Equilibrio Solutions (Jamaica) Ltd v Peter Jervis & Associates Ltd
| Jurisdiction | Jamaica |
| Judge | Laing, J |
| Judgment Date | 30 July 2021 |
| Court | Supreme Court (Jamaica) |
| Docket Number | CLAIM NO. SU2019CD00052 |
[2021] JMCC COMM. 26
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
CLAIM NO. SU2019CD00052
Mr Kevin Williams and Mr David Ellis instructed by Grant, Stewart, Phillips & Co Attorneys-at-Law for the Claimant
Mrs Daniella Gentles-Silvera, Ms Katherine Williams and Mr Aon Stewart, instructed by Knight Junior Samuels, Attorneys-at-Law for the Defendant
Contract for services — No single written document containing the terms — determining scope of agreement — General Consumption Tax — Whether payable — Whether Defendant agreed to pay
The Claimant is a company registered under the Companies Act of Jamaica and having its place of business at Suite #3, 29 Munro Road, Kingston 6 in the parish of St. Andrew. Mr John-Paul White (“Mr White”), is its Managing Director.
The Defendant is a company registered under the Companies Act of Jamaica and having its place of business at 491/2 Upper Waterloo Road, Kingston 10 in the parish of Saint Andrew. Mr Peter Jervis (“Mr Jervis”) is the Manager of the Defendant.
On or about 10 th June 2011 the Defendant entered into a contract with the National Works Agency (“the NWA”) for the restoration of the drainage system in Kingston and Saint Andrew (“the NWA Contract”). Subsequently, in or around July 2011 the Defendant requested the Claimant to perform services of project management and quantity surveying. This was in relation to the drainage system repairs (“the Project”) pursuant to the NWA Contract. Mr. White asserted that by letter dated the 7 th of July 2011 the Claimant outlined its initial fee structure of $29,000,000.00 to undertake the work for which the Claimant's services was then being contemplated, thus advising Mr. Jervis that:
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i. the original completion date is at the end of September 2011 for the completion of the works;
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ii. the Claimant was nonetheless prepared to include in the original contract sum of $29,000,000.00 any additional time/work required for completion up to 30 th November 2011; and
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iii. the original contract sum of $29 million included projected payment requirements for a final payment on 20 th October 2011 of $5,500,000.00 to complete the payment of total fees.
The NWA contract extended beyond the six (6) month period the Claimant had initially contemplated. Consequently, the services provided by the Claimant to the Defendant were also extended.
The Claimant admitted that the Defendant has made payments in the sum of $40,475,198.55 for the work done by them. However, the Claimant asserted that Defendant failed to pay the balance of $24,313,601.51 on the adjusted contract sum. It is further asserted that the Defendant failed to pay General Consumption Tax (GCT) on the final adjusted contract sum of $64,583,528.06 which amounts to $12,740,238.48. Accordingly, this has formed the basis of this claim in the amount of $37,953,839.99 which the Claimant is asserting is due to it.
The Defendant has asserted that the Claimant has been paid in full for the work performed. Its defence is that on or about June 2011 the Defendant sought a proposal from the Claimant for some of the services required under its contract with the NWA. They provided the Claimant with a copy of the NWA Terms of Reference and a sample of the contract document from the NWA. The Defendant's case is that the fees proposed by the Claimant were agreed. However, the payment schedule was not agreed and the Claimant was made aware that any intended agreement to be entered into was subject to the NWA Contract. Therefore, the Claimant was aware that all outstanding issues in the contract between the Defendant and the NWA would affect the proposed subcontract between the Claimant and the Defendant.
The evidence of Mr Jervis is that in late August 2011 the Defendant received a document from the Claimant entitled “Terms of Agreement”, dated July 2011. He said he reviewed the document and indicated to the Claimant that he could not sign such a tight and binding agreement as the Defendant had yet to settle the terms with the NWA including the position in respect of GCT. However, he agreed to Appendix A which set out the agreed sum of $38,168,000.00 and the breakdown of same.
