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Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] ABC.L.R. 11/22 - page 1 / 5

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Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] ABC.L.R. 11/22

CA on appeal from QBD (Mr Justice Ramsey) before Neuberger LJ; Richards LJ; Leveson LJ. 22nd November 2006 LORD JUSTICE NEUBERGER:

  • 1.

    This is an appeal from the decision of Ramsey J on the preliminary point of interpretation of a contract in a letter dated 17 August 2000 (the "August letter"), which included a temporary arrangement between Skanska Rashleigh Weatherfoil Ltd ("Skanska") and Somerfield Stores Ltd ("Somerfield").

  • 2.

    Somerfield is a well-known operator of around 1300 supermarkets in the United Kingdom. In 2000 it decided to reorganise the way in which it procured the maintenance of those buildings and the machinery therein. It had in mind either a single national contract or a limited number of regionally-based contracts. Such a contract is known as a Facilities Management Agreement ("FMA").

  • 3.

    On 19 June 2000 Somerfield invited Skanska, which specialises in such services, to tender for the provision of maintenance services to its properties in four, subsequently reduced to three, regions. The letter (the "June letter") included a draft of the proposed contract in the form of the incomplete FMA which, although in draft form, I shall call "the June FMA". The June letter invited prices to be submitted on the basis of three different service levels, of which only one, the "fully comprehensive level", is relevant.

  • 4.

    The basic nature of the proposed FMA was that a contractor, for instance Skanska, would be required to provide preventative and reactive maintenance services to all the properties in the region for a term of three years. Preventative maintenance was envisaged as involving visits to carry out regular maintenance and servicing and, where necessary, replacements in accordance with a schedule to be agreed. Reactive maintenance was envisaged as being ad hoc maintenance, for instance carrying out work on request caused by acts of vandalism or leaking pipes. The June FMA contemplated a fixed annual fee, payable by instalments, for preventative maintenance services, and payment at agreed hourly rates for the reactive maintenance services.

  • 5.

    Between June and August 2000, discussions between Skanska and Somerfield took place as to the scope and terms of the ultimate FMA they would enter into. Skanska submitted a tender on 14 July 2000, which was revised in a number of respects in the next month. By mid-August 2000 the position was as follows. There was an incomplete draft of the proposed FMA, namely the June FMA, which if finalised would govern the relationship between the parties for some three years. Pursuant to Somerfield's request, Skanska submitted its tender, which had been subjected to a number of revisions and was itself subject to a number of negotiations. The parties accordingly envisaged that there would have to be further negotiations before the June FMA, as amended by agreement, could or would eventuate into a contract.

  • 6.

    However, Somerfield wanted to receive the provision of maintenance services immediately. In those circumstances Somerfield wrote a letter to Skanska on 17 August 2000. The letter was headed "Subject To Contract" and was in the following terms, save that the paragraphs were un-numbered, but I have numbered them for ease of reference:

"Dear Sirs, Facilities Management Agreement

  • 1.

    We refer to the invitation to tender ("Tender") sent to you on 19th June 2000 for the provision to us of preventative and reactive maintenance services ("Services") in, respect of the major plant and related equipment. located in our stores in regions two (2) six (6) and eight (8) as detailed in the Tender.

  • 2.

    We now wish to appoint you to provide us with the Services, which are more particularly described in the contract (ref.: JRB/2240842 DRAFT 3 - 14th June 2000) ("Contract") enclosed with the Tender.

  • 3.

    This appointment is, however, strictly subject to contract, and to the approval of our board. As soon as this letter has been signed, we both undertake to commence good faith negotiations with a view to completing and signing a mutually acceptable contract derailing the terms of your appointment as soon as is reasonably practicable ("the Agreement"). No commitment from either of us relating to the provision of the Services shall (subject to the remaining provisions of this letter) arise until we have both signed the Agreement

  • 4.

    We agree to negotiate exclusively with you in respect of the Services until we give you notice indicating otherwise, save that we may negotiate the termination of our existing arrangements with our existing suppliers relating to the provision of any services similar to the Services.

  • 5.

    In consideration of the above, and whilst we am negotiating the terms of the Agreement, you will provide the Services under the terms of the Contract from 28th August 2000 (or such other date as we may advise to you) until 27th October 2000 ("the Initial Period"), such Services to be provided at the prices detailed in the Tender return provided by you (as subsequently amended) as the same are more particularly itemised on the attached schedule.

  • 6.

    In agreeing to the Services being provided on the above basis during the Initial Period, neither of us is in any way fettering our discretion to seek additional or different provisions or prices when negotiating the detailed terms of the Agreement. We acknowledge that you will be expending time, resources and expense during the Initial Period, and in preparing to provide the Services after the Initial Period. Such expenses will include staff recruitment and the purchase of equipment. We, therefore, agree to reimburse your reasonable wasted costs and expenses should the Agreement not be signed or should we unilaterally withdraw from, or otherwise terminate, negotiations prior to signature of the Agreement PROVIDED ALWAYS that our liability under this paragraph shall not in any event exceed …"

Arbitration, Building & Construction Law Reports. Typeset by NADR. Crown Copyright reserved. [2006] EWCA Civ 1732

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