Mr. Justice Cresswell :
- The background to this claim is set out in the judgments of the Court of Appeal dated 17 February 2006. The present judgment is concerned with issues as to liability only. The central issue is as to the meaning of the clause in a 'Service Cleaning Contract': -
"This Contract will be of a minimum two year period and will be re-negotiable at the end of that period. During that period Proforce will hold preferred supplier status."
- The claimant alleges that in breach of this clause the defendant failed to offer the claimant the opportunity to supply contract labour and hire equipment at the Rugby site in preference to other suppliers and engaged other agencies to meet its requirements for contract labour and machinery. The defendant disputes the claimant's construction of the clause and denies that it was in breach of contract.
Proforce Recruit Limited
- The claimant describes its own business, until 2003, as a recruitment agency supplying both temporary and permanent labour to businesses, a resources company and a security company.
The defendant says it knew the claimant as a supplier of unskilled labour and recruitment services.
- According to the claimant, since 2003 the claimant's business has undergone significant changes. At the present time the claimant's core business is the provision of HGV Class 1 and Class 2 lorry drivers (to drive HGV vehicles belonging to other businesses). In addition the claimant continues to supply some security personnel.
- The claimant carries on the business previously carried on by
Bloors Ltd (1988 – 1997)
Sterling Resources (1997 - 1998).
The Rugby Group Limited
- At all material times the defendant traded as Rugby Cement and had (according to the defendant) approximately 650 employees. In 2000/2001 the defendant had cement manufacturing sites at Rugby, Barrington, Ferriby and Southam.
- The main raw material required in the production of cement is chalk slurry. This was supplied to the Rugby site via underground pipe from various quarries in the UK. The second raw material required is clay. Clay was transported to the Rugby site from Southam quarry by road by Modern Plant. Approximately 2,000 tonnes would be delivered per day by trucks carrying loads of 25 tonnes. Iron oxide and sand were required in smaller quantities and were supplied and delivered by a number of different suppliers. Approximately 50 tonnes of iron oxide and approximately 500 tonnes of sand were delivered per day.
- The defendant's Rugby plant includes a factory for the manufacture of clinker. Clinker is produced from raw materials including chalk, clay, sand and iron oxide. Oxide is brought to the plant by truck. It is loaded by shovel into the feed system, which mixes the raw materials. The raw materials are mixed together and milled to a fine powder. This is then blown into a large rotating kiln (oven) which is fired using coal at a temperature of up to 1500 degrees centigrade. In this way clinker is produced.
- Within the clinker process a bag filter operates to clean the emissions from the kiln. The dust which is produced is called cement kiln dust ("CKD"). The CKD is taken by truck to landfill. The clinker is mixed with gypsum and turned into a very fine powder (cement) by passing it through a mill. The cement is then either packed into bags in the packing shed on site or transported to silos for storage and subsequent transmission in bulk in cement tankers.
- The manufacturing process is managed by operators working together in a central control room and others who are on the ground.
- Raw materials are transported to the Rugby site from a quarry by truck or, in the case of chalk, by underground pipe in slurry form. The coal fuel used for firing the kiln is also transported into the Rugby plant by truck.
- Due to its nature, the manufacturing process creates dust and other waste around the site which has to be cleaned on a regular basis. This plant cleaning is generally undertaken at all times when the kiln is in operation.
- During the production of cement, a waste product, clinker dust, is produced. This was transported away from the Rugby site to landfill sites by Modern Plant who supplied trucks and drivers. The defendant says that approximately 50 tonnes of clinker dust were removed per day. The claimant says that Modern Plant transported away clinker dust using the same lorries that had brought in clay from Southam, pursuant to subsisting contractual arrangements between Modern Plant and the defendant.
- The cement was produced and packed on site and then transported from the site in bulk in tankers or in bags by truck.
- The Rugby site operated on a shift basis 24 hours a day, 7 days a week except for periodic shut downs. According to the defendant, at the material time the Rugby site employed about 110 permanent staff. These included kiln operators, electricians and engineers. In addition to these personnel there were approximately 20-25 temporary staff who mainly provided cleaning and oxide shovelling services. About 2 temporary workers were employed as laboratory testers, about 4-6 were employed to cover absences in the packing area and about 6 to cover absences in security at any one time. According to the defendant levels of temporary staff would fluctuate and there could be up to 200 total permanent and temporary staff on site at any one time.
- The defendant says that during a planned shut down, there could be up to 250-300 temporary workers on site, most of whom were skilled engineers supplied by specialist engineering companies to repair fixed equipment or make improvements to the site. The claimant agrees that the number of temporary workers on site increased significantly during a "shut down".
- In addition to these workers there were hauliers who moved raw materials to, and finished product from, the site. The number of drivers would fluctuate depending on the volume of production but typically (according to the defendant) there would be approximately 3-4 drivers at any one time.
- In addition to operational staff, the Rugby site employed approximately 26-27 permanent local management staff. These included persons concerned with general site management, human resources, finance, operations and environmental management. Office cleaning was provided by a specialist office cleaning contractor, separately from the industrial site cleaning referred to above.
- The headquarters of Rugby Cement was also located in Rugby, at Crown House, an office building a short distance from the Rugby manufacturing site. Approximately 150 management staff were employed at Crown House.
- In February 2000 RMC Group PLC acquired The Rugby Group PLC which was subsequently de-listed as a public company and changed its name to The Rugby Group Limited (the defendant). RMC Group PLC is an international company which owned a number of companies in addition to the defendant which produced, for example, ready mix concrete, aggregates and other products.
- In March 2005 CEMEX UK Limited acquired RMC Group PLC (including the defendant company). CEMEX UK Limited is owned by CEMEX S.A. de C.V. which is a multi-national business listed on stock exchanges in the USA and Mexico and employs approximately 67,000 people in 50 countries.
Background
- On 23 September 1998 Mr Philip Bruce, Chief Executive, Cement Division, Rugby Cement, wrote to Mrs Pegler of Sterling Resources: -
"I am writing to you as an existing supplier to keep you informed of three key developments with Rugby Cement …
Thirdly … we are undertaking a formal review of our Procurement Strategies. … forming a key element in this review will be a move towards approved supplier lists as it is necessary to concentrate our supply demand to those that can work with us to mutual advantage.
