By June 2008, Meadmanor was facing a winding up order petition in relation to another project, which was due to be heard on 28 July 2008. By this stage, LPI was, with Meadmanor’s agreement, paying various subcontractors and suppliers directly. The financial outlook for Meadmanor was bleak and LPI gave evidence that its directors had told them that the contractor was going to cease trading. LPI’s primary case, therefore, was that Meadmanor had repudiated the contract. Meadmanor did cease trading allegedly because of LPI’s conduct. Eventually a winding-up order was made against Meadmanor.
LPI commenced proceedings seeking damages for repudiation, or, alternatively, additional costs calculated in accordance with claimant.27 of the contract. The defendant’s defence and counterclaim specifically took issue with what had been said at the meeting between LPI and its directors on 21 July 2008. It denied that it had been insolvent or technically insolvent, or not in a position to trade, or not able to perform its obligations under the contract. It blamed LPI’s negative valuation as leading it to believe that it would be unable to defeat the petition. This Negative Valuation was produced on behalf of LPI on 21 July 2008 and purported to show a substantial six-figure sum due from Meadmanor to LPI.
Both parties appointed accounting experts, and reports were exchanged, but it was agreed that they would not give evidence at the trial. The parties came to an agreement on 23 July, with the defendant accepting that it was liable on the basis that Meadmanor had repudiated the contract and that that repudiation had been accepted. The defendant withdrew its defence, and the parties agreed that the defendant should pay LPI’s costs on a standard basis, subject to argument as to whether it should pay the LPI’s costs related to the accounting expert.
Initially, both parties took the view that the accounting expert evidence was irrelevant and was not needed following close of pleadings. However, this view had changed by March 2010 when they considered that it might at least be of assistance to the court. It had therefore agreed that each party that could produce the evidence of an accounting expert and a timetable was agreed. By late May 2010, the court at the very least had serious reservations about the relevance of the expert evidence because the primary issue revolved around a meeting on 21 July 2008 and in simple terms whether the Meadmanor’s directors had effectively said that it was ceasing trading and would not be continuing with the work.
It had not been reasonably for LPI to use the services of the expert from the time when it was clear that both parties believed that accounting evidence would or could be of assistance to the resolution of the dispute between the parties by the Court. Whilst it was for each party to decide whether it actually wanted or needed to put in such expert evidence, the parties were in practice proceeding upon the basis that they would each put in such evidence. It was not unreasonable in those circumstances for LPI to seek to protect itself by having accounting expert evidence at least by way of response to whatever the defendant might put forward by way of such evidence.
However, by the end of May, the parties should have looked at whether the expert evidence was needed. The defendant had decided by early June that it was not, and LPI and its advisers had had sufficient time to also come to a decision. LPI was only entitled to the costs of its expert between 18 March 2010 and 1 June 2010 inclusive, and not for work done outside that period.
LPI Hotels Ltd. v Technical & General Guarantee Company SA,  EWHC 2049 (TCC)
Also in this week’s BLISS BOOKS subscription bulletin:
- Singapore High Court Rejects Final Certificate Defence;
- Arbitration and Service Outside the Jurisdiction;
- The Adjudicator's Jurisdiction over Dispute under an Extended Contract;
- Arbitration and the Illegality of a Settlement Agreement;
- The Recovery of Wasted Expenditure following Repudiation.
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