How to Protect the Honest Contractor

Trant Engineering Limited (TEL) was hired by the Ministry of Defence (MOD) to construct a power station at Mount Pleasant Complex in the Falkland Islands. During the tender period for that project, it employed the claimant, Mott McDonalds Limited (MML), to supply design consultancy services. MML was paid a modest amount for this service, however, it was envisaged in further accords in the case the offer was prosperous. MML’s bid to the MOD was favourable. In July 2016, MML emailed TEL enclosing a contract expressing that it required to be signed, joined with documents consisting of the terms of payment including a plan for monthly payments to be made from June 2016 to September 2018; it also contained rates as regards of any additional work. In clause 1.11.7, there was a provision in relation to the intellectual property which stated ‘Upon full payment of the fees due under the consultancy agreement the consultant shall grant to the client an irrevocable royalty-free non-exclusive licence to use all rights…’  MML was in receipt of the documents and the contract, yet he did not follow up and did not, at any step before their disagreement, sign and return the papers to the TEL. TEL did not itemise bills regarding intermittent payments, although it was set out in their contract. Nevertheless, MML effectuated two payments, each of £250,000 plus VAT following invoices sent at the beginning of 2017.

In April 2016, TEL emitted an invoice to MML calling for the sum of £475,000 plus VAT. MML did not pay the cost and even with the provisions included in the contract, MML did not declare a pay less notice informing that it would be paying less than the sum asked. On 30 May 2017, MML delivered a notice articulating that it would cease tasks within seven days unless the payment of £475,000 plus VAT was made by 2 June 2017. On 2 June 2017, MML declined access to the servers hosting the design data by invalidating the passwords that had been sent in March 2017 to TEL. By letter on 9 June 2017, TEL declared that there was no contract between the parties and that, because the pending sum persisted not settled, it arrested all work with immediate effect, implementing its copyright and intellectual property rights in respect of the design data furnished thus far. MML, therefore, made an application for an interim injunction for that the TEL gives means of entry to use all that design data either by itself or by other third parties in connection with the project.

Section 37 of the Senior Courts Act empowers the court, by order, whether interlocutory or final, to grant an injunction in all cases in which it appears to the court to be just and convenient to do so. The applicable test is set out in the famous decision of American Cyanamid Co. First, whether there is a serious question to be tried; second, if there is, whether damages would be an adequate remedy for a party injured by the false grant of or its failure to grant an injunction; third, if damages are not an adequate remedy, whether the balance of convenience lies in granting or refusing the injunction. In the current matter, it is about a mandatory injunction. The relevant guidance is established in Nottingham Building Society v Eurodynamics Systems; first, this being an interlocutory matter, the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be wrong; second, when considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo. Third, it is legitimate, where a mandatory injunction is sought, to consider whether the court does have a high degree of assurance that the claimant will be able to establish this right at a trial. Fourth, even where the court is unable to feel a high degree of assurance that the claimant will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage such as the risk of injustice if the injunction is refused sufficiently outweigh the risk of injustice if it is granted.

It was said that it was uncertain whether there was a contract between the parties. From my point of view, there was a binding contract – although the claimant had never returned the contract to the defendant, under English contract law, the key requirements to establishing a binding contract by conduct in English law were present, and the judge formulated that MML continued to carry out its services in accordance with the contract’s provisions, regardless of an express acceptance. A clause of the contract clearly stipulated that the data would be granted after the completion of the whole payment. TEL indicates that the claimant amplified the ground of the interim injunction since the design documents had already been delivered in pdf form. The claimant’s position was that without access to the database, the project could no longer progress, and he would be obliged to start the project from nil. The claimant also introduced fees and terms’ matters and was told that its services’ scope had not been finalised and agreed upon. However, the judge acknowledged that the terms of the contract and MML’s scope of services were adequately delineated. The injunction’s principle is that it should not be granted when damages would be an adequate remedy, under section 37.

In my view, damages would have been an ample remedy. The court concluded that MML’s losses would not be just pecuniary given that this is a segment of a broader plan to benefit the Falkland Islands, and that damages would not be a decent remedy since the losses on a project of this nature would far surpass the £1 million limit on damages recoverable from MML under their contract. Conceding that, I think that, still, there was a contract. MML should have reacted from the outset – his attitude was not that of a professional. In addition, TFL’s position was that there was no real evidence that the claimant would have to do it over again. The court allowed the status quo, ordering MML for access to the design data he can progress the project, while he ordered MML to pay supposedly the pending sum to the TFL, while in fact, the sum proposed by the MML should have been the compulsory guarantee required in the event the defendant would be found successful later at trial. I believe that the ruling was unfair and inconsistent. The claimants’ complaint, just like his behaviour, was frivolous, and vexatious. The court had all the evidence to protect the defendant and should have refused to grant an interim injunction, which would have saved him later from another bad bargain.