Stephen West and Another v Ian Finlay & Associates (A Firm)
Jurisdiction | England & Wales |
Judge | Lord Justice Vos |
Judgment Date | 27 March 2014 |
Neutral Citation | [2014] EWCA Civ 316 |
Docket Number | Case No: A1/2013/1206 |
Court | Court of Appeal (Civil Division) |
Date | 27 March 2014 |
[2014] EWCA Civ 316
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
MR JUSTICE EDWARDS-STUART
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
Lady Justice Gloster
and
Lord Justice Vos
Case No: A1/2013/1206
Ms Patricia Robertson QC and Mr Richard Coplin (instructed by CMS Cameron McKenna LLP) for the Appellants
Mr Adrian Williamson QC and Mr Jonathan Selby (instructed by Hewitsons LLP) for the Respondents
Hearing date: 25 th February 2014
This is the judgment of the court to which all members have contributed.
This appeal raises three issues relating to the works of renovation and improvement to the property at 63 Deodar Road, Putney, London SW15 2NU (the "Property") belonging to the claimants, Mr Stephen West, a successful banker, and his wife, Dr Carol West, an academic neuroscientist (the "Wests", or individually "Mr West" and "Mrs West"). The claim was brought against the Wests' architect Ian Finlay & Associates ("IFA"), whose sole principal was Mr Ian Finlay ("Mr Finlay").
The case was tried by Edwards-Stuart J in November 2012, who delivered a judgment (running to almost 400 paragraphs) on 16 th April 2013, awarding damages to the Wests against IFA in the sum of £649,251.06 plus interest at 7% per annum over base rate on their actual expenditure, and 2% per annum on general damages, totalling £243,688.89. IFA appeals with the permission of Tomlinson LJ granted on 31 st July 2013.
The first question concerns the construction of what has been referred to as the net contribution clause (the "NCC") in the appointment agreement between the Wests and IFA made in February 2006 (the "Agreement"). It provided as follows:-
"We confirm that we maintain professional indemnity insurance cover of £1,000,000.00 in respect of any one event. This will be the maximum limit of our liability to you arising out of this Agreement. Any such liability will expire after six years from conclusion of our appointment or (if earlier) practical completion of the construction of the Project. Our liability for loss or damage will be limited to the amount that it is reasonable for us to pay in relation to the contractual responsibilities of other consultants, contractors and specialists appointed by you" (emphasis added).
In essence, the judge held that the NCC did not operate to limit IFA's liability to the Wests in a situation where the other party liable was the main contractor, Maurice Armour (Contracts) Limited ("Armour"). Accordingly, he did not reduce the Wests' damages on account of the fact that Armour was also responsible for some of the losses. IFA submits on this appeal that the judge should have held that the NCC did operate to limit IFA's liability when any other contractor (including Armour) was responsible for some of the loss, and that we should remit the case back to the TCC to assess the amount that it is reasonable for IFA to pay under the NCC. The Wests say that the judge was right, but even if he was not, that the NCC cannot operate to exclude the principle of joint and several liability. They go on to submit that, if the NCC were to have that effect, it should be held to be unenforceable because it fell foul of (a) the requirement of good faith in regulation 5(1) of the Unfair Terms in Consumer Contracts Regulations 1999 (the "UTCC Regulations"); and (b) the requirement of reasonableness in sections 2, 3 and 11 and Schedule 2 of the Unfair Contract Terms Act 1977 (" UCTA").
The remaining two issues concern:-
i) the rate of interest that the judge determined to be applicable to the award of damages for the Wests' actual expenditure: the judge allowed a rate of 7% per annum over base rate; IFA contends that it should have been 3% per annum over base rate; and
ii) whether the judge was right to award the Wests and their infant son, Jacob, damages for distress and inconvenience amounting to £14,000 in total.
Background facts
In June 2005, the Wests purchased the Property for £1.7 million.
On 11 th February 2006, IFA sent the Wests a draft appointment agreement for signature with at least two differences to the Agreement ultimately signed: first it provided for an indemnity insurance and liability limit of £500,000 instead of £1 million in the final version, and secondly, it provided for one, instead of two, weekly site visits by Mr Finlay.
