No: HT 03 193
Neutral Citation Number: [2004] EWHC 2357 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
St Dunstan’s House
133-137 Fetter Lane
London EC4A 1HD

Friday, 30 July 2004

B e f o r e:

HIS HONOUR JUDGE TOULMIN CMG QC

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CITY CONNECT MANAGEMENT LIMITED
CLAIMANT
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TELIA INTERNATIONAL CARRIER UK
TELIA SONERA AB
DEFENDANTS
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Tape Transcription of Smith Bernal WordWave Limited,
190 Fleet Street London EC4A 2AG,
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)

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MR P RALLS QC (Mr Robert Temmink for judgment) (Instructed by Messrs Paul Roberts Solicitors) appeared on behalf of the Claimant

MR J MARRIN QC  (Mr Adam Constable for judgment)(Instructed by Messrs Harbottle Lewis) appeared on behalf of the Defendants
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J U D G M E N T
Friday, 30 July 2004

J U D G M E N T

HIS HONOUR JUDGE TOULMIN CMG QC:    
1.	This is a claim by City Connect Management Limited (“City Connect”) against Telia International Carrier UK Limited and Telia Sonera AB (sued as Telia AB).  In the course of the hearing the parties made no real distinction between the first and second defendants and I refer to them both as Telia, except where, rarely, it is necessary to make a distinction between the UK International company and the Swedish parent company.
2.	The litigation concerns a project for the financing and development of land and premises at No.443 to 451 Westferry Road, London E14 on which Telia had a 35 year lease derived from the freeholder, Hilcourt (Docklands) Limited (“Hilcourt”).  The lease was acquired from Hilcourt on very onerous terms.
3.	City Connect claims that in about September 2001 Telia engaged the services of City Connect in connection with the financing and building of a data centre on the site in connection with Telia’s international communications business.
4.	During the period between September 2001 and May 2002 when the project was abandoned before contracts were signed, City Connect says that it expended very substantial time and professional expertise on setting up the project for which it is entitled to be paid.  It says that it also has received small claims from professionals which it instructed whose fees should also be paid by Telia.  It claims the sum of £300,000 in respect of its own fees, and it claims the fees and abortive costs of the solicitors, Trowers and Hamlins, and a small sum in respect of the contractors, Fairbrothers.
5.	Telia agrees that it approached City Connect in about September 2001 to help it to secure funds for the development which it was about to undertake and to help it to reach an agreement with the freeholder, Hilcourt, under which a single purpose vehicle would be set up to obtain the benefit of the lease.  It agrees that it approached City Connect also to assemble a team to develop the site with Telia and to employ a contractor to build the data centre to Telia’s specification. 
6.	Telia says that City Connect knew that City Connect’s involvement in the project was conditional upon it being able to obtain finance for the project.
7.	Further, Telia contends that City Connect initiated the project as a speculative venture out of which, if the project was successful, City Connect would make very substantial profits.  Telia claims that in these circumstances, City Connect was prepared to spend its own time and money to bring the project to fruition.
8.	In order to focus the case, the parties have set out the following issues on liability: (1) Was the agreement made in late October 2001 between Telia and City Connect subject to contract?  (2) Did liability under such agreement arise if the project did not proceed because finance was not available?  (3) Is Telia estopped by representation from denying liability to pay reasonable costs and expenses to City Connect?  (4) Is Telia estopped by convention from asserting that it is not liable to pay City Connect’s reasonable fees and expenses?
9.	Two issues have not been pursued.  It is agreed that Mr Brown, Telia’s director of local services, did have authority to contract on behalf of Telia.  City Connect no longer pursues a claim in restitution.  In the event that City Connect is successful, I must assess quantum.
Contentions of the Parties
10.	City Connect’s case is that an agreement to pay abortive fees was made in October 2001 at the meeting of 16 October 2001 where, so it says, the minutes record an agreement in these terms:
“Telia agreed to pay all City Connect’s abortive costs if the deal was not signed by mid-December.”  
11.	City Connect further contends that the case is strengthened by the request for the minutes of the meeting to be amended by Mr Jackson, Telia’s Director of Procurement and Supplier relations in England.  This took place at the following meeting on 2 November 2001 where it is noted that:
“Telia agreed to pay all reasonable professional costs not all costs.” 
This, City Connect says, amounted to an acknowledgement that Telia agreed to pay all City Connect’s reasonable professional costs.
12.	City Connect contends that the agreement took effect on the commencement of the professional formalities.  The expression “professional formalities” meant, so it is said, the point where City Connect started to put together the team and do the work.  It argues that as a matter of construction the words “subject to formal contract” which appeared in correspondence between City Connect and Telia at that time, were not intended to apply to the arrangement that Telia would pay these costs in the event that contracts were not signed.  
13.	City Connect also contends that the liability of Telia to pay the fees applied even if the project did not proceed because finance was not available.  It points to a letter from Mr Joiner, its solicitor, dated 21 November 2001 and the instructions which it says Mr Brown of Telia gave DLA, Telia’s solicitors. 
14.	The case on estoppel is that Telia represented to City Connect, and it was the common understanding of the parties, that reasonable abortive costs would be paid.  On the evidence, City Connect says there is no distinction to be made between estoppel by representation and estoppel by convention.  
15.	Telia’s case is that the correspondence initiated by Mr Almond’s letter of 16 October 2001 on behalf of City Connect, was intended to be and was understood to be subject to contract in the conventional sense.  This included all the proposals, including those relating to payment of fees in the event that the project did not proceed.  
16.	Telia also claims that the minutes of the meeting on 16 October 2001 must be read in the light of Mr Mellish’s lack of understanding of the surrounding circumstances, the fact that other parties were present, and that this was a meeting for a different purpose.
17.	Telia contends that the minute does not reflect the full discussion between the parties on abortive costs, that discussions were taking place elsewhere and that any agreement was, in any event, subject to contract.  Telia also claims that the December date mentioned in the minutes was known by City Connect not to be the trigger since City Connect made no claim for payment of abortive costs at that date.  
18.	Telia further contends that the “subject to contract point” is reinforced by the fact that City Connect’s witnesses accepted that discussions between the solicitors on both sides over the draft undertaking of Telia to pay abortive costs, were a continuation of the negotiating process that had started earlier.  These negotiations were never concluded.  City Connect’s solicitors, Trowers & Hamlins, said in a fax as late as 7 February 2002 that it was the intention of City Connect that the abortive costs agreement should be put in place.
19.	If, contrary to Telia’s submission, any agreement was achieved, Telia claims that it could only have been on the basis spelt out in the undertaking drafted by Telia’s solicitor, Mr Watson of DLA, that it would only apply if the sole reason for proceeding was the unwillingness of Telia to enter into the agreement to redevelop the site with financing arranged by City Connect.  Telia says that this event did not occur.  There was no unwillingness on the part of Telia to proceed with the deal.  The deal and City Connect’s part in it was rendered impossible of performance because Hilcourt rejected it.  Hilcourt finally vetoed City Connect’s participation in a letter dated 9 April 2002.
