Davis Contractors Ltd v Fareham Urban District Council

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeViscount Simonds,Lord Morton of Henryton,Lord Reid,Lord Radcliffe,Lord Somervell of Harrow
Judgment Date19 Apr 1956
Judgment citation (vLex)[1956] UKHL J0419-1

[1956] UKHL J0419-1

House of Lords

Viscount Simonds

Lord Morton of Henryton

Lord Reid

Lord Radcliffe

Lord Somervell of Harrow

Davis Contractors Limited
and
Fareham Urban District Council

Upon Report from the Appellate Committee, to whom was referred the Cause Davis Contractors Limited against Fareham Urban District Council, That the Committee had heard Counsel, as well on Monday the 5th, as on Tuesday the 6th, Wednesday the 7th and Thursday the 8th, days of March last, upon the Petition and Appeal of Davis Contractors Limited, of 352 Kilburn High Road, London, N.W.6, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 20th of December 1954, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the printed Case of the Fareham Urban District Council, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 20th day of December 1954, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Viscount Simonds

My Lords,

1

This appeal arises out of arbitration proceedings to which the parties were the Appellants Davis Contractors Limited, a firm of building contractors, and the Respondents the Fareham Urban District Council. On the 9th July, 1946, the parties had entered into a building contract whereby the Appellants agreed to build for the Respondents 78 houses at Gudgheath Lane, Fareham, in the county of Southampton within a period of eight months for a sum of £85,836.

2

For various reasons, the chief of them the lack of skilled labour, the work took not eight but twenty-two months. The Appellants were in due course paid the contract price which, together with stipulated increases and adjustments, amounted to £94,424. They contended, however, that owing to the long delay the contract price had ceased to be applicable and that they were entitled to a payment on a quantum meruit basis.

3

The Appellants put their claims on alternative grounds ( a) that the contract price was subject to an express overriding condition contained in a letter of the 18th March, 1946, that there should be adequate supplies of labour and material and ( b) that the contract had been entered into on the footing that adequate supplies of labour and material would be available to complete the work within eight months, but, contrary to the expectation of both parties, there was not sufficient skilled labour and the work took twenty-two months, and that this delay amounted to frustration of the contract. It was conceded by the Respondents that, if the contract was frustrated as alleged, the Appellants were entitled to a further sum upon the basis of a quantum meruit. With this aspect of the case which might have presented some difficulty your Lordships will not be troubled. These two grounds of claim have persisted through the long course of these proceedings which have included a prolonged hearing before an arbitrator, an award in the form of a special case, a hearing of the case by the Lord Chief Justice, an appeal to the Court of Appeal, a reference back to the arbitrator, a supplemental award by him, a further hearing by the Court of Appeal, and an order of that Court rejecting the Appellants' claim.

4

My Lords, with the first ground of claim I will deal very briefly. I am in full agreement with the opinion of Lord Justice Parker on this part of the case, which will be elaborated by my noble and learned friend, Lord Radcliffe. The Appellants' letter of the 18th March, 1946, to which I have referred, was a covering letter in which, while enclosing their tender prepared in accordance with the Respondents' Bills of Quantities and Specifications, they made a number of statements about the basis of that tender. The material statement was as follows:

"Our tender is subject to adequate supplies of material and labour being available as and when required to carry out the work within the time specified".

5

It is possible that, if this letter had been followed by an immediate acceptance, the parties must have been deemed to enter into a contract which contained some such term, though its precise content and effect would have been extremely difficult to define. But that is not what took place nor what might be expected to take place. On the contrary, there were negotiations following the tender and these resulted in the formal agreement of the 6th July, which did not incorporate the letter of the 18th March. It would as it appears to me be contrary to all practice and precedent to hark back to a single term of preceding negotiations after a formal and final agreement omitting that term has been signed. The reference to the letter in an appendix to the tender is clearly confined to the matter with which that appendix dealt, namely the so-called "escalator" clause of the conditions of contract.

6

The second ground of claim demands more serious consideration not because it has any intrinsic merit but because it has acquired from the course of the proceedings a certain specious validity.

7

I cannot avoid reciting to your Lordships some of the findings of the Arbitrator. After stating that the site was handed to the Appellants and work was begun on the 20th June, 1946, and completed on the 14th May, 1948, the Arbitrator proceeded thus:

"(6) At the time of entering into the said agreement the Claimants and the Respondents anticipated that there would be available in the building industry a sufficient labour force and a sufficient supply of materials to enable the work specified in the agreement to be carried out substantially within the time stipulated in the agreement.

(7) The conditions in which the work had to be carried out were different from those anticipated by the Claimants and the Respondents in that:

(a) At all times there was a serious shortage of skilled labour in the industry and the Claimants were unable to obtain an adequate supply of such skilled labour;

(b) There was difficulty in obtaining adequate supplies of bricks, timber and plumbers' goods;

(c) There was an adequate supply of unskilled labour in the industry but not at all times within the locality of Fareham where the Claimants were required under the General Conditions of Contract to recruit such labour unless the importation of labour from elsewhere were specially sanctioned by the Respondents.

(8) As a result of the said shortage of labour and materials the Claimants were unable to complete the work within the time specified in the agreement and the Respondents accepted the position and allowed the work to continue until finally completed on 14th May, 1948, without serious objections by the Respondents.

(9) As a result of the longer time taken to complete the work the Claimants incurred additional expense and the actual cost to them of carrying out the contract was £115,233 14s. 0d. The Claimants have been paid by the Respondents the sum of £94,424 17s. 9d."

8

He then referred to the Appellants' claim for further payment in respect of their additional cost and expense, which he found to have been partly due to the circumstances set out above, over which they had no control, and to exceptional weather conditions and partly due to matters for which they were themselves to blame, and came to the conclusion that the sum of £17,651 13s. 1d. (which was afterwards slightly reduced) represented the amount of additional cost properly and unavoidably incurred by them. He then stated the submission of the Appellants on this point, viz.: that the contract was entered into on the "basis" that adequate supplies of labour and materials would be available at the times required and that because they were not so available the "footing" of the contract was removed and that they were entitled to be paid on the basis of a quantum meruit. The question of law stated by him which was intended to cover this point was put baldly thus "Whether the Claimants" [the Appellants] "are entitled to be paid any sum in excess of £94,424 17s. 9d. already paid them?"

9

Upon the matter coming before the Court the Lord Chief Justice was of the opinion which your Lordships have rejected that the letter of the 18th March, 1946, was incorporated in the contract and upon that basis was further of opinion that there was an implied promise by the Respondents to pay a further reasonable sum if the conditions of the letter were not satisfied. The learned Judge referred to the case of Bush v. Whitehaven Trustees, which must be discussed later, but observed "I do not think that it is necessary to go as far as that because I do not think that it is a destruction of the whole foundation of the contract".

10

An appeal was taken to the Court of Appeal. Upon the question of the letter of 18th March being incorporated in the contract the Court, though no order to that effect was drawn up, expressed a view adverse to the Appellants, but upon the alternative ground of claim, with which I am now concerned, thinking that the findings of the arbitrator were inadequate referred the case back to him with this direction "that the said Arbitrator may make further...

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