15th July 2021
Steve McCombe, a consultant in Thrings’ Construction and Engineering team, reviews a recent High Court case which highlights how a failure to agree legal fundamentals before commencing a domestic building project can have significant – and costly – repercussions for the parties involved.
On 11 June, His Honour Judge Stephen Davies, sitting as a High Court Judge in the Technology and Construction Court in Manchester, awarded the claimant, Cartwright Pond Limited (CPL), damages and interest of just under £54,000 in its claim against the defendant, Louise Wild, for work at her residential property in Cheshire.
Although it is not clear why this relatively low-value case remained in the High Court, the judgment deals with legal issues that often arise in homeowner building disputes, such as the basis of the contract, the process of terminating the contract if and when there has been a repudiatory breach, and the value of the disputing parties’ claims.
The judgment also highlights practical issues that any homeowner should consider carefully when procuring and managing construction work, including ensuring that the contract includes all the necessary terms and technical requirements.
Ms Wild purchased the 1970s property requiring modernisation in 2014. Three years later she instructed an architect to prepare a specification and various plans and a structural engineer to produce calculations. The specification envisaged that any contract would be entered into in the RIBA Domestic Building Contract 2014 (RIBA form), with the architect acting as contract administrator.
However, Ms Wild decided not to engage the architect (or anyone else) as contract administrator. The parties entered into a contract based on a series of emails and exchanges of documents on or about 18 April 2018, which included provision in the specification for £50 per day liquidated and ascertained damages (LADs) if the completion of the works was delayed.
CPL provided Ms Wild with a works programme of 14 weeks and started work on 9 July 2018. The works had not been completed in February 2019 and each party claimed that the other had repudiated the contract.
CPL’s claim was based on its final account, i.e. the contract sum as adjusted by the cost of variations, and its loss of profit. Ms Wild counterclaimed for LADs and/or general damages for delay and her loss associated with the defects.
Based on the issues for determination identified by the court:
1. The contract did not incorporate the terms of the RIBA form. Although the specification envisaged that a contract would be on a RIBA form, no such contract was drawn up with all the details included or signed. None of the parties’ exchanges indicated they had agreed to proceed on that basis. The RIBA form would only have been able to operate in accordance with its terms if there was a contract administrator and the architect was not appointed to act as contract administrator.
2. The contract included a fixed date for completion as an express term, namely 14 weeks (12 October 2018) after commencement of the works (9 July 2018). However, as the contract did not include a mechanism for extending time, the fixed date no longer applied once variations to the works caused delay. CPL was thus required to complete the works in a reasonable time, with time being ‘at large’.
3. Although the contract included a provision of LADs at £50 per day, Ms Wild’s claim would have to be based on general damages because time was ‘at large’.
4. As to termination, the court confirmed the relevant legal principle, namely “one party so acts or so expresses himself as to show that he does not mean to accept the obligations of a contract any further”, with “repudiation on the one side, and acceptance of repudiation on the other”. Based on the evidence, the court decided that:
a. save for a period of six weeks due to under-resourcing, CPL was not responsible for the delay which was attributable to Ms Wild, notably her failure to provide instructions on matters about which she was required to make decisions and after 25 February 2019 not permitting CPL to return to site; and
b. Ms Wild’s failure, from 25 February 2019, either to allow CPL to return to site to continue the works or to confirm she was willing to do so, was a repudiatory breach of her obligations as an employer which entitled CPL to accept the breach and terminate the contract on 20 March 2019.
5. The monetary claims and counterclaims were assessed on the basis that CPL was entitled to terminate the contract.
a. CPL was largely successful on its final account claim, the £51,043.50 awarded being based on the difference between the adjusted contract sum and the amount previously paid, less £6,237.05 damages associated with defects and £420 general damages covering the six weeks of delay attributable to CPL.
b. The court confirmed, as a matter of principle, that a contractor who has been wrongfully deprived of the right to complete the rest of the contracted works is entitled to recover the loss of the opportunity to earn those profits. However, as CPL had failed to provide any evidence as to the profit element of the contract or any evidence of loss opportunity profit, it was not awarded any damages for loss of profit.
c. CPL was awarded interest of £2,705.31 to 11 June 2021.
d. The total award inclusive of interest was £53,748.81.
To discuss any of the points raised in this article, or for more information about construction contracts, please contact Steve McCombe or Philip Thompson in Thrings’ Construction and Engineering team.