To help develop the preferred supplier list we are to conduct a Vendor Appraisal consisting of three elements, each of which will be tabulated into a numeric value to ensure the results are as objective as possible and are as follows.
1. A Vendor Appraisal Form will be sent to you personally within the next few days. This form will allow you to update Rugby Cement on your current range of services, planned improvements and willingness to embrace new opportunities.
2. Rugby Cement will undertake a comprehensive internal survey to evaluate the suppliers' overall performance through our supply chain.
3. Strategic Supply Analysis to objectively measure the criticality of your supply to our future operations.
Following the Appraisal, Rugby Cement will move to a preferred supplier list by 1 November 1998 with suppliers being ranked according to their overall numeric score.
…
In the future, Rugby Cement will only seek to do business with those suppliers who strive vigorously to increase value to our supply chain year on year. …"
- On 11 November 1999 Dawn Martin, Contract Engineering Sourcing Team at Rugby Cement wrote to the claimant as follows: -
"We are delighted to announce that … Rugby Cement has compiled a Contract Engineering Sourcing Team.
… The team has decided to rationalise our Contract Labour Supply Base.
The team's preferred solution is to develop a Supply Agreement for contractor services. Having been a supplier in the past you may be aware that it is the intention of Rugby Cement to move to Approved Supplier Lists for the majority of our goods and services …
The attached tender pro-forma has been developed to aid you in the quotation process … "
- On 17 November 1999 Mr Bloor of the claimant wrote to Mr Eastwood of the defendant: -
"… I have compiled a list of personnel we can supply. I have also taken the liberty of adding a list of services we can provide.
Labour/Shift Worker Management
Fork Lift Driver Secretarial
All Aspects of Heavy Plant Operators Technical
Bricklayer Production/Engineering
Carpenters Finance/Accountancy
Electricians Data Processing
***********************************
Haulage
Heavy Plant Hire
Demolition
Civil Engineering
All the above can be supplied or provided to any UK location. In the meantime it is hoped that this will be of interest to you and that any future business will be of mutual benefit."
- On 23 November 1999 Mr Eastwood of the defendant wrote to Mr Bloor of the claimant: -
"Thank you for meeting up last week and your subsequent letter dated 17 November 1999.
I have talked to my team in terms of the provision of labour for Rugby; they inform me that ProForce are currently part of a tendering exercise which is being carried out by a Labour Sourcing Team, and I look forward with interest to the deliberations of this exercise. …"
- On 3 March 2000 Mr Bloor of the claimant wrote to Mr Eastwood of the defendant: -
"We are writing to enquire as to the decision regarding the termination of our security contract for the R80 Alliance Project.
Following our meeting of 17 November 1999 you wrote informing us that you were in discussions with your colleagues regarding this matter, you also touched on the provision of labour for Rugby which we have since tendered for, however we have heard nothing further.
We do appreciate your very busy schedule but would be grateful if the matter concerning security could be drawn to a satisfactory conclusion."
- In April 2001 Hanson Support Services wrote to Mr Bloor of the claimant stating that Rugby Cement had invited Hanson to tender for an on site cleaning package that might include men currently provided by the claimant. The letter said "Under the TUPE 19 Regulations it is likely that your employees will be protected should a transfer take place." The letter sought certain information in this connection.
The Service Cleaning Contract.
- On 31 July 2001 the defendant and the claimant entered into a 'Service Cleaning Contract'.
- The introduction provided that "Proforce have pleasure in submitting the following proposals for a Service Cleaning Contract …"
- The Terms and Conditions included the following.
The claimant agreed to purchase from the defendant certain equipment "for the better performance of this Contract" being a VacPress (for £71,000) and a Volvo Road Sweeper (for £1,500).
The claimant guaranteed that the said equipment would be maintained at a satisfactory level to perform the services required. Further, the claimant agreed that should the equipment be unserviceable for any period, the defendant could hire alternative support machinery and recharge the claimant accordingly at cost rate.
The claimant guaranteed that there would be no increase in the basic rate of charges as set out below for a period of 2 years.
The claimant agreed to supply the following personnel per week: 8 VacPress operators, a Road Sweeper operative and a supervisor and 8 Volvo Shovel operators at a total price for the Service Team of £9,843 per week.
The Contract provided that any additional hours worked in excess of those set out in the Contract would be charged at the normal hourly rate (£12.75).
The claimant further agreed to provide equipment/machinery at a total cost per week of £1,994 (comprising the VacPress £1,200 per week, the Road Sweeper £270 per week, Water Bowser and Tractor £69 per week, and the Volvo Shovel (for loading oxide materials) £450 per week).
Thus the grand total payable per week under the Contract was £11,837.
- The Contract concluded with the following words "This Contract will be of a minimum two year period and will be re-negotiable at the end of that period. During that period Proforce will hold preferred supplier status." The dispute in this case turns on the meaning of the words "during that period Proforce will hold preferred supplier status."
- The claimant's pleaded case is that the term "preferred supplier status" is to be construed as meaning:
i) that during the contract period the claimant would be offered the first opportunity to supply contract labour and hire equipment at the Rugby site in preference to other suppliers; and
ii) that the defendant would not obtain contract labour or hire equipment from other suppliers without first offering the claimant a reasonable opportunity of meeting the claimant's requirements.
Further the contract labour and equipment hire of which the claimant was to be the preferred supplier was all of the contract labour and equipment hire which the defendant required during the contract period at the Rugby site.
- The defendant disputes the claimant's construction of the words in question.
- Terms and conditions were attached to the 'Service Cleaning Contract'. Although these were entitled "Standard" Terms and Conditions, the terms and conditions were apparently drafted by the claimant for the purposes of the Contract only. Clause 9.2 of the Terms & Conditions provided:-
"This Agreement together with any other document expressed to be incorporated herein constitutes the entire [contract] between the parties and supersedes all prior representations, agreements, negotiations or understandings whether oral or in writing."
- It is common ground that the defendant performed its obligation to pay to the claimant £11,837 per week in respect of Proforce Service Team Charges and Equipment Charges as set out in the Agreement during the two year period of the Agreement.
- The claimant supplied considerable contract labour/hire equipment beyond that provided for in the Agreement during the two year period from 31 July 2001. The claimant's primary complaint is that it was not offered the first opportunity to supply all contract labour (skilled or unskilled) and all hire equipment at the Rugby site in preference to other suppliers during the said period.
