Optimus Build Ltd v Matthew Southall
| Jurisdiction | England & Wales |
| Judge | Stephen Davies |
| Judgment Date | 11 December 2020 |
| Neutral Citation | [2020] EWHC 3389 (TCC) |
| Date | 11 December 2020 |
| Docket Number | Case No: G50MA009 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2020] EWHC 3389 (TCC)
IN THE COUNTY COURT AT MANCHESTER
BUSINESS AND PROPERTY WORK
TECHNOLOGY AND CONSTRUCTION COURT
Manchester Civil Justice Centre
Bridge Street, Manchester M60 9DJ
His Honour Judge Stephen Davies
Case No: G50MA009
Simon Whitfield (instructed by Gunnercooke LLP, Manchester) for the claimant
Simon Arnold (instructed by JMW Solicitors LLP, Manchester) for the defendants
Hearing dates: 24, 25 November, 2 December 2020
Draft judgment circulated on 4 December 2020
APPROVED JUDGMENT
This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be released for publication on BAILII. The date and time for hand-down is deemed to be 10 a.m. on Friday 11 December 2020.
I direct that pursuant to CPR PD 39A paragraph 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.
His Honour Judge Stephen Davies
This is a dispute about a contract for building works at a residential property in Worsley, Manchester where the parties are unable to agree as to the basis of the contract and as to who was responsible for the termination of the contract before the works had been completed. The claimant building company contends that the defendant houseowners wrongfully repudiated the contract and that it is entitled to the balance of the contract price for the works undertaken and its loss of profit on the remaining works. The defendants contend that the claimant wrongfully repudiated, that the claimant's claim for the balance is made on the wrong contractual basis and overstated, that it is not entitled to claim for loss of profit and that instead they are entitled to their delay related losses flowing from the repudiation. There had also been a pleaded issue as to whether or not the second defendant, Ms McManus, was a party to the contract but, sensibly given the evidence, that defence was not pursued at trial.
I heard evidence over two days from five witnesses of fact called by the claimant. The two principal witnesses called by the claimant were Mr Paul McSorley, its primary director, and Mr Paul Adams, its consultant quantity surveyor. It also called Mrs Nicola McSorley, who is also a director and who is married to Mr McSorley, and Mr Stephen Roberts and Mr Michael Higson, representatives respectively of steelwork and roof truss suppliers with whom the claimant had placed orders. I then heard from both defendants. There was also written evidence from Mr Rigby of Tozer Gallagher a jointly instructed quantity surveyor expert witness.
The evidence having taken the full two days allotted through no fault of counsel and due, in part, to the technical difficulties due to the hearing being held remotely, I adjourned to hear closing submissions on day three and then produced this judgment. I am grateful to both counsel for their capable conduct of the case and their clear and persuasive arguments.
It is necessary to go in some detail into the relevant events. Before I do so I will identify the relevant legal principles, record my view as to the credibility of the witnesses and, having done so, I shall address the relevant events and proceed to determine the issues.
Legal principles
The contract is one which was formed during the course of a series of meetings and documentary exchanges. The documents included various iterations of what was described as a budget estimate as well as a number of emails. What each of the parties intended or understood by their written and spoken communications is irrelevant unless that intention or understanding was shared with and agreed or accepted by the other party.
I must apply well-established principles of contractual construction to ascertain the meaning of the words used, both in written and in spoken form, which, as summarised by O'Farrell J in Entertain Video Ltd v Sony DADC Europe Ltd [2020] EWHC 972 (TCC) at [221] in relation to written contracts, are as follows:
“When interpreting a written contract, the court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It does so, having regard to the meaning of the relevant words in their documentary, factual and commercial context. That meaning has to be assessed in the light of:
(i) the natural and ordinary meaning of the clause;
(ii) any other relevant provisions of the contract;
(iii) the overall purpose of the clause and the contract;
(iv) the facts and circumstances known or assumed by the parties at the time that the document was executed; and
(v) commercial common sense; but
(vi) disregarding subjective evidence of any party's intentions.
