Oksana Mul v Hutton Construction Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 05 June 2014 |
| Neutral Citation | [2014] EWHC 1797 (TCC) |
| Docket Number | Case No: HT-13-382 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 05 June 2014 |
[2014] EWHC 1797 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Akenhead
Case No: HT-13-382
Peter Oliver (instructed by Dentons UKMEA LLP) for the Claimant
Anna Laney (instructed by Silver Shemmings LLP) for the Defendant
Hearing date: 21 May 2014
Introduction
Preliminary issues have been ordered in relation to the construction of Clause 2.30 of the JCT Intermediate Form of Contract (2005), which provides for defects to be rectified in the "Rectification Period" following practical completion or, if the Employer consents and the Contract Administrator so instructs and such defects are not to be put right, an "appropriate deduction" is to be made. It is these words which fall to be interpreted and there has been no authority on the point as to what the basis of valuation should be.
The Factual Background
There has been no witness evidence and I have taken the following from the papers put before the Court. What follows is not intended to bind the trial judge but seems to be broadly unexceptionable. Ms Oksana Mul, the Claimant, ("the Employer") owns and with her family occupies a large country house known as Fairhill, Riding Lane, Hildenborough, Kent (the "Property"). By a contract ("The Contract") made in April 2008, Hutton Construction Ltd ("the Contractor") was engaged by the Employer to carry out various substantial extension and refurbishment works ("the Works") to the Property. The contract sum was £3,134,916.82. The work started on or about 6 May 2008. Practical Completion was certified by the Contract Administrator on 14 May 2010 with the certificate having attached to it a substantial list of works said to have been incomplete or defective. The Claimant paid to the Defendant, subject to retention, the final sum certified by the Contract Administrator ("CA"), being £4,050,000. It seems that substantial further works were done by a number of other contractors engaged by the Employer, for instance in terms of additional joinery. I will use the terms "Works", "Employer" and the "Contractor", as the context makes clear, to describe both the Works to be done under the Contract and the Claimant and the Defendant as well as the Works and the generic parties under a building contract such as was used here.
On 25 March 2011, the CA wrote to the Contractor in these terms:
"I refer to our meeting at Fairhill or 22nd March 2011. The purpose of the meeting was an attempt to avoid further correspondence between ourselves arguing our respective positions, and to progress the completion of Fairhill. During the meeting, we both repeated our arguments set out in our previous letters, I can see no purpose or benefit in repeating these here. However, our Client has explained the significant financial consequence of not being able to occupy the property.
Therefore, in an order to mitigate these damages, we are arranging for all outstanding works to be attended to by other contractors. You are aware of this by way of copy correspondence we have sent to you so far in connection with the investigation carried out by Smith & Byford…
Additionally, we have recently carried out an inspection of the property in order to identify the repairs required at the end of the twelve-month rectification period. We confirm a copy of the schedules prepared by HJP and EPP were emailed to you during that meeting. We are also arranging for these works to be carried out by other contractors…"
The schedules contain scores of listed items of allegedly incomplete or defective work, running to some 20 pages' worth.
The Contractor responded on 7 April 2011, attaching comments on most if not all the items. It denied any suggestion that it had prevented the Employer taking occupation of the building. It suggested that at least some of the problems were attributable to shrinkage itself attributable to the fact that the property had been without heating for a considerable period of time; it pointed to shrinkage in the joinery items supplied and installed by Employer's own directly employed contractors.
There are extensive issues between the parties. The Employer issued proceedings on 17 October 2013 against the Contractor, for damages for defects as well as alleged overpayment. The alleged defects relate to the external render, exterior and internal decoration, internal joinery, hardwood flooring, under floor heating, downlights, electrical and mechanical installation, showers, an extension, the garage block, the orangery roof, insulation, damp proof course, brickwork and blockwork, pool room roof, portico and entrance steps and garage doors. The defects claim comes to over £1m. It seems clear that all or most of the defects claim relates to defects, the remedial works for which either have been or will be carried out by the Employer using other contractors or tradesmen.