WITNESSES
- I should record that following and in the light of the decision of the Court of Appeal, the Court heard the evidence referred to below de bene esse. It does not follow that all the evidence was admissible. The legal principles by which contractual documents are construed are set out below.
WITNESSES CALLED BY THE CLAIMANT
Mr Allen Bloor
- Mr Bloor is the Managing Director and Chairman of the claimant.
In my opinion Mr Bloor was an unsatisfactory witness. The case he advanced differed from time to time in material respects.
- Mr Bloor in a witness statement in earlier proceedings stated that "The total price of our services including both the labour and the machinery was agreed at £11,837 per week, which I considered from the perspective of Proforce to be a good deal." When giving evidence in this case Mr Bloor said that his earlier statement should have read "This amount was the minimum we needed and 'preferred supplier' would need to be in place to enhance profitability."
- Mr Bloor's evidence as to who first raised the question of 'preferred supplier status' was inconsistent. When giving evidence he said "it was initially raised [by me] with Emma Gough". The Particulars of Claim, paragraph 5, pleaded "in or about May of 2001 the defendant by Emma Gough … proposed that the claimant should become the preferred supplier for contract labour and hire equipment." The Reply, paragraph 2 (c) pleaded "Emma Gough told [Allen] Bloor that, the defendant was prepared to offer the claimant preferred supplier status. She explained this would allow the claimant to supply all labour and any additional plant required by the [defendant] at the Rugby site." The width of this contention should be noted. In his first witness statement Mr Bloor said "I believe it was Mr Bell at that stage who suggested that Proforce might be given a preferential agreement if we were prepared to take on the machinery." When asked in cross-examination "There, you are saying it was Mr Bell's suggestion?", Mr Bloor replied "Like I stated in my statement, I am sure it was Mr Bell, but I would be more inclined to say it was Emma Gough than Derek Bell." The first witness statement continued "Discussions continued in that vein until about May when Emma Gough offered Proforce preferred supplier status, saying that we would have the opportunity to supply all labour and additional plant at Rugby site." Again the width of this contention should be noted. It was not confined to service cleaning but extended to all labour (skilled and unskilled) and plant.
- Mr Bloor said in evidence that the defendant agreed to give the claimant first opportunity to supply skilled and non-skilled people, machinery and plant for hiring on the Rugby site. He added "only if we turn down the work could they use another supplier." It is a striking feature of Mr Bloor's letter of 2 May 2002 ("Rugby Cement has breached the contract by engaging contractors through other agencies, before giving Proforce the opportunity to supply") that Mr Bloor made no express mention of alleged preferred supplier status in relation to hired plant or hired machinery. As to price, Mr Bloor said "the equipment, we would obviously need to know. That was a little bit more difficult putting in our contract because we wouldn't know what type of machinery they were looking for, the list would have been for ever. … we would have gone back to the cement works with a price for that machinery, which would either have been accepted or it wouldn't … they had to give us the first opportunity to quote … we did have a track record for lorries and machines." Mr Bloor agreed when giving evidence that on his case Rugby Cement could give the claimant the first opportunity to quote and reject the quote every time if the claimant chose.
- In evidence Mr Bloor said that the meaning of the words "preferred supplier" that the defendant "put in [the earlier] letters was exactly what I believed they were going to do" and was the same meaning that he understood had been arrived at in the negotiations with Mrs Gough and Mr Bell. There was in my view a marked difference between what was said in the earlier letters and Mr Bloor's evidence as to what was allegedly agreed in the negotiations. Mr Bloor added that the word "partnership" came to his mind because of the terms of the letter of 23 September 1998, "because I thought it was the way forward that they wanted to go."
- The case and meaning advanced at trial by Mr Bloor when giving evidence was in my opinion wholly improbable in commercial terms. In particular the claimant had no experience of supplying and was in no position to supply the specialist skilled personnel (including for example engineers and software specialists) needed in connection with the new kiln.
For the reasons set out above I do not accept the evidence of Mr Bloor where it conflicts with the evidence of Mrs Gough or Mr Bell.
Mr John Langham
- From March 2001 when Mr Langham joined the cleaning team, he was Foreman in charge of six men who were all supplied by the claimant. At that time Mr Langham was employed by the defendant. Mr Langham took voluntary redundancy and was subsequently employed by the claimant as Foreman at the site.
Mr Mark Skelcey
- Mr Skelcey worked for the defendant at Southam until October 2000. In his witness statement he said that around 1999 to 2000 he was handed a list of preferred suppliers. He said "I was told that if I needed more workers on site for jobs such as general labour, machine drivers or cleaners, then I must only use suppliers on the preferred list." Mr Skelcey said that he did not go to the new (Rugby) site so he was not aware of any arrangements that were made on that site.
The first page of the list he was handed was concerned with maintenance. He used the second page. There were seven, eight or nine names on the second page including Proforce, Modern Plant, Simpson Refractories, LWB Refractories, and Sheffield Refractories.
WITNESSES CALLED BY THE DEFENDANT
Mrs Emma Gough
- In 2000 Mrs Gough was promoted to Production Manager at the Rugby site. She held that position until she left the defendant at the end of 2001.
In her witness statement Mrs Gough said she was not sure exactly what Mr Bloor meant when he proposed that Proforce be made a "Preferred Supplier". He seemed to want the proposed agreement to cover all the services Proforce could provide, including expanding into new areas that they did not currently supply to the defendant. She added that Mr Bloor had ambitions about expanding Proforce's services, but he did not have the necessary equipment or the people trained to use it to provide anything other than manual labour. He wanted to take over the world. In relation to the service cleaning contract under negotiation Mrs Gough said "it was certainly not my intention to include within the scope of this cleaning contract any commitment on Rugby's part to contract with Proforce for additional labour or equipment. In terms of Rugby's other requirements for contract labour and equipment, the status quo was working well for us. Modern Plant was a good contractor. They had very strong ties with the Rugby workforce, and it would have been a big deal to move the work away from them. I could not see any benefit in giving the work to Proforce, and did not want to limit our supply to one supplier as that would have been commercially unwise. I did not want to take the risk of even entering into detailed discussions with Allen on this point."