20.	Finally, Telia contends that it made no representations which could give rise to an estoppel.
The Law
21.	In examining the facts in this case it is important to have in mind the well-established principles of construction of contracts.  The starting point is the general principles on construction of contracts summarised by Lord Wilberforce in Prenn v. Simmonds [1971] 1 WLR 1381.  He said as follows:
“The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations.  … We must … enquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view.”

22.	What Lord Hoffmann described in Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 All ER 98 at 114 as the “fundamental change in the law brought about by Prenn v. Simmonds”, was carried forward in other cases and crystallised in Lord Hoffmann’s speech in Investors Compensation Scheme v. West Bromwich Building Society.  
23.	He said that the principles may be summarised 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: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] 2 WLR 945.
	(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense 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.” 
24.	It is agreed by the parties that the law is that ordinarily the qualification “subject to contract” will continue to apply unless expunged by express agreement of the parties or by necessary implication: see Cohen v. Nessdale [1982] 2 All ER 97.  
25.	It is also important to note that although extrinsic evidence is limited in the way set out above, in construing a concluded contract it is admissible to ascertain or interpret the intention of the parties where the document in question is not the formal and conclusive expression by the parties of their agreement: see Chitty (29th Ed) paragraph 12-107 and Orion Insurance Co v. Sphere Drake Insurance [1992] 1 Lloyd's Rep 239 at 273 and 301.
26.	Also, where an agreement is partly written and partly oral, subsequent conduct may be examined for the purpose of determining what were the full terms of the contract.  
27.	Finally, City Connect rely on the doctrine of estoppel.  They cite the passage of Lord Denning MR in Amalgamated Investment & Property Company v. Texas Commerce International Bank [1982] QB 84 at 122, approved by Lord Templeman in Attorney General for Hong Kong v. Humphreys Estate [1987] 1 AC 114 at 124.  Lord Denning said: 
“When the parties to a transaction proceed on the basis of an underlying assumption - either of fact or of law - whether due to misrepresentation or mistake makes no difference - on which they have conducted the dealings between them - neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so.”
28.	City Connect also relies on the decision of the High Court of Australia in Walton Stores (Interstate) Limited v. Maher [1988] 164 CLR 387 where the court held that it would be unconscionable for a party to stand by in silence when it must have known that the other party was proceeding on an assumption that they had an agreement and that completion of the formal signing of the lease was a formality.
29.	Telia points out that the doctrine of estoppel can be relied on as a shield but not as a sword, see Chitty (28th Ed.) volume 1, paragraph 3-100.  Properly described, the doctrine excuses (at least temporarily) the performance of the original obligation.  There is little or no support in law for the proposition that it can create or waive an obligation under a contract where there is no contract.  On the other hand it is relevant to consider whether, even if in principle, an agreement is subject to contract, in fact the parties have in fact entered into limited binding agreements in the course of negotiations.  
30.	For completeness, I should add that I accept as matters of law the claimant’s propositions that the law does not require the judge to attribute to the parties an intention which they plainly could not have had: see Investors Compensation Scheme v. West Bromwich Building Society, and that the fact that the parties might contemplate the possibility of a further written agreement, does not prevent the original agreement being effective: see Branca v. Cabarro [1947] KB 857.
The Facts
31.	The background to the project is not in dispute.  On 15 September 2000, Telia entered into a lease with Hilcourt for a term of 35 years with no break clauses in respect of the land and buildings at Westferry Road, London, E14.  The terms were very disadvantageous to Telia.  As a term of the lease, Telia agreed to carry out substantial works on site with the intention of creating a purpose-built data centre.  Telia was not only required to develop the site within the first half of the first five year term, but the lease was also subject to five-yearly rent reviews based on the current (i.e. enhanced) value of the site.  Telia would be redeveloping the site to a significant extent for the benefit of Hilcourt.  Telia wished not only to redevelop the site, but also to renegotiate the lease.
32.	It appears that in the Spring of 2001, Telia approached a construction firm which produced a specification which was not proceeded with.  In about May 2001, Telia engaged Malcolm Harris of Saradan Design and Management to assist in evaluating the specification and thereafter to assist as project manager.  In June 2001, Mr Brown of Telia entered into a contract with Miller Walmsley to provide design services for Telia and to undertake a role as appraisers of tenders and auditors of building services which were being provided for Telia.
33.	There were also ongoing discussions at this time between Telia and Mr Fisher of Hilcourt to try to renegotiate the rent review clause.  Hilcourt was taking a hard line in such negotiations (as they were entitled to do).  
34.	Mr Brown was introduced to City Connect in August 2001 and there were initial discussions on 29 August 2001.  These discussions continued in September 2001.  Telia was hoping that City Connect would provide an answer to its financial problems.
35.	The ideas from City Connect came from Mr Almond, who was retained as a consultant by City Connect.  It appears that he put his proposal to Mr Etheridge, one of the two directors of City Connect.  City Connect agreed that he could carry it forward.  Mr Almond was not permitted, for legal reasons, to carry the project forward on his own.  
36.	In evidence Mr Etheridge said that he oversaw the project on behalf of City Connect.  He was a rather unimpressive witness, with a poor memory for detail.  I am not clear how much control he had over City Connect’s side of the project, but it is not relevant to the issues I have to decide.  I certainly cannot accept as a starting point Mr Etheridge’s assertion that he would never have embarked on the project if City Connect’s fees had not been guaranteed by Telia.  
37.	It is clear that Mr Almond took the lead in the discussions with Telia and Hilcourt on behalf of City Connect.  He was a reasonably reliable witness, although I cannot accept all his evidence.
38.	There was an initial meeting between Hilcourt, Telia and City Connect on 28 September 2001.  Arising out of the meeting, Mr Brown confirmed to Mr Ian Smith of Hilcourt that Telia was in discussions with City Connect “and specifically David Almond with a view to structure a solution to the Westferry Road matter”.  
39.	The outline of the proposal was set out in Mr Almond’s letter to Mr Fisher of Hilcourt dated 4 October 2001 as follows:
“A.  City Connect to purchase your above freehold interest for the sum of £23.5 million (twenty-three million five hundred thousand pounds).
B.  Alternatively City Connect would be prepared to purchase your freehold interest for the sum of £14.5 million (fourteen million five hundred thousand pounds) subject to an arrangement for a term of 35 years whereby you are paid a sum of £1 million p.a. (one million pounds per annum) subject to a 3.3% compound annual increase per annum.  
The above is subject to satisfactory financial guarantees which we would supply on agreement of terms, together with terms safeguarding your position over the full term of 35 years.”  
40.	It is noteworthy that City Connect is a £100 company and that the only way this agreement could be achieved would be by City Connect being able to arrange the necessary finance.  The financial position of City Connect was known to Telia who understood that, in retaining services of professionals who would be working on the project, City Connect had no significant financial resources themselves.
41.	On 8 October 2001 Mr Fisher of Hilcourt wrote to Mr Brown of Telia expressing a willingness on the part of Hilcourt to discuss Mr Almond’s proposal, but making it clear that if the discussions were unsuccessful, Telia would be required to go ahead with building the facility under the terms of the existing lease.  He said that the price for Hilcourt accepting surrender of the lease was £35 million.  The current offer of £23.5 million fell significantly short of this.  
