A1 Lofts Ltd v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | THE HON MR JUSTICE LEWISON |
| Judgment Date | 30 October 2009 |
| Neutral Citation | [2009] EWHC 2694 (Ch) |
| Docket Number | Case No: CH/2009/APP/0047 |
| Court | Chancery Division |
| Date | 30 October 2009 |
[2009] EWHC 2694 (Ch)
The Hon Mr Justice Lewison
Case No: CH/2009/APP/0047
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Guy Tritton (instructed by Halliwells LLP) for the Claimant
Richard Smith (instructed by Solicitors Office HMRC) for the Defendant
Hearing dates: 21 st October 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Lewison:
A1 Lofts Ltd, as its name suggests, is in the loft conversion business. The issue before the VAT Tribunal (Chairman Miss JC Gort) was whether it supplied a complete package to a homeowner, consisting of a finished loft conversion; or merely project management services with the individual tradesmen (fitters, plumbers, electricians etc.) making separate supplies to the homeowner. The Tribunal decided ( [2008] UKVAT V20888) that A1 Lofts supplied the whole package. A1 Lofts, represented by Mr Guy Tritton, now appeal. The appeal is confined to a point of law only.
The Tribunal found the following relevant facts. A1 Lofts was one of a number of companies associated with Mr Stephen Mills (whom the Tribunal found to be honest and reliable) and his family. The others were A1 Designs Ltd which carried out design services for A1 Lofts; MM Administration Ltd, which dealt with pre-build work (e.g. party wall awards, scaffolding and skip hire) and MM Logistics Ltd which ordered materials. A1 Lofts and the homeowner entered into a written agreement upon which much of the argument in this appeal turned. In paragraph 9 of its decision the Tribunal described what happened before the agreement was signed:
“A1 Lofts advertises in the Yellow Pages and also on its own website. Upon being contacted by a customer, Mr Mills arranges a visit to get details of the work/project required. This visit is almost invariably carried out by Mr Mills himself, on behalf of A1 Designs, and includes inspection of the proposed conversion, preparation of an indicative design and preparation of a quote to the customer for the total price of the job, including labour and materials. That quote is presented to the customer on A1 Lofts' headed notepaper. It is calculated by Mr Mills on the basis of his experience, and the customer is given no breakdown of the details of how that quote is made up and is unaware of the existence of A1 Designs. There is no negotiation with the customer over the price of the job. For each job there is an order form detailing all the works necessary, a payment schedule and a client agreement (“the A1 Agreement”). Prior to the signing of an agreement with the customer A1 Lofts provides a document which sets out what A1 says it does. In particular at Clause 1.2 which is headed “What does a full A1 Loft Conversion include?” It sets out the various matters, such as the technical survey, the design, the submission to authorities or approve inspectors, scaffolding and skip hire and then the work which is required to effect a loft conversion. Under Clause 1.3 headed “About us and what we do” it states as follows:
“A1 Lofts are the loft conversion specialist in your area. We are specialist and therefore have a wealth of knowledge on all related issues such as design, planning, building regulations and of course the construction. …
“We concentrate on specific areas within London and the Home Counties where we know we have access to a reliable and experienced workforce …
“Building a loft conversion is complex and requires careful planning. A1 are unique in that we will manage the whole project for you by using tried and trusted professionals and experienced personnel, from plans through to completion.
…
“We will not just build your loft conversion we will manage the whole project on your behalf by appointing specialised teams to look after every single stage of the process. You will have access to a pre-survey design team, pre-build client services, drawing build client services, heaters, electricians and plumbers.””
The Tribunal quoted part of the website later in their decision (§ 46):
“Q. Are A1 Lofts Ltd experienced specialist in loft conversions?
A. Yes. We have many years experience in designing and building loft conversions and we use only skilled professional tradesmen.”
At the conclusion of (or following) Mr Mills' visit A1 Lofts and the homeowner sign what the Tribunal called the A1 Agreement. This provides:
“The Client … hereby appoints A1 Lofts Ltd as Project Management and Agent for the Client in respect of the construction and installation of:
………….
