MERIT HOLDINGS LTD v MICHAEL J LONSDALE LTD

[2017] EWHC 2450 (TCC), Technology and Construction Court, Jefford J, 11 October 2017

Expiry of letter of intent – Terms of contract between parties – Appropriateness of use of CPR Part 8 procedure – Potential use of Part 7

The claimant brought a CPR Part 8 claim in which it sought a declaration as to the "correct interpretation of the contract" between the parties. The initial contractual relationship was set out in a letter of intent dated 20 November 2015 under which the defendant agreed to reimburse the claimant in respect of the "costs wholly and necessarily incurred by you pursuant to this letter up to a maximum of £330,000". The letter of intent was replaced by two subsequent letters, the final one of which increased the cap to £430,000 and extended the date of expiry to 29 April 2016. Notwithstanding the expiry of the final letter of intent, the claimant continued to work on the project until 12 July 2016. On 12 July, the defendant terminated the arrangement between the parties on the ground of the claimant's persistent failure to proceed regularly and diligently with the works. A dispute then arose between the parties which was referred to adjudication and the adjudicator decided that the defendant was obliged to pay the claimant £1,128,106.42. In reaching that decision the adjudicator decided that the parties' contractual relationship continued after the expiry of the letter of intent and, on the basis of that subsequent conduct of the parties, concluded that payment was to be made by the defendant by reference to the Contract Sum and the Quantified Schedule of Rates.