42.	In relation to City Connect, Mr Fisher said cautiously:
“3.  I have no knowledge of City Connect beyond the fact that I knew David Almond many years back when he was a commercial property agent and am concerned as to their ability to raise finance especially in the present climate.  It would not be in either of our interests to go into any detailed discussions with City Connect without knowing their source of finance and meeting their advisors and receiving suitable guarantees.”  
43.	On 16 October 2001, Mr Almond wrote to Mr Fisher on City Connect notepaper.  The letter confirmed that City Connect was prepared to purchase a long leasehold interest on Westferry Road “on the following terms and conditions and subject to formal contract”.  The terms followed the general outline set out in the letter of 4 October 2001.
44.	In paragraph 6 of the letter, the sum offered to be paid for the surrender of the lease was increased to £24 million for the granting of a long leasehold interest.
45.	Paragraph 8 of the letter referred to the reimbursement of Hilcourt’s costs in these terms:
“8.  On commencement of legal formalities, all reasonably incurred professional costs to be reimbursed by Telia AB in the event of negotiations proving abortive through the action of Telia AB or City Connect.”
46.	This letter was copied to Mr Brown of Telia, Mr Hallam of DLA, the solicitors then acting for City Connect, and Mr Watson at a different office of DLA, as solicitors acting for Telia.  
47.	Also on 16 October 2001, Mr Almond wrote to Mr Brown at Telia’s London address.  This letter was also copied to Mr Hallam and Mr Watson.  The letter  enclosed the offer letter to Mr Fisher.  The letter then went on to outline ten separate points.  Points 9 and 10 are as follows:
“9.  We would look to all reasonable costs incurred on commencement of formalities in the event of Telia AB not proceeding to be payable by Telia AB.
10.  We would confirm that all matters discussed and negotiated by City Connect in relation to all matters relating to its development of 443-451 Westferry Road London E14 and confidential between the parties and are not to be used in connection with any negotiations with any third party unless specifically agreed upon.”  
48.	City Connect says that these two paragraphs are freestanding and are not part of the composite offer which is confined to paragraphs 1 to 8 and is subject to contract.  
49.	Mr Almond gave evidence that paragraphs 9 and 10 had not in fact been the subject of previous discussions between him and Mr Brown.  Mr Brown said in evidence that there had been outline discussions.  He regarded this letter as City Connect’s formal proposal which Telia would consider.  Thereafter, each party had to formalise the proposal into a written agreement.  
50.	I am satisfied that this letter was an offer which contained a number of terms which required agreement.  At this stage, paragraphs 9 and 10 were not put forward as part of a separate discussion as to what City Connect might be paid in the event that work was carried out on a project which did not come to fruition.  I find that paragraphs 9 and 10 of Mr Almond’s letter of 16 October 2001 did not evidence a separate concluded agreement in relation to abortive fees, the position for which City Connect contends.
51.	There was a meeting on 23 October 2001 at which Mr Etheridge and Mr Almond were present for City Connect.  Mr Harris (presumably in his role as project manager) was representing Telia, and Mr Parkin was present on behalf of McAlpines, who were at that stage the preferred contractors.  This meeting discussed the projected works.  It was to be followed by a meeting on Friday, 26 October 2001.
52.	 Before this next meeting, Hilcourt had made its counter-offer in response to Mr Almond’s letter.  It agreed the premium for the surrender of the lease at £24 million and set out various conditions which appear to have been within the negotiating range of Mr Almond’s letter.  
53.	In relation to fees incurred by Hilcourt it proposed:
“3.  On commencement of the legal formalities Telia AB to put in an escrow account the sum of £250,000.  If the transaction fails to materialise due to Telia or City Connect then this money is released to HD [Hilcourt].
5.  Each party to bear their own professional fees and stamp duty liability.”
54.	The meeting of 26 October 2001 is crucial to City Connect’s case.  Mr Brown, Mr Jackson and Mr Harris represented Telia.  Mr Almond represented City Connect.  Mr Mellish and Mr Parkin of McAlpine were also present.  The note on which City Connect relies was made by Mr Mellish, principal of an independent company carrying on business as quantity surveyors.  
55.	In oral evidence Mr Mellish gave the background to the meeting from his point of view.  He said that he was appointed just before the date of the meeting.  He had never met Mr Brown, Mr Jackson or Mr Harris before the meeting.  The meeting lasted about two hours.  He said that the background was that the deal which City Connect had put together was a very clever deal and was very good for both sides:
“Throughout the whole period we were under huge pressure to get on with the job and abortive costs were mentioned at each meeting, I agree with you, but they were not the crux of the matter.  They were not the crux of the matter.  People did not want to discuss abortive fees in great detail because nobody believed that it would come to that.”
56.	I accept Mr Mellish’s evidence on this point.  It explains why the issue of abortive fees was dealt with in the manner in which it was.  All parties thought and hoped that an agreement on this issue would not be necessary since the project was almost certain to go ahead.  
57.	Mr Mellish said in answer to Mr Marin that his understanding was that Telia would pay the abortive costs “because City Connect could not”.  On his evidence, the “understanding” leaves entirely open the question of City Connect’s own expenses and fees which form overwhelmingly the largest part of the claim.  
58.	The summary of points discussed in the meeting includes the following three important paragraphs:
“1.  Telia confirmed that the contract for the new datacentre should be finally approved by Telia on 22nd November after which the lease can be signed.  City Connect to change their solicitors to avoid conflict of interest.
2.  City Connect to send copy of their Bank Terms Sheet to Telia and Telia to reply to City Connect letter.  How to accommodate power costs still under consideration.
3.  Telia to pay all City Connect’s abortive costs if deal not signed by Mid December.  Telia to send DA [Mr Almond] details of all fees expended to date.”
(This note was amended at the meeting of 2 November 2001; see below).
59.	Paragraph 6 set out the likely professional teams.  In the case of professionals to be instructed by City Connect, those named were IDP as architects, F&A Quantity Surveyors, Integra as the structural experts, and Mellish & Lynch as employers’ agent.
60.	After the meeting Telia made a written presentation to its Chief Executive in Stockholm to seek approval for the arrangement with City Connect.  This letter is also dated 26 October 2001.  It dealt with the three options as to how to be released from the onerous lease: (a) to buy themselves out of the lease, a proposal that was rejected as being very expensive; (b) to make the capital expenditure required to build the data centre and pay enhanced rent, a proposition which was unattractive since Telia would probably not be in a position to make an operating profit; (c) to surrender the existing lease and acquire a new lease from a third party provider who would fund the full fit-out, thus taking all investment exposure off Telia’s balance sheet.  This was, in essence, the City Connect proposal.  
61.	The recommendation to the Board was contained in paragraph 6 of the paper:
“We recommend that the proposal from City Connect be accepted in principle and that we take a more professional level of legal advice than was used during the acquisition of the first lease for Westferry Road.”  
62.	On 29 October 2001 Mr Brown responded to Mr Almond’s letter dated 16 October 2001.  This letter made two amendments to the proposal, but accepted the other proposals, including those contained in paragraphs 9 and 10.  This said that City Connect would look to all reasonable costs incurred on the commencement of formalities in the event of Telia AB not proceeding to be payable by Telia AB.  It is suggested that this letter constitutes a separate agreement in relation to abortive fees.