The Defendant's position is that it has paid all the sums due under the contract between it and the Claimant. As it relates to GCT, the Defendant maintains that its contract with the Claimant was subject to the terms of the NWA Contract and that the NWA Contract made no provision for the payment of GCT. Furthermore, the services provided by the Claimant are exempt from GCT pursuant to Schedule 3 Part 2 items 1 (b) and (e) of the General Consumption Tax Act.
The law of contract provides that for there to be a valid contract there needs to be an intention to create legal relations, an offer, and by the acceptance of that offer an agreement and consideration. Contracts may be formed by the parties signing a written document which embodies all its terms. However, a contract can also be entirely oral or it may be partly oral and partly in writing.
The determination of whether an agreement has been reached by the parties is usually relatively straightforward where there is a well-written contract. It sometimes proves to be problematic where there is an oral component and this is one such case. The parties did not execute a written document embodying all the terms of their agreement. The Court is not required to practice alchemy and conjure a contract from thin air. What is necessary is for the Court to examine the evidence as to the terms which the parties have asserted form a part of the contract, based on oral agreement and/or conduct. For this reason, it is necessary for me to assess the interaction between the parties and deconstruct the agreement between them into distinct component parts, in order to determine what constitutes the legal agreement. I will thereafter make findings using this template.
Chitty on Contracts, 23 rd edition, chapter 2 paragraph 43 defines an offer as:
…a definite undertaking made with the intention (which may often be objectively ascertained) that it shall become binding on the person making it as soon it is accepted by the person to whom it is addressed.
It is distinguishable from an invitation to treat which is not made with that intention.
A letter of intent is a document which, when utilized, usually precedes the entry into a formal contract. It can constitute an offer. In the case of Cunningham v Collettt and Farmer [2006] All ER (D) 233 (Jul), Justice Peter Coulson made a number of observations which are apt.
90. Thus, so it seems to me, a letter of intent can be appropriate in circumstances where:
i) the contract workscope and the price are either agreed or there is a clear mechanism in place for such workscope and price to be agreed;
ii) the contract terms are (or are very likely to be) agreed;
iii) the start and finish dates and the contract programme are broadly agreed;
iv) there are good reasons to start work in advance of the finalisation of all the contract documents.
In those circumstances I consider that, if the employer wants the work to start on site promptly and the contractor is also keen to commence work, then a careful letter of intent can be appropriate.
91. It is important to stress, however, that, if the parties enter into a letter of intent of this type, there is a clear risk that agreement will not be possible on all the matters necessary to give rise to the full building contract and that, if there is no such agreement, no principal contract will ever be entered into. It seems to me that that is an inevitable risk of any letter of intent which creates respective rights and obligations, no matter how carefully it is drafted. The point of the careful drafting, however, is to minimise the risk, to both sides, if no contract eventuates. After all if, pursuant to a letter of intent, the contractor carries out a fixed amount of work, or an amount of work limited by a particular sum, but no final contract can be agreed, then the contractor is paid for the work that he has carried out in accordance with the letter, and the employer looks elsewhere for another contractor to carry out the bulk of the work. In such circumstances, there should be no significant loss to either side.
The evidence of Mr. White is that he had discussions with Mr. Jervis about the possibility of the Claimant providing services to the Defendant in general. When the Project came up Mr. Jervis reached out to him based on the Claimant's expertise and experience which was in alignment with the needs of this Project. This was sometime in February or March 2011. Mr. White explained that at this time they spoke about the nature and scope of the Project and Mr. Jervis asked him to put a price/cost proposal together because the majority of services required would have been performed by the Claimant. The smaller portion, being engineering works, would be done by the Defendant. Mr. White admitted that he was provided with a document entitled Engineers Proposal for Consultant Services. He stated that this was one of the documents which he looked at in order to arrive at his fees in early February 2011. He said the other document he looked at was a listing of various locations to be worked on.
Mr. White stated that he and Mr. Jervis met again in June 2011 to discuss the Project and at that stage he went through a document entitled “Terms of Reference” and the same list of various sites to be worked on. He agreed that the Terms of Reference set out the scope of the works which was to be done on the Project. He also agreed that the...
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