When giving evidence Mrs Gough added that the scale of the work that Modern Plant did for the defendant was not something that the defendant would have looked to move across to Proforce in its entirety. Mrs Gough said that predominantly she used Proforce, Modern Plant and Hansons. On the engineering side the defendant dealt with about twenty contractors.
In my judgment Mrs Gough was a particularly impressive witness. I prefer her evidence to that of Mr Bloor. I find that she did not make the statements attributed to her by Mr Bloor.
Mr Derek Bell
- Mr Bell was the Works Manager at the Rugby plant between about June 2000 and the earlier part of 2002 (when he was asked to leave).
Mr Bell explained why oxide loading was included in the 'Service Cleaning Contract' – "Although [oxide loading] would appear to be unrelated to cleaning services, which was the whole purpose of Rugby entering into the contract, this type of work was most easily carried out by those who were already on the cleaning shift." I accept this explanation.
- In his witness statement Mr Bell said:-
"It was definitely [Allen] Bloor who first introduced the provision about Proforce being a preferred supplier into our negotiations about the cleaning contract.
We then discussed these words with [Allen] the next time we met with him, and what they meant. He asked us to agree with him that Rugby Cement should go to him for any outsourcing labour and equipment that we required, in addition to cleaning. He wanted to include in this contract all other outsourced services that we might require, without us having the choice of whether we would first obtain quotes or comparisons from elsewhere, or of obtaining those services from another supplier, where that was more appropriate or cost effective.
I remember telling him that he may think that this was feasible, but in fact it would never work. I told him that because Proforce had not got either the machines or the skilled people that we would require for a lot of our other outsourcing needs, we could not agree to this.
…
I said something to the effect of, "[Allen], you cannot supply engineering skills, so I would not come to you for that type of service."
…
I told him that we would assess what we needed as the need arose, and find the most appropriate supplier to meet it. I made it very clear to him that, in the context of this contract, we were not agreeing to use Proforce for anything other than the cleaning services and particular machines that the contract covered.
…
I understood that preferred supplier status would mean that if we required any additional cleaning services, we may choose to ask Proforce to provide them. … It did not mean that Proforce was to be our exclusive supplier for cleaning services. If there were services that they were unable to provide (such as when a second Vacupress was required, for example) or that we could get cheaper elsewhere, we would go to another supplier for them. We would not automatically use Proforce to meet all these additional cleaning requirements, especially if they would have to subcontract the provision of them to another supplier.
…
I therefore could not agree to what [Allen] had proposed, and I told [Allen] quite clearly that we were not going to use Proforce for all our other requirements. … I thought he wanted the phrase in the contract simply as a marketing badge, so that he could tell other customers that Proforce was a preferred supplier to Rugby Cement. We had agreed that it referred only to the same types of services as set out in the contract (i.e. the cleaning and oxide shovelling …). …"
- When giving evidence Mr Bell said: -
"I wanted to understand what [Mr Bloor] meant by Preferred Supplier Status and what he was asking for was to have the first option of any additional work, supply of plant, machinery or people, that I [might] need on this site. I said that that was not feasible. It couldn't operate and I was not prepared to operate on that basis. As far as I was concerned, I was comfortable with him being the Preferred Supplier for this type of work only for the unskilled labour for the cleaning contract or extension to that contract. But I would not go to him for skilled labour, of any description or indeed for plant and machinery, because he hadn't got that. Despite his suggesting that he had and could, I flatly refused to accept that that would be part of the agreement. … If one of the shift supervisors had a cleaning requirement that was over and above the capability of the people that we [had] on shift, he had a facility whereby he could call for extra labour in order … to fulfil that cleaning part of the contract. … That was where the preference would be. If … there was a skilled requirement, then … we would go to the relevant contractor to be able to supply that skill. [It was] not a contractual entitlement … only that we would give him the first option in terms only in the cleaning contract and clearly for unskilled labour. … [In relation to additional cleaning works that were not covered by the specific contract] it meant that there was a price in place to be able to do that. … I believe [that Mr Bloor understood what I was saying to him].
Q. Do you believe that you reached an understanding or agreement with him as to what was meant by preferred supplier status?
A. Yes, on the basis that I recall a discussion around the fact that it was something that he could use as a marketing badge, and therefore it was something that could be taken forward as an indication of the work that he was capable of doing and, on that basis, I was not unduly perturbed.
… The contract would give him the first option in relation to cleaning, and then … there would be a price in place for the additional work … if it was cleaning, unskilled labour, we would go to Proforce. That was the understanding, that was the basis of the Agreement. … I made it clear I would not go to him for specialist engineers or specialist personnel. … Modern Plant … [was] a company that we would go to first, because of their long-standing and the provision of necessary machinery. … The Preferred Supplier Agreement with Proforce, was purely for the cleaning operation."
- My findings of fact in the light of all the evidence and in particular in relation to Mrs Gough's and Mr Bell's evidence (which I prefer to Mr Bloor's account) are set out below.
Mr John Timson
- In 2001 Mr Timson was the National Procurement Manager for the defendant.
In his witness statement Mr Timson said that he could not remember when the Preferred Supplier List was published for Southam, but he believed it must have been during the course of 1999. He added that once the list had been published, those with responsibility for contracting with suppliers were (as a matter of internal company policy) obliged to consult it to find an appropriate supplier. If someone used a supplier that was not on the list, Mr Timson would ring them up or email them to ask why. On some rare occasions there might be good reason for not using a supplier on the list, for example if none of the preferred suppliers had resources available to meet the defendant's requirements. Mr Timson stressed in his statement that inclusion on the list of Preferred Suppliers was no guarantee of work. It simply meant that those suppliers might be given the opportunity to provide workers, depending on what the defendant required at the time. A supplier on the Approved Supplier List would have a greater opportunity of receiving work than if the supplier was not on the list. In practice, however, a supplier on the list might still not get any work at all. The defendant would always assess which supplier was most appropriate to meet the defendant's requirements and what prices were being quoted for the work. Mr Timson added that in every circumstance where he had come across the words "preferred supplier", it has always meant that the supplier would be one of a limited number of suppliers who might be granted the work in question, depending on what the person requesting the work needed. He had never seen the term "preferred supplier" used to refer to exclusive supply of goods or services. If that was what the defendant meant, he would use the term "sole" supplier instead.