63.	At the meeting in Telia’s offices dated 2 November 2001, the minutes of 26 October 2001 meeting were reviewed.  Telia’s corrected point 3 saying that they agreed to pay all reasonable professional costs not all costs.  On this basis the full note as amended would have read:
“3.  Telia to pay all City Connect’s reasonable professional costs if the deal is not signed by mid-December.  Telia to send DA details of all fees expended to date.”
64.	On 5 November 2001 Mr Almond wrote to Mr Brown saying:
“I refer to my conversation with you on Friday and confirm agreement of terms on the following terms and conditions subject to formal contract.”  
65.	The letter set out various conditions in line with previous letters.  It included the following as paragraph 9:
“We would look to all reasonable costs incurred on commencement of professional formalities in the event of Telia AB not proceeding to be payable by Telia AB.”  
66.	Again the question arises whether this paragraph represents a concluded agreement or is one which is intended to be “subject to formal contract”.  This letter would make little sense if City Connect and Telia had already agreed that Telia would pay all City Connect’s abortive costs if a deal was not signed by mid-December.  
67.	On 6 November 2001 Mr Almond wrote to Mr Smith at Hilcourt.  The costs provision was at paragraph 8:
“On commencement of legal formalities all reasonably incurred professional costs to be reimbursed by Telia AB in the event of negotiations proving abortive, through the action of Telia AB or City Connect.”  
68.	On 7 November 2001 Mr Brown wrote to Hilcourt about Hilcourt’s legal costs in these terms:
“I am writing to confirm our conversation of the 7th November 2001.  In the event Telia decides to exit the proposed arrangement … then Telia shall pay City Connect reasonable legal costs, this shall include the reasonable legal costs of Hilcourt Docklands Limited.”
69.	With this background, taken largely from the minutes, I return to the evidence of the meeting of 26 October 2001.  Mr Almond said in oral evidence that he did not remember the length of the meeting.  The discussions at the meeting had to be seen against the background of the letters which he had previously written.  He said, rather surprisingly, that he had no independent recollection of the discussions with Mr Brown which were reflected in the minute.  It was suggested to him that Mr Brown made two conditions of Telia’s agreement to pay abortive costs; the first was the limit of £150,000, not mentioned in any minute at this stage.  The second was that Telia would only pay if Telia itself withdrew from a viable scheme.
70.	Mr Mellish said in chief that his recollection of the meeting was that:
“Initially item 3, abortive costs, were raised.  Mr Almond to my recollection raised the subject in that he was now getting his professionals to work on the job and he wanted to be certain that his costs and his professional costs would be covered under abortive arrangements.  That was agreed at that meeting, and there were also abortive costs on Telia’s side.  Those abortive costs referred to their professional fees in the work they had done to date on their design.”  
71.	In cross-examination Mr Mellish said that the minutes were intended to be a summary of the points discussed in a two hour meeting.  He emphasised City Connect’s concern expressed at the meeting that City Connect were taking on professional liabilities in terms of fees.  As Mr Mellish put it:
“They were not a wealthy company to put it politely and they wanted to be assured that, should anything go wrong, that those fees would be paid for, and so did the professionals.”
72.	He emphasised that on the basis of his understanding, Telia and City Connect thought that City Connect devised such a good project that “people did not want to discuss abortive fees in great detail because nobody believed that it would come to that”.  He said that it was a safety net.  If anything went wrong, those fees would be paid.
73.	Mr Brown in his oral evidence emphasised that this was not a meeting at which he would have negotiated questions of abortive costs.  It was of no concern to others present at the meeting who did not represent Telia or City Connect.  He said that the minute did not reflect what had been decided  There were ongoing discussions taking place at the time with a view to agreeing either a cap on the fees which Telia was prepared to pay, or that the payment would become due only if Telia was responsible for the breakdown of the project.
74.	Mr Jackson said that he had been the person who insisted on the correction to the minutes of 26 October 2001 meeting.  He too said that discussions were taking place outside the meeting of 26 October, which were not reflected in the minute.  
75.	I have to consider the minute in the context of the background evidence at the time.  I am satisfied that the evidence points to the following conclusion.  There was no concluded agreement between City Connect and Telia under which Telia agreed to pay all the abortive costs, or that those costs included City Connect’s own fees for its services in addition to the professional fees that it had incurred from third parties.  
76.	I accept that there may have been a general discussion intended to reassure McAlpines and Mellish & Lynch that if they incurred professional fees those would be paid by Telia, but I find that no concluded agreement was reached at the meeting, and that any discussion which did take place was not intended to be binding and must be considered in the context of discussions which were taking place at that time directly between Mr Almond for City Connect and Mr Brown for Telia.  
77.	If there had been an agreement along the lines reflected in paragraph 3 of the minute, it would have made unnecessary the further discussion on costs which did take place.  Mr Almond would have pointed this out clearly in any subsequent correspondence.  The fact that after this meeting Telia referred to Stockholm for general approval of the way ahead, points again to there being no concluded agreement at the meeting.  
78.	At the highest, by the end of October 2001, there was a general understanding that Telia would pay fees to outside professionals instructed by City Connect which were necessary to further the project, but this did not amount to an agreement between the parties.
79.	The note of the meeting of 7 November 2001 (at which Mr Brown was not present) was a design team meeting.  Mr Harris represented Telia, Mr Almond represented City Connect.  Paragraphs 1.01 and 1.02 must be read together:
“1.01	PM [Mr Mellish] confirmed that this was the professional team that would progress the design in the short term to produce … an acceptable GMP with either McA [McAlpine] or Bellwater.  The target date for this is 3rd December.  The GMP would trigger the finance deal and the signing of an Agreement between Telia and City Connect.  DA explained the detail and background of the deal.
1.02	Professional appointments would be forthcoming with novation agreements for IDP, Integra and Halloran Payne [all represented at the meeting].  All professionals will be required to sign Warranties.  PM requested details of PI [Professional Indemnity] and assessments of fee expenditure up to agreement of GMP should the project abort.  These costs to be underwritten by Telia and written confirmation of this will be sent to each practice individually.”  
No written confirmation was in fact sent.  
80.	Mr Jackson was asked specifically about the note of the meeting it being suggested that it contradicted his witness statement that it was understood from the outset that City Connect was working at risk, and that, whilst in principle Telia agreed it would pay City Connect’s abortive costs, this was always subject to contract and only on the basis that Telia pulled out of the project of its own volition.  He was led into agreeing that he should have contested the note of the meeting if it was not correct.  I am asked to infer that the note was accurate and was evidence that Telia would pay all abortive costs.
81.	Mr Brown was asked about the minutes in cross-examination.  Mr Brown, who was not at the meeting, said that these professionals were employed by City Connect and not by Telia and he did not know the basis on which they were being retained.  He maintained that he was negotiating on the basis that Telia would pay the costs of professionals if Telia pulled out of the project and subject to a cap on fee expenditure which was being discussed.  