The Contractor's Defence and Counterclaim is detailed. It pleads (at Paragraph 4) that it at all times remained ready, willing and able to repair all defects as provided by Clause 2.30 of the Contract Conditions and even after the expiry of the Rectification Period. It also pleads that all that the Employer is entitled to is the "appropriate deduction" under Clause 2.30 and that this is to be a "sum calculated by reference to the contract rates/priced schedule of works". In respect of defects notified after the expiry of the Rectification Period, essentially it pleads a failure to mitigate, which, it asserts, would reduce the claim therefore to nil or to what it would have cost it to remedy.
It is this which has lead to the Court ordering preliminary issues:
"In respect of a defect arising within the Rectification Period (as defined in Contract Particulars) of the JCT Intermediate Form of Contract ("the Contract"), is an "appropriate deduction" under Clause 2.30 of the Contract calculated by reference to:
a. The Contract rates/priced schedule of works/Specification; or
b. The cost to the Contractor of remedying the defect (including the sums to be paid to third party sub-contractors engaged by the Contractor): or
c. The reasonable cost to the Employer of engaging another contractor to remedy the defect; or
d. The particular factual circumstances and/or expert evidence relating to each defect and/or the proposed remedial works."
The Contract
The Contractor's primary obligation is set out in Article 1:
"The Contractor shall carry out and complete the Works in accordance with the Contract Documents"
Those Documents are listed in Article 10.2 as the JCT form, a Schedule of Amendments, the Contract Drawings and the Contract Specification. The Specification was priced by the Contractor and is referred elsewhere as the "Priced Document". Clause 1.3 of the JCT Conditions required these documents to be read as a whole, albeit that the Specification could not override or modify the Agreement or Conditions. Article 15 required the Contractor to provide a Guarantee Bond for 20% of the Contract Sum. The Rectification Period (known in other JCT contracts as the Defects Liability Period) was to be 12 months from practical completion. Clause 1.10 addressed the Final Certificate which was to be "conclusive evidence" (save for fraud) that work and materials which was to meet the approval of the CA was to the CA's reasonable satisfaction.
Clause 2.1 partly repeated Article 1 saying that the Contractor "shall carry out and complete the Works in a proper and workmanlike manner and in compliance with the Contract Documents…and the Statutory Requirements". Apart from this, there are a number of clauses which deal with quality, for instance:
"2.1A.1 The Contractor warrants to the Employer that: 2.1A.1.1 all workmanship, manufacture and/or fabrication will be good of up-to-date practice and of a standard appropriate to the Works;2.1A.1.2 the Works when completed will comply with the Statutory Requirements, the Contract Drawing and Specification."
Within Clause 2, which broadly addresses the Contractor's obligations, Clause 2.4 provides for commencement by the Contractor of the Works (on the Date of Possession) and thereafter for it to "regularly and diligently proceed with and complete the same on or before the relevant Completion Date". Clauses 2.19 and 2.20 provide for extensions for various events and Clauses 2.22 and 2.23 for the payment of liquidated damages for culpable delay. A corollary of this is the Contractor's entitlement, subject to various requirements, to loss and expense for delay and disruption caused by specified causes. Clause 2.21 addresses practical completion:
"When in the opinion of the [CA] practical completion of the Works…is achieved and the Contractor has complied sufficiently with clause 3.18.3, then: .1 in the case of the Works, the [CA] shall forthwith issue a certificate to that effect ('the Practical Completion Certificate')…
and practical completion of the Works…shall be deemed for all the purposes of this Contract to have taken place on the date stated in that certificate."
Provision is made by Clause 2.25 for "partial possession" to be taken before Practical Completion where "the Employer wishes to take possession of any part or parts of Works…and the consent of the Contractor has been obtained (which consent shall not be unreasonably delayed or withheld)…" and when that happens to any such "Relevant Part", Clause 2.26 provides that "practical completion of the Relevant Part shall be deemed to have occurred, and the Rectification Period of the Relevant Part shall be deemed to have commenced, on the Relevant Date."
There are numerous provisions which enable the CA to require defective work or materials to be dealt with, not least of...
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