Mears Ltd v Shoreline Housing Partnership Ltd

June 18, 2015

The Technology & Construction Court handed down judgment this year in Mears Ltd v Shoreline Housing Partnership Ltd [2015] EWHC 1396 (TCC). The case touches on Clause 10.1 of NEC3 and provides some further guidance as to its effect.

Facts

Shoreline Housing Partnership Ltd engaged Mears Ltd to carry out on-going repair and maintenance to a portfolio of properties. The parties’ contract comprised the NEC 3 TSC, incorporating Option C (target contract with price list).

The parties departed from the contractual pricing mechanism. The employer later became concerned that it was paying too much and sought to rely on the contractual pricing mechanism, alleging that it had overpaid £300,522.03. It sought to recoup that amount by making a deduction under the contract.

The contractor began legal proceedings against the deduction, arguing that the employer was not entitled to make the deduction because:

• It was estopped from doing so by way of an, estoppel by convention; or estoppel by representation as to the pricing and payment mechanism.

• It had made a misrepresentation.

• It was acting in breach of the NEC 3 TSC clause 10.1, which required the parties to act in a spirit of trust and co-operation.

The dispute took some time to reach trial, with the employer’s application to strike out the claim failing at first instance and in the Court of Appeal, together with a failed mediation.

Decision

Akenhead J held on the facts that the employer was prevented from making a deduction by the doctrine of estoppel by convention and estoppel by representation. The court rejected the contractor’s arguments relating to clause 10.1 of the TSC and felt it unnecessary to make a finding in relation to misrepresentation.

Comment

Clause 10.1 of the NEC 3 Term Service Contract (or even an obligation to act in a “partnering way”) ultimately does not override or prevent either party from relying on any express terms of the contract. So, the focus must be on what the Clauses in NEC 3 actually say rather than relying upon overriding principles of collaboration and good faith.

The parties must act honestly and fairly but at the end of the day they must to do what the contract says they should do. Although this may seem straightforward it provides a useful guidance on the meaning of clause 10.1.

Please note: The content of this article is for information purposes only and further advice should be sought from a professional advisor before any action is taken.