82.	Neither Mr Almond, who was at the meeting, nor Mr Etheridge or Mr Duke who were not present, were asked about the meeting.  I conclude that it did not evidence a concluded agreement between City Connect and Telia.  Mr Brown was not present.  He was the person carrying on negotiations on behalf of Telia.  Mr Harris had not been negotiating questions of abortive costs between City Connect and Telia.  He was there as the project manager for a design team meeting.  I note that paragraph 1.02 said nothing about City Connect’s fees, but this is not surprising, since this was not a negotiating meeting, but a design team meeting.  
83.	Mr Harris wrote to Mr Jackson after the meeting.  He said that at the meeting he asked Mr Almond what the budget was “for the potential abortive costs”.  This is consistent with further information being sought by Telia before an agreement could be concluded.
84.	On 8 November 2001 Mr Almond wrote a letter to Mr Smith of Hilcourt.  The letter ends:
“I enclose a letter from Telia confirming legal fees, and am endeavouring to bring DLA, their lawyers into line, on the remaining fees.”  
This was clearly a reference to the letter of 7 November 2001 from Mr Brown to Mr Almond.  
85.	Mr Smith replied to Mr Almond also on 8 November 2001 saying that Hilcourt was prepared to proceed provided its abortive costs were covered in relation to legal and surveyor’s fees, accountant’s fees and Bradford and Bingley’s fees and their surveyor’s fees.  The letter said that Mr Smith looked forward to hearing from Mr Almond when he had discussed the matter with Mr Brown.  The background to this letter, so Mr Almond explained in oral evidence, was that the undertaking was required before Hilcourt would release the contract documents.
86.	At about this time, City Connect started discussions with the Royal Bank of Scotland (“RBS”) to provide finance for the project.  On 9 November 2001, Miss Dickinson of RBS wrote to Mr Duke at City Connect giving a positive initial response to RBS participation.  
87.	On 21 November 2001 there was a design team meeting.  The meeting records at paragraph 6.04:
“Telia require details of City Connect’s abortive costs and City Connect require final details of Telia’s costs to date.”  
And at paragraph 6.05:
“Telia confirm their lawyer DLA were in discussion with Trowers and Hamlins.”  
88.	Mr Brown said in evidence that this was the stage where Telia was considering a scheme that required a further planning application which would be submitted by IDP on 26 November 2001.  Mr Brown explained the note at 6.04 by saying that:
“It was just an element in the budget that needed to be coped with.  That is certainly my recollection of how the abortive costs would fit into the discussion.”
89.	He explained that he did not query the minutes because the lawyers for Telia and City Connect were by then in direct negotiation, but he said his understanding had not changed, namely that Telia offered to pay all reasonable professional costs capped at £150,000 if Telia withdrew from the project. 
90.	It was indeed the case that solicitors for City Connect and Telia were by now actively involved.  In his witness statement, Mr Watson of DLA said that, having been instructed to do so, he picked up where Mr Brown left off.
91.	It appears that the solicitors had different instructions from their clients.  On 22 November 2001, Mr Joiner of Trowers & Hamlins for City Connect wrote to Mr Watson.  He said that he looked forward to receiving “the proposed form of costs undertaking without delay”.  He said that:
“David Almond of City Connect has provided me with a list of abortive and actual professional fees and a copy of the list is enclosed”.
The letter concluded:
“I understand that your Client’s costs undertaking will also cover legal fees, in the event that your Clients withdraw from the transaction, and I anticipate that these will be calculated on an hourly basis.”
92.	Mr Watson, acting for Telia, was clear in his evidence that at that stage he had not produced a draft undertaking and had not been involved in any negotiations with City Connect or its solicitors over an entitlement to abortive fees.  
93.	There was clearly some urgency in providing an undertaking for Hilcourt, without which Hilcourt was not prepared to proceed.  This is clear from Mr Joiner’s letter to Mr Almond, also of 22 November 2001.  He told Mr Almond that he was hoping to obtain a form of undertaking from Mr Watson the same day.  
94.	This letter enclosed a note of outstanding fees amounting to £303,000, of which £150,000 related to City Connect’s own proposed fee.  I was told that this was calculated on the basis of 20 per cent of a total fee of 2 per cent of £35 million which City Connect thought it would have been entitled to charge.  Mr Almond agreed that this figure had not been discussed with Telia.  Apparently Mr Almond composed the document and Mr Mellish typed it.
95.	On 23 November 2001 Mr Brown gave Mr Almond an assurance in relation to Hilcourt’s accountancy fees as follows:
“I am writing to confirm that Telia will cover the abortive cost in relation to justified accountancy fees incurred by Hilcourt (Docklands) Limited and paid by City Connect Limited to a maximum of £15,000 plus VAT.”  
This matter was specifically agreed by Mr Brown on behalf of Telia.  He agreed in evidence that this was binding on Telia and was not “subject to contract”.  
96.	On Monday, 27 November 2001, Mr Fisher of Hilcourt wrote to Mr Almond in very positive terms about the project, noting that when they spoke on 24 November 2001, Mr Almond said that he had “a done deal” with Telia and that he had agreed terms with RBS and that an undertaking on Hilcourt’s abortive fees would be with Mr Fisher that week.  Mr Fisher said that on that basis they would send out a draft lease as soon as the undertaking was received by their solicitors, Rosling King.  
97.	On 28 November 2001, Mr Joiner wrote to Mr Watson saying that he understood that the abortive costs position had now been agreed.
98.	Unfortunately, as Mr Watson underlined in his evidence, this was not the case.  This became clear in the course of a telephone conversation between Mr Watson and Mr Joiner.  A draft of the undertaking, in the terms in which Mr Watson understood it, was sent to Mr Joiner with Mr Watson’s letter dated 5 December 2001.  It said that:
“… in order to enable your client, City Connect Management Limited (‘City Connect’) to instruct its professional team to commence work on the design of the relevant aspects of the proposed development of the property, that Telia will reimburse City Connect with the fees and costs thereby incurred in accordance with the terms of the undertaking.”  
99.	The undertaking was a conditional undertaking.  It was to apply:
“ … if the matter does not proceed to an unconditional exchange of agreements provided that the sole reason for the matter not proceeding is the unwillingness on the part of Telia to enter into such an agreement.  In that situation, Telia will pay the costs for each of the members of the professional team listed in column 1 of the table below, subject to the maximum amount shown opposite each member shown in column 2 thereof … Telia will also pay the abortive legal costs of City Connect’s solicitors incurred in connection with the negotiation of the proposed agreement for lease …”
The schedule gave the amount which had been appended to Mr Joiner’s letter of 22 November 2001.  The figures included a figure of (up to) £150,000 for the development manager of City Connect.  
100.	Mr Watson followed up the letter with a letter to Mr Joiner dated 7 December 2001 explaining that Telia would not be paying City Connect’s or Hilcourt’s abortive legal costs as a separate item, but Mr Brown had spoken to Mr Almond that morning and they had agreed that legal costs were included in the sum of £150,000 payable to City Connect as “development manager”.  Mr Watson asked Mr Joiner to confirm that the proposal concurred with his instructions so that he could issue the undertaking.  
101.	At about this time (see the letters of 7 and 12 December 2001) RBS introduced defeasance conditions which meant that if one of three conditions occurred, RBS would be entitled to serve a put option, on receipt of which Telia would be required to pay in cleared funds a premium of an amount which would enable RBS to purchase defeasance instruments in an amount which would produce payments to RBS to secure the income stream for the balance of the lease.  The trigger events were as follows: (1) if the Swedish Government shall cease to have 51 per cent interest in Telia or to cease to have voting control; or (2) if Telia’s credit rating falls to BBB+; or (3) if the debt of Telia exceeds 3.75 times EBIIDA.