Some time on or after 11 th February 2006, the Wests entered into the written Agreement with IFA whereby IFA agreed to render "Normal Architectural Service as per RIBA Conditions" as amended by the Agreement to the Wests in relation to the alteration and refurbishment of the Property. The Agreement included the NCC. The intended works to the Property included lowering the lower ground floor and replacement of the plumbing, mechanical services and electrics ("M&E"). At various stages, the Wests engaged certain specialist contractors including GlasSpace to design, supply and install a "glass box" conservatory, Ardern Hodges to supply and install wooden floors, Spiral Stairs to supply and install a staircase, and Pedini to supply and install the kitchen.
In mid-March 2006, IFA put the main contract out to tender. When the 4 tenders were received at a higher level than the Wests wanted, IFA suggested that the tender documents should be sent for the first time to Armour. Armour's tender of some £370,000 was received in May 2006. It was later reduced to some £260,000 by deletion of various items.
On 19 th June 2006, Armour took possession of the Property as main contractor to start the works with a 26-week programme. 11 months later, in May 2007, the Wests moved in to the Property, when the works were completed.
The Wests had been there just a month, in June 2007, when the lower ground floor of the Property was found to be affected by serious damp, and it was apparent that the remedial works would probably require the removal of the new kitchen.
On 8 th/9 th October 2007, the Wests moved out of the Property into alternative rented accommodation in Deodar Road. The judge found that they behaved entirely reasonably in doing so.
After significant debate about the damp proofing works that were required to the Property, and the discovery of serious defects to the M&E works and the floor slabs, there continued to be serious delays in agreeing a contract for the remedial works. Ultimately, the floor slabs were replaced in June 2008, and the remaining works began in about October 2008.
Between December 2007 and May 2009, the remedial costs were invoiced to the Wests. In June 2009, the Wests moved back in to the Property, upon completion of the remedial works.
On 29 th April 2010, a compulsory winding up order was made in respect of Armour.
On 23 rd September 2011, the Claim Form was issued. After a trial between 19 th and 29 th November 2012, the judge handed down judgment on 16 th April 2013. The judge's order was dated 4 th June 2013 and reflected an agreed amount of damages and interest on the basis of the judgment. The judge held that IFA was in breach of its professional duties in respect of the damp and the need to remove and replace all the M&E works. He also held that the losses were caused to some extent by Armour's breach of contract.
The judge's reasoning on the meaning of the NCC
The judge dealt with the NCC between paragraphs 195 and 205 of his judgment. His reasoning may be summarised as follows:-
i) He said that the NCC should be construed in the context that, by the date of the Agreement, it was understood that the Wests would themselves procure several aspects of the work, which would not form part of the main building contract.
ii) There was doubt as to the true meaning of the NCC: the words "other consultants, contractors and specialists appointed by you" could either mean (a) everyone with whom the Wests entered into a contract in relation to the project apart from IFA, or (b) the various specialist contractors or suppliers with whom the Wests were proposing to enter into direct contracts outside the main building contract, which IFA was expected to administer.
iii) Since there was doubt as to the meaning of a written term in the Agreement, regulation 7(2) of the UTCC Regulations required the court to give the NCC the interpretation that was most favourable to the Wests, which was the second meaning above.
iv) It was not, therefore, necessary for the judge to decide the true meaning of the NCC, but if he had to do so he would have decided that, in the context of the factual background, it bore the second meaning which was "what I consider the parties thought it meant", namely that it did not limit IFA's liability where the other party liable was Armour.
v) The judge derived what he thought the parties thought the NCC meant from:-
a) Mr West's letter to IFA 6 months after the Agreement on 10 th August 2006 referring to the agreement that key aspects would be undertaken by separate contractors, and saying that the NCC meant that one such contractor, GlasSpace, provided their own warranty: "and we are simply asking you as project manager and "independent arbiter" to confirm when the work has been completed & we should release the 5% retainer to GlasSpace".
b) The fact that Mr Finlay had written "Yes Agreed" against the first statement in Mr West's letter, and "Fine Understand" against the second.
vi) For...
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