England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR LEAVE TO APPEAL

		Royal Courts of Justice Strand London WC2
		19th November 1998

LORD JUSTICE ROCH: I will ask Lord Justice Chadwick to give the first judgment.

LORD JUSTICE CHADWICK: This is a renewed application for leave to appeal the order made on 29th May 1998 by Mr Atherton, an assistant recorder sitting as a Deputy Judge in the Carlisle County Court. By that order the judge directed that there should be judgment for the plaintiff in the sum of £4,367.42, including interest, and dismissed the defendant's counterclaim. The application is made on behalf of the defendant by Mr Watson-Gandy whose submissions, if I may say so, lost nothing in clarity and force by reason of the fact they were economical and succinct.

The defendant is a builder. The plaintiff is an accountant, but lives at a farm near Carlisle. The plaintiff's claim in the action, as set out in the particulars of claim served on 20th October 1994, was for damages for breach of an agreement made in 1991 for the supply and erection of an agricultural shed at the plaintiff's farm at Scaleby. The complaint was, in short, that the shed as constructed was not in accordance with specification and had not been constructed within a reasonable time. The plaintiff had paid a total of £17,129.15, being £14,578 plus VAT, in respect of work which, as he contended, was worth no more than £13,765. Subsequently, he amended that latter figure down to £13,165. His claim, which was for money had and received in respect of payment which he had made, was for the difference between those two figures, a net claim of £3,972.22. I will refer to that claim as the plaintiff's first claim.

The second claim made by the plaintiff in the action was for damages arising out of alleged breach of the contract. That claim, after amendment, totalled £3,918.57. It included five separate items: the cost of completing the shed, £400; the cost of replacing inadequate cattle fences and doors, £1,010; the cost of removing soil from the site, £390; the cost of reseeding a field, £318; and a loss of profit caused by a forced sale in October and November 1991 of cattle which would otherwise have been housed in the shed over winter and sold in the Spring, a claim of £1,800.

Faced with those two claims, the defendant, by a defence and counterclaim served on 5th December 1994, counterclaimed in the amount of £20,930. That was made up of a claim for £8,047 in respect of work done on the agricultural shed, that is to say, a difference between a price of £25,000 or thereabouts and the £17,000 odd that had been paid, and a claim for £12,883 in respect of other works done at the property - being the construction of a stable block and the surfacing of yards with concrete. The amount in respect of the stable block and the yards (£12,883) is based on an invoice sum of £22,883 against which credit was given for payments, which the defendant accepted had been made in cash, amounting to £10,000.

By further amendment served with the reamended reply and defence to counterclaim in, I think, July 1997 the plaintiff introduced a third claim. That claim is in respect of an alleged overpayment in respect of the work done by the defendant in building the stable block and concreting the yards and apron. The amount of the overpayment is quantified at £2,265. The plaintiff's contention is that he paid not only the £10,000 for the stable block which the defendant conceded but a total of £16,000 for that work; and further that the value of that work was only £12,734. The difference between the £16,000 paid and the value of the work (£12,734) is £3,266 - the amount of that third claim.

The judge was faced therefore with a complex factual dispute as to work done between a local builder and a part-time farmer at a farm in Carlisle. At the risk of stating the obvious this was not the sort of building contract in which there were RIBA or JCT standard documents and architects' certificates.

The judge identified the issues in a lengthy and careful judgment. At page 2 of that judgment he said this:

"In general terms, therefore, the issues are:

(1) was the defendant in breach of the shed contract and, if so, what are the damages?

(2) what extras were agreed in respect of the shed contract, and what was the value of the extra work?

(3) what extras were agreed in respect of the stables contract, and what was the value of the extra work?

(4) has the plaintiff paid too much? If so, can he recover the difference as monies paid under a mistake of fact?"

In relation to the stables contract the judge accepted that the plaintiff had paid £16,000 in cash for the work that was done. He rejected the defendant's contention that only £10,000 had been paid for that work. The judge reached the conclusion that £2,000 of that £16,000 (being an instalment paid in 1990) had been paid by mistake. Accordingly, that the plaintiff was entitled to recover £2,000 of that £16,000 as money paid by mistake. But the judge found also that there should be allowed to the defendant in respect of the stables contract items totalling £1,087 as being extras over and above the quoted price. Accordingly, the judge allowed a set off of £1,087 against the £2,000 claim of money having been received and reached a net figure of £912.05 in the plaintiff's favour.

The judge rejected any further claim on the part of the defendant in respect of the price for the stables contract. He held that, in any event, there was a fixed price contract arising out of a quotation of £14,000 and that the defendant had not established that he was entitled to any further payment beyond the identified extras totalling £1,087 (to which I have referred).

In relation to the cattle shed, the judge rejected the plaintiff's claim that the £17,000 odd had been paid under any mistake and rejected any claim that there was a right of restitution in relation to that sum or any part of it. He also rejected the defendant's claim that the defendant was entitled to any more than a total of some £12,495 as the fixed contract price including extras amounting to £1,415. Accordingly, the defendant having been paid £17,000 odd, the defendant was not entitled to any further payment in respect of the cattle shed.

The judge then considered the plaintiff's claim for damages for breach of contract in relation to the cattle shed. Of the five items to which I have referred, set out in the particulars of claim, the judge allowed in whole or in part three. He allowed £1,800 in respect of loss of profit on the cattle; he allowed a sum of £300 in respect of the cost of removing soil from the site; and he allowed £400 as the cost of completing the cattle shed. Those three items together made up £2,500.