102.	On 12 December 2001 Ms Gubbins, a solicitor employed by Trowers & Hamlins, wrote to Telia explaining the position.  Also on 12 December 2001, Mr Brown wrote to Mr Almond saying that City Connect had changed the deal that had been agreed, pointing out that instead of signing a 35 year lease with City Connect, Telia would now be contracting with the Royal Bank of Scotland.  He made it clear that the defeasance clauses would not be acceptable to Telia.  
103.	Mr Almond replied immediately that there had been a misunderstanding and that he was trying to move matters forward on the basis that the defeasance clauses were unacceptable.  
104.	There were further discussions and Mr Watson thought that matters had been resolved.  He wrote to Mr Joiner on 18 December 2001, enclosing a final form of the undertaking, and asking for confirmation that the text was now agreed.  This undertaking retained the condition that it only applied if the sole reason for the matter not proceeding was the unwillingness on the part of Telia to enter into an unconditional exchange of agreements relating to the proposed development of the property.
105.	On 19 December 2001, Mr Joiner wrote to Mr Watson protesting that the undertaking did not reflect his understanding.  It appears that his problem did not relate to the condition that Telia was only liable to make payments if Telia withdrew from the transaction.  
106.	It is clear that there was at this stage a certain nervousness over the prospects of success of the project which had not been present in the earlier stages of the discussion.  Mr Brown wrote to Mr Almond on 18 December 2001 (letter dated 20 November) noting that since they depended on planning permission, the conclusion of the agreements could not occur until the following February at the earliest and that the parties needed to talk over the situation.  
107.	This new level of concern is also reflected in RBS letter to Mr Duke, also retained by City Connect as a consultant, dated 21 December 2001 which acknowledged that there were problems that needed to be resolved and noted that there was to be a meeting between City Connect, RBS and Telia on 7 January 2002 to discuss further options.  
108.	I note that Mr Almond wrote in his letter to Mr Joiner, his own solicitor, also on 21 December 2001 in relation to Hilcourt’s legal fees, that Hilcourt would receive £100,000 out of City Connect’s “agreed abortive fee of £150,000 … in the event that the transaction aborts”.  If this had happened City Connect’s fees would, if agreed, have been reduced to £50,000.
109.	Also on 21 December 2001 Mr Joiner attempted to amend the draft undertaking put forward by Mr Watson.  Significantly he did not say that the condition that the undertaking was only to apply if Telia withdrew from the transaction was contrary to his instructions, and that the undertaking was to apply if the transaction was abortive, whatever caused the breakdown, let alone that such a provision had already been agreed.  Mr Joiner sought an amendment that the undertaking was to apply if the principal reason (and not the sole reason) for the matter not proceeding was the unwillingness of Telia to enter into such an agreement.  There were various other proposed amendments, notably in relation to City Connect’s legal fees.  Trowers & Hamlins also proposed that DLA should be jointly and severally liable for the performance of the undertaking.  
110.	Mr Watson replied to Mr Joiner also on 21 December 2001 noting that Mr Joiner had introduced amendments which had not been discussed between them.  He said he thought they had finalised the form of the agreement and returned his original form of undertaking.  
111.	After consulting his clients, Hilcourt, Mr Hardman of Rosling King, wrote to Mr Joiner on 2 January 2002 saying that three conditions needed to be fulfilled before Hilcourt would take matters further: (1) a solicitor’s undertaking to be responsible for Hilcourt’s abortive costs; (2) a copy of a written confirmation from RBS of the terms on which they were prepared to fund the transaction; (3) written confirmation from Telia that they were happy with the proposed funding arrangement.  
112.	On 4 January 2002 Mr Watson received a letter from Trowers saying that until they received confirmation from Hilcourt’s solicitors, it was pointless to proceed with the draft agreement for a lease and draft licence.  
113.	On 8 January 2002, Mr Fisher wrote to Mr Brown expressing doubts about City Connect’s ability to arrange satisfactory funding.  It is to be noted that this was a continuing concern of Hilcourt, first expressed in Mr Fisher’s letter to Mr Brown dated 8 October 2001.  
114.	On 10 January 2002, RBS wrote to City Connect with revised proposals.  This was the last offer made by RBS and was not pursued because, although one of the defeasance events had been removed, the ones relating to Telia’s credit rating and debt ratio remained.  Telia was not prepared to sign any defeasance conditions.
115.	A progress review meeting of the design group took place on 11 January 2002 at which Mr Almond, Mr Brown and Mr Jackson were present.  Mr Almond agreed to send a report on the current funding situation on 16 January 2002.  Mr Almond’s report, also dated 11 January 2002, indicated that City Connect had been and were currently in contact with a number of potential sources of funds.
116.	It appeared that Mr Almond and Mr Duke had been successful in providing alternative funding.  On 17 January 2002 they emailed Mr Brown that they had agreed terms with Loyd’s Property Investment Corporation Limited (“Loyd’s”) to fund the Westferry Road development.  Hilcourt was also informed.  
117.	Mr Fisher wrote to Mr Etheridge, also on 17 January 2002 saying that Hilcourt had received advice that the deal should be restructured.  Hilcourt’s stance prompted the further progress review meeting on 22 January 2002, attended by Mr Almond and Mr Brown and others at which those present were told that negotiations with Hilcourt were not progressing well and there was some concern.  
118.	By 29 January 2002 Mr Brown was looking for alternatives.  On that day he met Mr Ashford of Chesterhouse Properties.  
119.	On 30 January 2002 Mr Ashford wrote to Mr Brown with his view, both of the design of the proposed new building at Westferry Road and of the financing arrangements.  He envisaged that if his company was involved, City Connect would still be involved as financier.  
120.	By an agreement signed on 31 January 2002 and 1 February 2002, City Connect and Loyd’s entered into a Memorandum of Understanding.  The proposal indicated the potentially profitable nature of the venture.  Paragraph 7 set out the offer in these terms:
“City Connect and Loyds will enter into a Joint Venture arrangement [on] the basis of a 50/50 split on the surplus generated on the difference between the purchase price of £76,000,000 and the agreed total development costs of £61,267,759 in accordance with the total costed model.  
Any potential development over runs will be shared on a 50/50 basis up to a maximum amount of £68 000 000, thereafter all amounts over this capped amount will be paid from City Connect’s profits under the preceding paragraph.”  
121.	Mr Almond accepted in the course of his evidence that if the project had come to fruition, City Connect stood to make a very substantial amount of money for brokering the deal.  This was confirmed by Mr Brown.
122.	The letter from Loyd’s to Mr Almond dated 5 February 2002 set out Loyd’s understanding of the proposed deal.  Hilcourt would grant a 99 year lease to Loyd’s for £24 million and Telia would take a 35 year lease from Loyd’s.  