Mr Timson emphasised when giving evidence that there was flexibility to choose anybody on a Preferred Supplier List.
Mr Timson struck me as a reliable witness.
Mr Kevin Hayman
- In 2001 Mr Hayman was the Readymix Finance Executive. Mr Hayman explained the contents of spreadsheets from the defendant's accounting system. In particular he provided and explained (1) Proforce Summary Invoice Analysis and (2) Modern Plant Summary Invoice Analysis.
Mr Neville Roberts
- In May 2001 Mr Roberts took up the position of UK Operations Director at Rugby Cement. In his witness statement he said that he remembered that at the time there were a lot of external contractors on site, including workers from Proforce. The defendant's aim in reaching an agreement with Proforce was to ensure that the claimant carried on providing the cleaning services it currently supplied, but with a proper contract in place so that the defendant could budget for the costs. After Mr Bell left Rugby Cement in March 2002, Mr Roberts took over Mr Bell's responsibilities, in addition to his existing role.
- When giving evidence Mr Roberts mentioned that there was a forty five day shut down starting in early November 2001. Mr Roberts said that in his view a preferred supplier "is a supplier who has been vetted by our procurement people, if need be vetted also by our technical people, and almost given a clean bill of health by Head Office, so to speak, to tell the people on the plant that this is a company you can do business with." He added "sole supplier is a different situation. A preferred supplier gives you a choice of companies you can go to. A sole supplier, there is one supplier. … [A preferred supplier] was one of a number of companies you could go to who had been approved by our company."
-
-
- THE SUBMISSIONS OF THE PARTIES
THE CLAIMANT'S SUBMISSIONS
Mr Sweeting QC for the claimant submitted as follows.
- The term "preferred supplier status" is to be construed as meaning:
i) that during the contract period the claimant would be offered the first opportunity to supply contract labour and hire equipment at the Rugby site in preference to other suppliers and:
ii) that the defendant would not obtain contract labour or hire equipment from other suppliers without first offering the claimant a reasonable opportunity of meeting the claimant's requirements.
- Further the contract labour and equipment hire of which the claimant was to be the preferred supplier was:
i) all of the contract labour and equipment hire which the defendant required during the contract period at the Rugby site (the pleaded case) alternatively
ii) all of the contract labour and equipment hire which the defendant required during the contract period at the Rugby site for the purpose of cleaning and oxide shovelling.
- The first and wider meaning relied upon by Proforce is, realistically, only likely to be a negotiated meaning. The second and alternative construction is a proper and reasonable one in the absence of reference to negotiation.
As to negotiated meaning it is common ground that there was negotiation as to what the term "preferred supplier" would mean. The factual dispute turns essentially on the evidence of Mr. Bloor and Mr Bell.
- As to reasonable construction against background, the factual matrix includes the following:
(a) the letter of 23 September 1998.
(b) The letter from "Contract Engineering Sourcing Team", dated 11 November 99.
(c) The meeting on 15 November 1999 between Mr. Eastwood and Mr. Bloor at which the term "preferred supplier agreement" was referred to.
(d) The letter of 17 November 1999 from Mr. Bloor to Mr. Eastwood.
(e) The letter from Mr. Eastwood of 23 November 1999.
(f) The letter from Mr. Bloor of 3 March 2000 to Mr Eastwood.
(g) The fact that Rugby did operate preferred supplier lists at Southam.
(h) The fact that Rugby had entered into preferred supplier agreements.
(i) The novel form of the Contract and the obligations it imposed on Proforce in relation to the purchase and operation of machinery and supply of labour at fixed rates.
(j) The fact that no other contractor was a preferred supplier for cleaning or labour.
- Against this background a proper construction would be that Proforce had the first option in relation to the supply of labour and equipment on the basis of its alternative case as to meaning of the Agreement.
THE DEFENDANT'S SUBMISSIONS
Mr Keith for the defendant submitted as follows.
- The Court of Appeal in this case did not decide that pre-contractual negotiations were admissible in construing the words "preferred supplier status", only that it was arguable that they were: Mummery LJ paras 22 and 38; Arden LJ at para 56; Richards LJ at para. 61; Great Hill Equity Partners v. Novator One & Ors [2007] EWHC 1210 at para. 59, per Field J; Chartbrook v. Persimmon Homes Ltd [2007] EWHC 409 at para. 42 per Briggs J.
- Such negotiations may only be admissible by way of exception to the general rule which remains, that excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in the circumstances referred to by Kerr J in The Karen Oltmann [1976] 2 Lloyds Law Rep. 708, 712, the CA in this case and the Chancellor in Jones v. Bright Capital [2006] EWHC 3151: "the private dictionary" lines of cases. See per Field J in Great Hill Equity at paras 59 and 60.
- The boundaries of the exception remain unclear. In Chartbrook Ltd v. Persimmon Homes Briggs J held at para. 44 that it did not apply so as to assist construction in a case where the disputed term was already defined in the written contract. He also expressed two sound reasons at paras 34 to 42 for keeping the boundaries of the exception to an absolute minimum, namely (a) the availability of the remedy of rectification in a private dictionary situation and (b) the potential adverse effect on third party rights. In addition to those, there is the increased uncertainty and unpredictability in dispute resolution, as demonstrated not only by the history of this case but also by the fact that there have already since February 2006 been four reported cases in which arguments for the admission of extrinsic evidence have either been rejected (Chartbrook Homes, Great Hill Equity and Berkeley Community Villages Ltd v. Pullen & Others [2007] EWHC 1330(Ch), Morgan J. at paras 45 - 48) or described as "not adding a great deal" (Jones v. Bright Capital at para. 25). See the comment of Field J in Great Hill Equity at para. 60: "I am also of the opinion that this is not a case where I should relax the exclusionary principle. On the contrary, these proceedings demonstrate all too clearly the wisdom of Lord Wilberforce's approach" in Prenn v. Simmonds.
