission is made under rule 14.5 or 14.7…

(5) The permission of the court is required to amend or withdraw an admission.
(Rule 3.1(3) provides that the court may attach conditions when it makes an order).”
  1. Dorchester claim that by the letter of 21 September 2015, Kier has admitted that their pleaded case, that they can retain the discount for early payment to Mitie, is wrong, and that they have admitted that they are liable to Dorchester for all undisclosed discounts, including that one. They say that, in consequence, they are entitled to judgment pursuant to r.14.1(4). But:
(a) The letter makes no reference to r.14.1;

(b) The letter does not admit to the truth of Dorchester’s case that all undisclosed discounts are due. It simply “accepts” that proposition for the purposes of the offer;

(c) The letter makes no reference at all to the defence based on the partial discount for early payment, and there is nothing on the face of the letter that amounts to an admission that in some way that partial defence was a bad one, and/or was no longer pursued.

  1. As a result, it must follow that the letter of 21 September 2015 was not a notice pursuant to r.14.1. It was not a ‘formal admission’ of the type discussed in the short note at paragraph 14.1.1 of the White Book (Volume 1, 2015).
  2. Thirdly, and linked to that last point, it seems to me that, for judgment to be entered under r.14.1, the admission has to be clear and unequivocal: see for example, Technistudy v Kelland [1976] 1 WLR 1047. That is how r.14.1 is intended to work. Here, the alleged admission about the discount for early payment to Mitie is neither clear nor equivocal. We know that, because Dorchester’s first reaction was to seek clarification of the offer on this point, and the explanation made it clear that there was no such admission. In those circumstances, it cannot possibly be said that there was a clear admission in the offer letter.
  3. The disjunct between the letter of offer, on the one hand, and Dorchester’s application now, on the other, can be seen in Dorchester’s proposed draft order. The application seeks an order that:
“pursuant to CPR Rule 14.3, the defendant’s case that it is entitled to retain the benefit of any discount granted by Mitie for early payment (as set out in paragraph 55 of its defence) is dismissed.”
Yet those words simply do not appear in the letter of 21 September 2015. The order sought makes it clear that it is not a judgment on an admission, but instead, a judgment based on a contentious construction of one paragraph of the offer letter. Indeed, if the letter contained an admission at all, it was an admission in the sum of £686,575.00. That of course is the complete opposite of Dorchester’s case, because that amount has already been credited by Kier to their account. The last thing that they would want would be for the court to give judgment on such a basis.
  1. For all those reasons, I reject the first application made by Dorchester.

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