123.	On 7 February 2002, Trowers & Hamlins wrote to Mr Mellish concerning the draft letter of intent to reflect Mellish & Lynch’s desire that the contractor should be liable for detailed design.  The letter also dealt with abortive costs on the basis that City Connect recognised that no agreement was in place:
“Clearly, as regards timing, it is crucial that the abortive costs agreement is in place with Telia in advance of the Client entering into the Letter of Intent with Bellwater (the contractors).”  
124.	Both Mr Almond and Mr Mellish confirmed that there had been continuing discussions from about January 2002 as to whether the professional team might be paid fees in excess of the figures set out in November 2001.  In oral evidence Mr Mellish readily agreed that his understanding was that there was no abortive costs agreement in place at this stage.
125.	Suddenly it looked as though the difficulties had been overcome.  Telia’s Board in Sweden approved the proposed deal and on 12 February 2002 Mr Brown sent Mr Almond an upbeat letter setting out the actions to be carried out as a result of that day’s meeting and looking forward to completion of the project.  The only item relating to fees was that Telia was to provide an undertaking directed to Hilcourt to cover £100,000 of Hilcourt’s legal fees in the event of an abortive deal.
126.	The progress review meeting at 2pm on 12 February 2002 was told that details of the funding would be with Telia by lunchtime on 15 February 2002 “after which quick confirmation from Telia was expected”.  Once the funding package had been agreed by Telia, an undertaking could be given to Hilcourt over legal fees and the relevant leases could be drafted.  This was expected to take about 14 days.  Under “Any other business”, it is noted at paragraph 13.03:
“13.03	Abortive costs: Both Telia and CC to issue full details of abortive costs.”  
127.	Mr Mellish said in oral evidence that the reference was to a need to City Connect to issue details of abortive costs in excess of those already given so as to inform Telia of the additional fees that the professional team would be seeking when the project went ahead in order that City Connect could build them into the budget.  He agreed that there were some of Telia’s costs which could be described as abortive costs.  
128.	In his oral evidence Mr Almond said that the sum for abortive costs for the professionals would be increased, but said that this did not apply to City Connect’s own costs, which remained at £150,000.  When pressed on the point Mr Almond agreed that the interpretation of Mr Brown, in his letter of 12 February 2002 which was consistent with Mr Mellish’s oral evidence, might well be the right one.  The meeting on 19 February 2002 noted that the exchange of abortive costs had not taken place.
129.	On 15 February 2002, Telia met City Connect and said that in principle they were satisfied with the funding proposals which were passed to Telia’s solicitors.  
130.	The review meeting of 19 February 2002 also referred to abortive costs at paragraph 12.03:
“Both CC and Telia have yet to exchange full details of their abortive costs to date.  Telia also requested details of costs above the Bellwater GMP and the £35 m budget.”
It should be emphasised that these costs were required in order that they could be accommodated in a project which those present thought was about to proceed.
131.	Unfortunately Hilcourt was not prepared to proceed on the proposed basis.  Mr Fisher set out the problems in a detailed letter dated 25 February 2002 to Mr Brown.  In his oral evidence Mr Brown said that Hilcourt was not actually ruling out any possibility of proceeding, “They did go through a process of negotiation, but eventually Clive Fisher chose to write to Telia saying that in no shape or form would they entertain a deal being done with a third party … That pretty much stopped the negotiations.”  I accept this evidence.  
132.	The 25 February 2002 letter was passed to City Connect which responded on 27 February 2002 with an offer subject to formal contract.  
133.	In a letter from Mr Almond to Mr Brown dated 8 March 2002, Mr Almond was still clearly hoping that the project would proceed.  He acknowledged that the negotiations were nearing the end.  He made it clear that there were continuous negotiations which involved Loyd’s and Hilcourt, and he hoped that the negotiations would be finalised in the following week.  He noted that Hilcourt were playing “hardball”.  The letter referred to abortive fees:
“I assume that the £100,000 abortive fees have not been triggered due to Hilcourt reneging on the original negotiations in order to re-negotiate their position … 
I enclose a number of initial fee accounts catered for under the abortive fees arrangement which I would appreciate being paid by Telia in order for momentum to be maintained.”  
134.	Mr Almond agreed that he was not in a position to insist that they should be paid because, apart from anything else, the project had not become abortive.  He said the sum was an invitation to Mr Brown to help out.  The £100,000 referred to earlier was not payable because Hilcourt was not co-operating.
135.	By 15 March 2002 Mr Brown and Telia had reached the stage where Mr Brown felt it necessary to write to Hilcourt to say that Telia required a deal to be struck with City Connect/Loyd’s by Friday, 22 March 2002 and that any funding arrangement that Hilcourt was negotiating with the Bank of Scotland should be completed by that date.  In short, if matters were not concluded within a week, Telia would have no option but to construct a distribution warehouse in conformity with the existing lease and terminate its plans to build a telecoms facility on the site.  
136.	Mr Brown explained that the alternatives which he was putting to Mr Smith were either to agree to do the deal with Loyd’s and City Connect or Telia would build a building which would comply with the strict terms of the lease but would have significantly less value than a telecom warehouse and would not be so advantageous to Hilcourt.  This position was confirmed by the letter from Mr Brown dated 25 March 2002.
137.	It is clear that in late March 2002 City Connect was in direct contact with Mr Smith trying to salvage the deal.  At the same time Hilcourt was conducting its own discussions with Bank of Scotland on a  proposal which excluded City Connect.  
138.	On 22 March 2002, Bank of Scotland sent Hilcourt outline terms and conditions relating to a term loan facility of £67 million for Hilcourt to fund the development of the data centre together with funds to repay the existing indebtedness.  
139.	On 28 March 2002, Mr Mellish sent a fax to Mr Almond asking him to check the abortive costs and send them to Telia.  The costs included the sums previously sent for the period to December 2001, including City Connect’s £150,000 and further costs by way of professional fees which did not include an additional figure for City Connect.  Mr Mellish said in evidence that he did not know what the figures were for City Connect or Trowers & Hamlins (although he put in a figure of £35,000 for their fees).  
140.	Mr Mellish said that Telia neither agreed nor disagreed with the schedule of abortive fees, but the list was sent in to Telia in the expectation that if they were reasonable they would be paid.  
141.	It is clear from the letter from Hilcourt to Mr Brown dated 5 April 2002 that separate negotiations were taking place to negotiate with City Connect but no-one referred to the letter or suggested that the issue of abortive fees was part of a settlement between Hilcourt and City Connect.
142.	On 9 April 2002, Hilcourt made it clear that it would not accept City Connect’s participation in any scheme.  Mr Smith’s letter to Mr Brown said:
“I confirm our conversation when we mentioned that following these protracted negotiations from October 2000 Hilcourt (Docklands) is not now prepared to countenance any third party offers for the renegotiation of your interest.
… I hope you can appreciate that we have reached this decision because of the inability of any other party, but particularly City Connect, to deliver.  We believe that the offer from the Bank of Scotland to us offers the best opportunity of seeing this project through to a successful conclusion.”  
143.	In oral evidence Mr Almond accepted both that Telia had tried to persuade Hilcourt to accept the Loyd’s scheme and that Hilcourt had come to the position where they were not prepared to accept any third party offers, such as that which Loyd’s were putting forward.  