- It is submitted that:
(1) the private dictionary exception should not be used so as to contradict or subvert the natural and ordinary meaning of the written agreement as construed in its context, using the ordinary cannons of construction, in circumstances where rectification or estoppel by convention are unavailable;
(2) it should only be used as a last resort, i.e. when the usual cannons of construction do not throw up an answer and some other method of construction is needed to rescue a contract or contractual provision that would otherwise fail for uncertainty;
(3) it should only be used where the evidence shows that a clear agreement was reached as to the meaning of the words in question, reflecting the intention of both parties. This would be the position in the case of rectification: Chitty on Contracts (29th Ed) Vol. 1, para. 5-096.
- The word "preferred" does not mean "sole" or "exclusive". The word "status" does not connote a specific exclusivity obligation, but rather that Rugby will regard Proforce in a particular, recognised way, in common with other suppliers. An analogy would be the list of junior Treasury Counsel, who enjoy no rights to receive work from the Government, and presumably have no right to prevent the Government from instructing counsel from outside the list, but who do enjoy a recognised status which makes it likely that they will receive work from the Government (and others). It would be extraordinary if one short, obscure sentence at the very end of the Agreement could, without more, give rise to something as far reaching as a right to supply all personnel, or equipment to the Rugby site over a two-year period.
- In the absence of any agreement between the parties as to rates for the supply of personnel outside the Contract, or the hire of equipment, or any terms as to the hire of equipment, any notion of Proforce being a sole or exclusive supplier of such personnel or equipment is commercially unrealistic.
- The implied term alleged at paragraph 8(b) of the Particulars of Claim that "the defendant would not engage other suppliers of contract labour and hire equipment without first having offered the claimant a reasonable opportunity of meeting the defendant's requirements in such respects" cannot be implied. This term is also too vague to be workable.
- As to the factual matrix, according to Mr Skelcey, there was in use at Rugby's Southam Site in the period 1999-2000 a list of preferred suppliers. Both Proforce and Modern Plant were on it. Mr Skelcey could use any of the names on the list. If for example, both Modern Plant and Proforce could supply a particular item of hire equipment, he could go to either.
- There is no suggestion that Proforce, or any of the other contractors, was on the list pursuant to any contractual entitlement.
- Rugby also had initiatives to introduce preferred supplier lists nationally (as evidenced by the letter dated 23 September 1998) and in the sphere of engineering (as evidenced by the letter from Dawn Martin to contractors of 11 November 1999). Inclusion of a contractor on a list constituted no guarantee of work. The whole point of the list was that Rugby had agreed rates and response times with the suppliers included on it. Rugby did not use the term "preferred supplier" to refer to the exclusive supply of goods or services. To Mr Roberts, "preferred supplier" was a supplier who was one of a number on a list who had been vetted by Rugby's procurement people at head office.
- In 2001, Rugby had many types of contract labour working at the Rugby site, skilled and unskilled. The most specialist types of personnel were the hardware and software personnel, at approximately £700 per day. Condition monitoring engineers, project managers, even fitters and welders charged skilled rates.
- Mrs Gough primarily used Proforce, Modern Plant and Hansons. Some 20 or more engineering contractors were regularly used. So far as the clinkering work was concerned, there was occasionally some flux between Proforce and Modern Plant as to who did what. The operation of the dust removal varied between Modern Plant and Proforce. If an operation required a bulldozer or an extra piece of equipment, then she would go to Modern Plant. Modern Plant had such equipment readily available on site. Modern Plant had a long-standing commercial relationship with Rugby. They were regarded as a good contractor, they had very strong ties with the Rugby workforce and it would have been a big deal to move the work away from them.
- Unlike Modern Plant, Proforce owned no heavy equipment other than a mini-digger. If it was to supply any equipment to Rugby, it would have to hire the equipment in and cross-hire it out. It did not have the operators on its books to use it. Rugby had occasionally hired equipment from Proforce in the past, but it was not Mrs Gough's practice to do so. Proforce had less bargaining power than Rugby in obtaining prices from third parties for e.g. the hire of equipment. In addition, Proforce as middle-man would have sought to charge a mark-up.
- Proforce charged out all its labour at a flat rate of £12.75 an hour. It only had unskilled labour on its books. Proforce was not asked by Rugby to provide skilled personnel.
- As to the negotiations, in relation to the supposed exclusivity for the hire of equipment, this never formed part of Proforce's case or Mr Bloor's evidence until the Particulars of Claim.
- Mr Keith pointed out that it is common ground that the defendant performed its obligation to pay to the claimant £11,837 per week in respect of Proforce Service Team Charges and Equipment Charges as set out in the Agreement during the two year period of the Agreement. He submitted that at all material times in effect the defendant accorded to Modern Plant and Hansons the status of preferred suppliers to the Rugby site. Mr Keith further submitted that to the extent that the defendant used other providers of personnel or machinery for the purposes of cleaning at the Rugby site during the two years from 31 July 2001 (a) the defendant was not precluded from doing so by the terms of the 'Service Cleaning Contract' and (b) it was open to the defendant at any time in effect to accord the status of preferred suppliers to further suppliers.
ANALYSIS AND CONCLUSIONS
THE RELEVANT LEGAL PRINCIPLES
- In Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 912H-913E Lord Hoffman summarised the principles by which contractual documents are construed as follows:
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. … ."
In relation to principle (2) Lord Hoffman confirmed, in BCCI v Ali, [2002] 1 AC 251, 269[39], that
"When … I said that the admissible background included "absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man", I did not think it necessary to emphasise that I meant anything which a reasonable man would have regarded as relevant.
I was merely saying that there is no conceptual limit to what can be regarded as background. It is not, for example, confined to the factual background but can include the state of the law (as in cases in which one takes into account that the parties are unlikely to have intended to agree to something unlawful or legally ineffective) or proved common assumptions which were in fact quite mistaken. But the primary source for understanding what the parties meant is their language interpreted in accordance with conventional usage: "we do not easily accept that people have made linguistic mistakes, particularly in formal documents". I was certainly not encouraging a trawl through "background" which could not have made a reasonable person think that the parties must have departed from conventional usage".
- In BCCI v Ali [2002] 1 AC 251, 259[8] Lord Bingham said: -
"In construing … any other contractual provision, the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties' intentions the court does not of course inquire into the parties' subjective states of mind but makes an objective judgment based on the materials already identified."