…………
(“the Works”)
at the property
………….
(“the Property”)
for the price of ……….
Subject to the Terms of Business (receipt of which the Client acknowledges) and any special conditions detailed overleaf.”
The Terms of Business are contained on a printed form. Among the drafting deficiencies is the fact that almost every cross-reference within the contract is wrong. I have corrected the errors in quoting it. They begin with a number of definitions which include:
“the Contractors”—the Architect, Service Providers, tradesmen and other persons engaged by the Project Manager on behalf of and as independent contractors to the Client to fulfil in whole or in part the obligations herein”
“ the Project Manager”– shall be A1 Lofts Limited which shall throughout the existence of the agreement act as the agent of the Client”
The Service Providers are not defined or identified, but are in fact MM Administration Ltd and MM Logistics Ltd. Clause 2 provides:
“The Project Manager, as agent for the Client shall:
(a) Prepare and agree with the Client an initial scheme of design for the construction of the Works and generally oversee and co-ordinate the conduct of the Works at the Property until completion;
(b) Upon receiving the deposit (which shall be non-returnable) and stage payments from the Client pursuant to the terms herein utilise the same for the purposes of making payments to the suppliers, the Service Providers, Contractors and all other persons properly entitled to the same, including the Project Manager either for his own account or on behalf of the Contractors;
(c) Upon satisfactory completion of the Works, and the Client having fully complied with the proficiency of the agreement and made payment of all moneys due, issued to the Client the Guarantee.”
Clause 3 requires the Architect “as agent for the Client” to produce plans, and to submit them for approval. He is given authority on behalf of the Client to make certain alterations to the plans. Clause 3 (e) provides that the copyright in all plans and specifications will belong to the Project Manager. Clause 4 sets out the obligations of the Service Providers “as independent contractors to the client”. Clause 5 provides:
“The Contractors, as independent contractors to the Client, shall:
(a) Complete the Works in accordance with good building practice and within a reasonable time. In respect of the commencement, carrying out and completion of the Works time shall not be of the essence.
(b) In the event that the Contractors shall unreasonably delay the completion of the Works the Client, having complied fully with the provisions of Clause [6], shall have the right to give the Project Manager formal notice in writing requiring the Project Manager to remedy such default as may be specified in the notice with a reasonable time being not less than 30 days from the date of delivery of such notice by registered or recorded delivery post.”
The Contractors are not identified in the agreement either, and are not directly parties to it. Clause 6 sets out the obligations of the Client himself. These include giving access to the Architect; ensuring that clear access can be gained to the property by the Contractors throughout the works; providing necessary services such as electricity, water and drainage; protecting personal property from damage; removing carpeting. They also include paying the Price to the Project Manager in accordance with the provisions of clause 7, time being of the essence. Clause 7 deals with financial matters. In particular clause 7 (b) says that payment of the Price shall be made to the Project Manager and “credited to his general client account from which he is hereby authorised as agent for the Client to make payment to any supplier of materials the Architect and Contractors pursuant to clauses 2 (b) and 7 (c)”. Clause 7 (c) says that all invoices issued by the Architect, the Project Manager and the Contractors must be “addressed to the Client” and will be discharged out of moneys in the client account. The invoices will be collated and retained by the Project Manager “as agent for the Client” and on completion of the works the Project Manager will provide to the Client “a financial statement showing details of all the moneys received from the Client pursuant to the provisions of this agreement”. The financial statement is apparently not required to show disbursements out of the client account. Clause 8 deals with default on payment or other breach by the Client. In that event the Project Manager has the right to suspend the works and to withdraw all contractors from site; by himself or his agents to remove from the property all tools equipment and materials; and to add to the price the sum of £100 for each day's suspension “being a genuine pre-estimate of loss arising out of the Client's breach”. Clause 9 provides that on completion of the works and payment of the Price the Project Manager will deliver the Guarantee to the Client. Clause 10(a) contains an entire agreement clause which says:
“It is hereby acknowledged that the provisions herein...
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