The effect was that the plaintiff succeeded in relation to the claims in respect of the cattle shed to an extent of £2,500. The judge added the £2,500, which he allowed in respect of the second claim to the £912 which he had allowed in respect of the stables (the third claim) and reached a figure which, with interest, made up the amount of the judgment.

The points which are sought to be taken on appeal are set out conveniently in the skeleton argument which has been delivered on behalf of the applicant. First, it is said that the judge was wrong to reject the defendant's claim in respect of extras relating to drainage on the stables contract. In fact, the judge did allow a certain amount in respect of additional charge for drainage but took the view that the principal cost of drainage had been included in the quotation. It is said that he erred in failing to give effect to the principle that certainty was required when making a term of a contract. In my view the judge, having heard the witnesses over a period of several days - and, plainly, having examined the factual basis on which these parties dealt with each other - was entitled to reach the conclusion, as a matter of fact, that drainage was to be included in the quotation for the stables and yard. I do not find it possible to conceive that an appellate court would interfere with that finding of fact.

Secondly, it is said that the judge misdirected himself in holding that there was a breach of contract in failing to complete the buildings - the agricultural or cattle shed buildings - by October 1991. That question goes to primarily the loss of profit on the sale of the cattle; it being the plaintiff's case that the absence of buildings in which to house the cattle over the winter made it necessary to sell them in the late Autumn as store cattle rather than to hold over until the Spring and sell them as fat stock. The judge considered the evidence carefully and came to the conclusion that it was agreed that the works would be done within a reasonable time and that in the light of the circumstances known to these parties in that part of the world it was plainly envisaged that a reasonable time would not extend into the winter months. If I may say so, it would be obvious to a builder building a shed for housing cattle that the shed was wanted before the land became so wet that the cattle could no longer be kept outside. Again, that seems to me essentially a matter of fact on which the judge was entitled to reach his own conclusion; and on which an appellate court is in no position to interfere.

The third point on which the applicant seeks to appeal is the judge's finding that the delay was such that the plaintiff was entitled to repudiate the contract for the construction of the cattle shed. The effect of the alleged repudiation was that the plaintiff engaged another builder or bricklayer to complete the work at a cost of £400. That was an element of damage which the judge allowed in his computation of damages. It is said with force that simply failing to complete a contract within a specified time does not of itself amount to a repudiation unless there is some evidence of intention to abandon the contract altogether. The judge, however, did not base his decision simply upon delay. He found, on the facts, that the defendant had made it plain that he was unwilling to complete the contract without further payments in excess of the amount of the quoted or contract price. That finding of fact, as it seems to me, was sufficient to enable the judge to conclude that, as a matter of law, the defendant's conduct amounted to repudiation of his contractual obligations.

Fourthly, the applicant challenges the judge's finding that the defendant was not entitled to charge VAT on top of his quoted price. The point goes only to the stables contract. In relation to the contract for the cattle shed, the amount which the plaintiff paid included VAT, and the judge rejected the plaintiff's claim to have any part of that payment returned to him. In relation to the stables contract, two features may be noted. First, that it was a contract under which the defendant stipulated for payment in cash, and was paid in cash; secondly, that the building that was being built - a stable block - was, at least prima facie, not an agricultural building in respect of which the plaintiff would be able to reclaim VAT - if, indeed, he were registered as a farmer in respect of his farming enterprise.

The applicant referred us to two decisions in the Construction Law Journal: a decision of His Honour Judge Newey QC in Franks & Collingwood v Gates (1983) 1 ConLR 21, and a subsequent decision of His Honour Judge Bowsher QC in Tony Coggs Dismantlers Ltd v Jim 5 Ltd (1996) ConLR 209. In my view, the cases illustrates what might be thought to be self-evident, that the question whether or not the price for a building contract is inclusive or exclusive of VAT must turn on the terms of the particular contract. Normally of course it will be made clear expressly. It is in the interests of the builder who will be receiving the price to make it clear because, as between the builder and the Commissioners for Customs & Excise, the provisions now found in Section 19 (1) and (2) of the Value Added Tax Act 1994 require the recipient to account for VAT on the basis that the consideration that he receives is such amount as equals the value of the goods or services provided plus VAT. So if the builder fails to make it plain to the employer that he is stipulating for payment of VAT in addition to the contract price, he will be left to account to the Revenue for the VAT out of what he receives.

Tony Cox Dismantlers Ltd v Jim 5 Ltd shows that there may well be a custom in the construction industry that prices quoted are exclusive of VAT. There was no evidence in the present case - nor, in my view, was there likely to be any such evidence available - that on a contract between a small builder seeking to be paid in cash and a part-time farmer it was an implied custom that VAT would be paid on top of the cash payments. For my part, I would expect that the officious bystander, when asked whether the parties to such a transaction intended that VAT should be paid on top of the cash payments, would say, no, of course that was not the intention of the parties. The judge reached the conclusion that it had not been established that there was an expressed or implied term that VAT should be paid on top of the contract price. I see no realistic prospect of an appellate court disturbing that finding.

The remaining point on which the applicant seeks to appeal is the judge's decision to award to the plaintiff the costs of what had been a lengthy and complex proceeding on County Court scale 2. That, as it seems to me, was essentially a matter within the judge's discretion and it is impossible to find any basis upon which he could be said to have exercised that discretion wrongly.

For the reasons which I have sought to give, I am not persuaded that this is an appeal which has any realistic prospect of success on any of the points which have been identified in Mr Watson-Gandy's able submissions before us. In those circumstances I would refuse leave to appeal.

LORD JUSTICE ROCH: I agree.

Order: Application refused