144.	On the basis of the evidence, I find that Hilcourt was responsible for the project not going ahead with City Connect.  There is no evidence that Telia was party to or welcomed Hilcourt’s decision.
145.	Also on 9 April 2002 Mr Brown responded on behalf of Telia to Mr Fisher at Hilcourt rejecting a proposal which would exclude City Connect and saying that they would consider what they would do.  
146.	On 11 April 2002 Charterhouse Properties set out a revised offer to Telia for the development of Westferry Road.  
147.	I find therefore that if there had been any agreement in relation to Telia’s payment of abortive fees which attached to it a condition that it was only to apply if Telia withdrew from the project, on the facts as I find them, such a condition would not have been fulfilled.  
148.	On 13 May 2002, the Telia Board met and agreed to refer the options for Westferry Road to a smaller committee which would consider the way forward and make a presentation to the management committee on 27 May 2002.  The decision was taken not to proceed with the development of the data centre but to buy out the lease.  
149.	Mr Brown explained that “in the light of City Connect’s failure to secure acceptable funding with Hilcourt, it could not see that there was any point in continuing to work with City Connect at that point in time.”  
150.	This decision necessitated rejection of an alternative proposal from City Connect known as the Arcos Project.  It is suggested by Telia that by then City Connect had themselves abandoned their own scheme to build the data centre.  
151.	I accept the evidence that at this stage City Connect were only putting forward Project Arcos.  I am satisfied that this project was only put forward after Hilcourt had made it clear that City Connect’s original proposal was not going to take place.  
152.	As far abortive costs are concerned, Mr Brown agreed in oral evidence that he met Mr Almond at a trade exhibition shortly after 27 May 2002 at which Mr Almond raised the question of abortive costs.  Mr Brown said that Mr Almond needed to put them in writing and send them to Telia.  I do not understand this to be an admission on Mr Brown’s part that Telia was liable to pay such costs.  If this had been Mr Almond’s understanding, no doubt the question would have been put directly to Mr Brown in cross-examination.
153.	On 29 May 2002 Mellish & Lynch sent its fee request to Telia.  It referred to “agreed fee as Mellish & Lynch letter dated 31 October 2001”.  This letter was sent to Mr Almond at City Connect.  Mr Mellish gave evidence that it was accepted by City Connect and that City Connect were his clients.  The fee claimed is 45 per cent of the total fee of 1 per cent of the contract sum of the project.
154.	The final outcome of Mellish & Lynch’s claim for fees is not something which is before this court.  It was the subject of litigation between Mellish & Lynch and Telia which was settled before the hearing of this action on terms that the settlement terms between the parties would not be disclosed.  I therefore have no knowledge of them.
155.	On 31 May 2002, Mr Almond sent a fee request to Mr Jackson on the basis of a fixed price contract of £32,715,266.69 and the planning permission which was granted on 19 April 2002.  The sum included a sum of £300,000 for City Connect’s fees.  Mr Etheridge said in evidence that this sum was rounded down from a fee based on percentages and work done which came to £352,000 as set out in Mr Almond’s statement.  It was an estimated figure because City Connect does not keep hourly records of time spent.  No fees have been paid by City Connect, either to Mr Almond or Mr Duke who were said to be retained as City Connect’s consultants.  
156.	On 10 June 2002, Mr Jackson rejected the claim for costs and expenses and asked City Connect to justify them.  Mr Almond replied on 13 June 2002 that Mr Brown had said that all costs incurred were to be put together by 31 May 2002 for onward transmission to Telia AB in Stockholm.  
157.	City Connect had changed its solicitors.  Paul Roberts (the new solicitors) wrote to DLA on 17 June 2002 to say that:
“As you are aware, from the first and throughout the Westferry Road project, your client repeatedly accepted its liability for abortive costs.”  
The letter referred to City Connect’s letter dated 16 October 2001 and Telia’s response dated 25 October 2001.  I have already dealt with the letter dated 16 October 2001 as a matter of evidence.  I have also dealt with the letter from Telia in response which was in fact dated 29 October 2001 to which Mr Roberts’ letter may have intended to refer.  
158.	The provision to which Mr Roberts’ letter refers specifically is set out in paragraph 9 of the letter of 16 November 2001, namely:
“9.  We would look to all reasonable costs incurred on commencement of professional formalities in the event of Telia AB not proceeding to be payable by Telia AB.”  
Conclusion
159.	I summarise the main conclusions as follows:
(1) No agreement was concluded on 16 October 2001 in relation to abortive costs: see paragraphs 9 and 10 of the letter from Mr Almond.  The letter from Mr Brown dated 29 October 2001 did not constitute an agreement in relation to paragraphs 9 and 10 in the absence of an overall agreement.
(2)  If I am wrong about that, it was the condition of Telia’s obligation to pay abortive costs that Telia did not proceed with the project put forward by City Connect i.e., the project did not proceed because of the default of Telia.  
(3) The meeting of 26 October 2001 was not a negotiating meeting between City Connect and Telia.  The note, even in its amended form, taken in its proper context, is not evidence of an agreement between City Connect and Telia, whereby Telia would pay all City Connect’s reasonable professional costs if the deal was not signed by mid-December 2001.  
(4) Mr Almond and Mr Brown on 5 and 7 November 2001 reached an agreement which was “subject to contract” as evidenced in Mr Brown’s letter to Mr Almond of 7 November 2001 as follows:
“In the event Telia decides to exit the proposed arrangement prior to the signature of the proposed arrangement, then Telia shall pay City Connect reasonable legal costs, this shall include the reasonable legal costs of Hilcourt Docklands Limited which may be charged to City Connect.”  
(5)  On 23 November 2001, Telia agreed with City Connect that it would pay Hilcourt’s accountancy fees up to a maximum of £15,000 plus VAT.  This was not subject to contract.
(6)  I do not find that City Connect was misled into instructing other professionals on the basis of Telia’s representation that it would pay all City Connect’s professional fees and expenses.  Telia did not misrepresent its position.  On the basis of this finding of fact, the question of whether estoppel can be used as a sword rather than a shield does not arise.  I find that although they might have been prepared to enter into some form of agreement along these lines, they did not in fact do so.  If I had to make a finding on the law, I would find that estoppel does not act as a sword.  But in my view the issue is a more simple one: did Telia agree to fund the professionals and City Connect in the event that the project did not go ahead?  I have concluded that it did not agree to do so.
(7)  The project failed not because of any action by Telia, but because Hilcourt was not, in the end, prepared to accept the participation of City Connect.  
(8) At the earlier stages of the discussions, they were carried on primarily by Mr Almond for City Connect and Mr Brown for Telia, although the solicitors on both sides were copied in to relevant correspondence.  In the course of November 2001, the solicitors on both sides were brought in to agree an undertaking which would remove the “subject to contract” reservation.  Unfortunately the parties were not able to reach agreement.
160.	I therefore find for the defendants, Telia, on the main issue.  I also find for Telia in relation to the ancillary claims for solicitors fees, Trowers & Hamlins, and contractor’s fees, Fairbrothers.  If I had concluded that City Connect were entitled to recover fees on its own behalf and on behalf of the solicitors and contractors, I should have allowed the figures for the solicitors and contractors, and doing the best I can, have allowed a figure of £130,000 for City Connect.