- In The 'Tychy' [2001] 2 Lloyd's Rep 403, 409[29]. Lord Phillips MR said: -
"Before taking extrinsic evidence into account, it is important to consider precisely why it is said to assist in deciding the meaning of what was subsequently agreed and to consider whether its relevance is sufficiently cogent to the determination of the joint intention of the parties to have regard to it.' It is also important, though not always easy, to identify what is extrinsic to the agreement and what forms an intrinsic part of it. When a formal contract is drawn up and signed, care must be taken to distinguish between admissible background evidence relating to the nature and object of the contractual venture and inadmissible evidence of the terms for which each party was contending in the course of negotiations."
- In Sirius International Insurance Co. v FAI General Insurance Ltd and others [2004] UKHL 54, Lord Steyn said at paragraph 19: -
"There has been a shift from literal methods of interpretation towards a more commercial approach. In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191, 201, Lord Diplock, in an opinion concurred in by his fellow Law Lords, observed: "if detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense." In Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 771, I explained the rationale of this approach as follows:
"In determining the meaning of the language of a commercial contract … the law … generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language."
The tendency should therefore generally speaking be against literalism. What is literalism? It will depend on the context. But an example is given in The Works of William Paley (1838 ed), vol III, p 60. The moral philosophy of Paley influenced thinking on contract in the 19th century. The example is as follows: the tyrant Temures promised the garrison of Sebastia that no blood would be shed if they surrendered to him. They surrendered. He shed no blood. He buried them all alive. This is literalism. If possible it should be resisted in the interpretative process. This approach was affirmed by the decisions of the House in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 775E-G, per Lord Hoffmann and in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913D-E, per Lord Hoffmann."
- The court may not look at the subsequent conduct of the parties to interpret a written agreement (Lewison, The Interpretation of Contracts 3rd edn, paragraph 3.12 and the cases there cited).
- Drafts of the contract and preparatory negotiations may not in general be relied upon in interpreting the contract which the parties eventually make. But a concluded antecedent agreement may be relied upon in interpreting a later instrument made pursuant to the agreement (Lewison, supra, para 3.05).
- Although the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent
"If the contract contains words which , in their context, are fairly capable of bearing more than one meaning, and if it is alleged that the parties have in effect negotiated on an agreed basis that the words bore only one of the two possible meanings, then it is permissible for the Court to examine the extrinsic evidence relied upon to see whether the parties have in fact used the words in question in one sense only, so that they have in effect given their own dictionary meaning to the words as the result of their common intention." Kerr J in The Karen Oltmann [1976] 2 Lloyd's Rep 708 at 712.
It follows that exceptionally evidence of what the parties said in negotiations may be admissible to show that the parties negotiated on an agreed basis that the words used bore a particular meaning.
When this case was before the Court of Appeal [2006] EWCA Civ 69 Arden LJ said "In this case, the parties have used a very unusual combination of words ("preferred supplier status"). These words are undefined and they are not introduced or accompanied by any words of explanation. In those circumstances it is in my judgment reasonably arguable that on their true interpretation those words bear the meaning that the parties in common gave them in their communications leading up to the signing of the agreement. In admitting evidence as to those communications, the court would be hearing that evidence not with a view to taking the parties' subjective intent into account for the purposes of interpretation (a purpose precluded by the principles laid down by Lord Hoffmann in the ICS case) but for the purpose of identifying the meaning that the parties in effect incorporated into their agreement in circumstances where the court was satisfied that on their true interpretation the terms of the agreement were to have this effect."
(See further Lewison supra para 3.05 and the analysis of the authorities by Briggs J in Chartbrook Ltd v Persimmon Homes Ltd [2007] EWHC 409 Ch).
ANALYSIS
- No assistance is afforded to the claimant by the decision of the Court of Appeal in Dunblane Property Ltd and Motorcare Holdings Ltd [2003] EWCA Civ 1033. In that case the meaning of the words 'Preferred Supplier' in the agreement in question was the subject of an express definition in four paragraphs of the agreement.
- The central issue in the present case is as to the meaning of the clause in the Service Cleaning Contract: -
"This Contract will be of a minimum two year period and will be re-negotiable at the end of that period. During that period Proforce will hold preferred supplier status."
- Exceptionally evidence of what the parties said in negotiations may be admissible to show that the parties negotiated on an agreed basis that the words used bore a particular meaning.
- The present case serves to illustrate some of the difficulties with this (the agreed dictionary) exception to the rule that the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. It is in my opinion important that it should be recognised that this is an exception which will seldom arise in the interpretation of commercial contracts. If commercial parties wish to contract on the basis of their own dictionary meaning, they might be expected to include that dictionary meaning in the contract itself. (The parties in Dunblane Property Ltd supra set out an express definition in their agreement). Where the parties have included their own dictionary meaning in the contract itself, the exception will not apply. Where the agreement is silent as to the meaning of the words in question, and those words have been used in a particular sense in correspondence preceding the agreement (which forms part of the factual matrix), it would be surprising if commercial parties intended to contract on the basis of some other meaning, without saying so in the contract. The exception under consideration should not be allowed to become a means, regularly adopted by litigants, of attempting to circumvent the fundamental principle that generally the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.
- It is convenient in the first place to construe the words "During [a two year] period Proforce will hold preferred supplier status" by reference to the principles summarised by Lord Hoffman in Investors Conversation Scheme v West Bromwich Building Society as explained in subsequent authorities, leaving on one side for the moment, consideration of whether the agreed dictionary exception applies – i.e. whether the parties negotiated on an agreed basis that the words used bore a particular meaning.
- To ascertain the intention of the parties the Court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the contract, the parties' relationship and all relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties' intentions the Court does not inquire into the parties' subjective states of mind, but makes an objective judgment.
- If the intention of the parties was to confer contractual rights or obligations by use of the words "preferred supplier status" they might have been expected, in the context of this particular contract, to explain the nature and extent of those rights and obligations. It is to be noted that detailed Terms & Conditions were annexed to the Contract. These have no bearing on the words "preferred supplier status". They provided by condition 9.2: "This Agreement together with any other document expressed to be incorporated herein constitutes the entire [contract] between the parties and supersedes all prior representations, agreements, negotiations or understandings whether oral or in writing."
- The word "status" is not a word which is ordinarily used when defining express rights or obligations. The words "preferred supplier status" do not convey any form of exclusive right. "Preferred" does not in context mean "exclusive", it means "approved".