See: Arnold v Britton [2015] UKSC 36 per Lord Neuberger at paras. [15] to [23]; Wood v Capita Insurance Services Ltd [2017] UKSC 24 per Lord Hodge at paras. [8] to [15].”
Moreover, whilst I should not treat the defendants as having the same detailed knowledge of building contract procurement and the terms commonly used in by those experienced in the construction industry as did Mr Adams as an experienced quantity surveyor, the terms used must be construed by reference to the meaning they would convey to a reasonably well-informed reader. Whilst the defendants were not particularly familiar with building projects, Mr Southall is involved in the professional football business and it is apparent from the way in which he and Ms McManus expressed themselves, both at the time and at trial, that they are intelligent people with good business acumen. There is no pleaded or other basis for any contention that the claimant in any way mispresented the effect of the terms used in the documents or that it was under a duty to explain their effect to the defendants.
The paradigm definition of a building contract, as stated by Lord Diplock in Modern Engineering v Gilbert-Ash [1974] A.C. 689 at 717, HL and as cited in the current (10 th) edition of Keating on Construction Contracts at [1-001], is “an entire contract for the sale of goods and work and labour for a lump sum price payable by instalments as the goods are delivered and the work is done.”
However, as the authors observe, the law applicable to construction contracts is the general law of contract and it follows that the parties may agree to enter into a building contract which is not an entire contract or which is not a lump sum price contract or (save where statute intervenes) which does not contain provision for payment by instalments. As the authors of Keating observe at [4–027] and following, the manner of payment can be arranged in a variety of ways, such as (as particularly relevant here): (a) a contract to do a whole work in consideration of the payment of different sums for different parts of the work; or (b) a measurement and value contract, whereby the work when completed (either at the end of the whole works or at the end of a defined period) is measured and valued according to the agreement.
One example of the latter is a “cost plus percentage contract” (commonly abbreviated to a “cost plus contract”), under which the contractor is entitled to the actual cost honestly and properly expended in carrying out the works together with a percentage, either agreed in advance or a reasonable percentage, for overheads and profit (“OHP”). As to such a contract, as the authors of Keating suggest at [4–029] and I agree: “the contractor is not, it is submitted, disentitled from such cost merely because it exceeds what was anticipated. But it is thought that there would normally be an implied term that the contractor would carry out the works with reasonable economy so that expenditure in excess of what was reasonable would be irrecoverable. It would be a question of fact and degree in each case”.
It is also necessary to consider whether the use of the word “estimate” — or more specifically in this case — the term “budget estimate” has any particular legal effect when compared with the use of words such as “quotation” or “tender”. The latter would usually be understood as a firm offer to undertake works for the specified price stated in the quotation or tender. The status of an estimate however may vary according to the circumstances. It may simply be a preliminary indication of the contractor's opinion of the likely cost of undertaking works which is not on an objective construction intended as being an offer capable of being accepted so as to result in a contract. Alternatively, it may be an offer to undertake works on the basis of a reasonable cost which is estimated to be in the region of the figure specified but subject to measurement and valuation in due course, either on a cost plus or some other basis. Alternatively, it may be regarded as equivalent in all respects to a fixed price quotation, where the use of the word estimate does not on an objective construction differ in any material way from the effect of the use of the word quotation. See generally Keating at [2–103] and the decision of the Court of Appeal there referred to in Sykes & Anr v Packham t/a Bathroom Specialist [2011] EWCA Civ 608 where Gross LJ observed at [23]:
“Secondly, I am amply persuaded that the estimate did not give rise to a fixed price contract. In this connection, I do not think that there is any “magic” in the label “estimate”; certainly in the present case, I do not regard that label as a term of art. However, I do regard both the context and language of the estimate as pointing decisively against this being a fixed price contract …”
Turning next to the issue of repudiation, it is common ground that there is no right at common law to suspend performance for non-payment of an interim payment so that where – as...
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