- The background or matrix of fact in the present case included the correspondence set out above under the heading Background. That correspondence contained the words "preferred supplier". The correspondence referred to two distinct matters (a) "a tendering exercise" (the claimant defeated two rivals in successfully tendering for the supply of the personnel and the provision of the equipment in the 'Service Cleaning Contract'); and (b) "preferred supplier list"/"approved supplier lists". The words "approved" and "preferred" were used interchangeably in the letter of 23 September 1998.
- It is important to note that the contract in question was a 'Service Cleaning Contract' relating to the Rugby site (and no other site operated by the defendant). Thus the words "preferred supplier status" appear in the context of a contract for particular services (service cleaning as set out in the Contract) at a particular site (the Rugby site). In my judgment the meaning which the words "preferred supplier status" would convey to a reasonable person having all the background knowledge reasonably available to the parties, would be consistent with the meaning of "preferred supplier" found in the letters that preceded the Contract. In the light of the relevant background, preferred meant approved. Thus I would construe the words "preferred supplier status" as meaning that in relation to the provision of personnel to the Rugby site for cleaning services of the nature referred to in the 'Service Cleaning Contract', the defendant acknowledged that the claimant was of sufficient standing to justify the status of a preferred/approved supplier for such services. Thus there would be no need for the claimant to undergo any further "tendering exercise … carried out by a Labour Sourcing Team" (see the letter of 23 November 1999) or any other process of evaluation. Although the previous correspondence had referred to preferred/approved supplier lists(s) the Contract used the word "status" which did not necessarily connote inclusion on a list. 'Preferred supplier status' did not mean sole supplier status or a supplier who could expect to be approached first. It was for the defendant to designate from time to time other suppliers to be accorded similar status. Nor was there any obligation on the part of the defendant to offer any particular contract to one of the companies that had achieved preferred supplier status. The defendant did not commit itself to only doing business with such suppliers. (The letter of 23 September 1998 expressed an aim (not a commitment) when it said "Rugby Cement will seek only to do business with [such] suppliers.")
- I turn to consider the agreed dictionary exception - whether exceptionally evidence of what the parties said in negotiations shows that the parties negotiated on an agreed basis that the words "preferred supplier status" bore a particular meaning, other than that set out above.
- It is important to distinguish between on the one hand evidence (which is exceptionally admitted) of what the parties said in negotiations, to show that the parties negotiated on an agreed basis that particular words used bore a particular meaning, and on the other hand declarations by the parties of subjective intent, the parties' subjective states of mind or evidence to similar effect. Once evidence is admitted in connection with an alleged agreed meaning, experience in this case shows that there is a real danger that this distinction may be ignored or become blurred.
- My findings of fact in the light of all the evidence and in particular in relation to Mrs Gough's and Mr Bell's evidence (which I prefer to Mr Bloor's account), are as follows.
1. There was no agreed meaning as alleged by the claimant (the term "preferred supplier status meant that during the contract period the claimant would be offered the first opportunity to supply contract labour and hire equipment at the Rugby site in preference to other suppliers"). Mr Bell made it plain to Mr Bloor that there was no question of the defendant agreeing to this. Further, for the reasons set out above, the case and meaning advanced at trial by Mr Bloor when giving evidence was in my opinion wholly improbable in commercial terms.
2. The words "preferred supplier" were, together with the word "partnership", drawn from the letter of 23 September 1998. Mr Bell had made it clear that he would not accept any suggestion of partnership. He was prepared to accept that the claimant would be accorded preferred or approved supplier status in relation to the provision of personnel for cleaning services of the nature referred to in the 'Service Cleaning Contract', in the sense referred to in the earlier correspondence. This may have given the claimant a "badge" in the sense mentioned by Mr Bell, but did not give rise to any "contractual entitlement".
3. To the extent that Mr Bell said anything in evidence which went beyond his witness statement or the above
(a) it is necessary to distinguish between what was said and what Mr Bell may now think he expected to happen.
(b) in commercial cases the best guide to what happened is frequently found in the documents. If and to the extent that the parties accorded to the words "preferred supplier status" any agreed meaning it was the meaning in the earlier correspondence – a preferred (or approved) supplier among other preferred (or approved) suppliers who might change from time to time, it being for the defendant to select which (if any) preferred supplier to approach for any particular requirement.
4. It is to be noted that at one point when giving evidence Mr Bloor said that the meaning of the words "preferred supplier" that the defendant "put in [the earlier] letters was exactly what I believed they were going to do" and was the same meaning that he understood had been arrived at in the negotiations with Mrs Gough and Mr Bell.
- Mr Sweeting QC, whose conduct of the claimant's case throughout was impeccable, accepted (correctly in my view) that the wider meaning relied upon by Proforce is, realistically, only likely to be a negotiated meaning. The second and alternative construction is (he submitted) a proper and reasonable one in the absence of reference to negotiation. I find that the wider meaning contended for was not agreed. It follows from Mr Sweeting's concession that the dictionary meaning exception has no application, and that the general principles by which contractual documents are construed (which exclude from the admissible background the previous negotiations of the parties and their declarations of subjective intent) apply.
- For completeness I should record that in my opinion the words "preferred suppliers status" do not import any obligation on the part of the defendant "that the defendant would not obtain contract labour or hire equipment from other suppliers without first offering the claimant a reasonable opportunity of meeting the claimant's requirements" as contended for by the claimant. No express obligation to this effect can be spelt out of the words in question. Further, in my opinion there is no basis for implying a term to this effect. I do not consider that such a term is necessary to give business efficacy to the contract. Nor do I consider that such a term represents the obvious, but unexpressed, intention of the parties.
I find that at all material times the defendant in effect accorded to Modern Plant and Hansons the status of preferred suppliers to the Rugby site. Mrs Gough said that predominantly she used Proforce, Modern Plant and Hansons. On the engineering side, she said, the defendant dealt with about twenty contractors. I accept the defendant's submission that to the extent that the defendant used other providers of personnel or machinery for the purposes of cleaning (or any other work) at the Rugby site during the two years from 31 July 2001 (a) the defendant was not precluded from doing so by the terms of the 'Service Cleaning Contract' and (b) it was open to the defendant at any time in effect to accord the status of preferred supplier to further suppliers.
- It follows that for the reasons set out above the claim fails.
