England and Wales Court of Appeal (Civil Division) Decisions

Mrs Kathleen Saigol is the central figure in this tragic saga. In 1988 she was a BBC Television Producer and Researcher, living at 6 Cranley Mansion with her two sons, Matthew aged 17 years and Pasha aged 7. In the previous year her leasehold interest in her flat was valued at £475,000. Jackson Stops advised that when the then contemplated works were complete, her flat would be worth in the region £750,000. Her equity at that time was approximately £180,000. She owed £295,000. She was servicing the interest from her deposit account. As a result of a divorce settlement, she had deposits in a bank account which on 31 December 1988 totalled approximately £100,000. She was earning £25,000 a year in her career. She was in receipt of maintenance of £25,000. She had £200,000 in capital. She intended to spend about £130,000 on the renovation of her flat which she then intended to sell. She was thus in a comfortable situation.

If the works which are the subject matter of these proceedings had been performed properly, they would have been completed in October 1988. The loan she needed to finance this work was therefore intended for a limited period. If all had gone according to plan, she would have enhanced her equity by at least £250,000. She would then have been in a position to obtain another property in London where she would continue to bring up her sons.

As a result of the gross incompetence of those responsible for the refurbishment of the block of flats and her flat in particular, her life has been ruined. She suffered severe and continuing damage to her health, the indignity of bankruptcy, 11 years of litigation, a disrupted family life, a nomadic existence, loss of her home and her professional career. This state of affairs should never have come about. How it did must be explained in some detail.

Cranley Mansion is a red brick, Edwardian block of flats near Gloucester Road in South Kensington, London. There were seven flats spread over six floors and a basement. Flat 6, acquired on a long lease by Mrs Saigol in 1983 for £157,000, was the largest flat in the block and extended to 3,400ft. over the top 5th and 6th floors with fine views over West London. In 1986 the residents acquired the freehold and vested it in the newly created Cranley Mansion Ltd., (“Cranley”) in which Mrs Saigol was a 19% shareholder. Cranley’s only asset, apart from the freehold itself, was its ownership of the basement flat occupied by the caretaker under a service licence. Mrs Saigol’s demise of Flat 6 did not include the external envelope of the building, or any part of the building lying above the surfaces of ceilings or below floor surfaces or any of the common parts.

By the late 1980’s the block was seriously overdue for major structural refurbishment. Particular needs included a new roof covering, cleaning and repair of the external brickwork, the eradication of dry rot, and the installation of a new lift. Mrs Saigol realised that if she were to make structural alterations within her flat they would considerably enhance the value of her property. The work contemplated included the construction of a new roof terrace, the installation of a new roof lantern light and windows in the roof, the stripping out of partitions and old wiring and the installation of plumbing and electrical points ready for a new occupier. The proposed structural work could only have been undertaken satisfactorily as part of, and in conjunction with, the external structural refurbishment of the block. The work on her flat was designed by Mr Richard Goldsbrough. This was to be done in two phases. Phase 1 was largely a structural phase, and was to be undertaken in conjunction with the external refurbishment of the common parts of the block. Phase 2 was largely re-decoration work and the construction of a new internal staircase within the flat. Mrs Saigol was liable to reimburse Cranley for 19% of the cost of the common parts works; she was liable to pay 100% of the cost of her own works. Cranley’s managing agents instructed Congreve Horner & Co., (“Congreve”) to prepare a specification for the common parts works. All the work was included within one building contract, with Cosmur Construction (London) Ltd., (“Cosmur”) as contractor and Congreve as supervising officer. The contract was in the 1980 JCT Private Without Quantities Form and the contract sum was £254,294.00 (ex VAT). It was signed on 21 January 1988. Work began on site on 25 January 1988 and was due to finish on 22 July.

Mr Goldsbrough was responsible for preparing the specification for the personal work. Mr Johnson produced the combined specification and included the relevant parts of Mr Goldsbrough’s specification. These were not fully detailed, nor was the boundary between them clearly defined. The relations between the parties were laid down in a series of letters written by Congreve (dated 7 September 1987) and countersigned by Mr Goldsbrough to indicate agreement.

Mr Johnson ran the project virtually single-handed. He was a trainee surveyor who completed his examinations in 1988 and left Congreve in September 1988 shortly before Mr Horner (a partner in Congreve) certified practical completion. Mr Johnson’s role was pivotal in the disastrous outcome of the project. He gave evidence and the Judge in assessing his performance concluded that his manner was ‘overbearing, offensive and extremely unhelpful. He was over-confident and unprepared to accept that he was a trainee surveyor running single handed an unduly complex contract without experience of such contracts’.

Mrs Saigol raised the money for her share by means of a £400,000 loan facility from Dunbar Bank Plc and a smaller overdraft facility with Lloyds Bank. Dunbar agreed to provide Mrs Saigol 80% of sums certified by its own surveyor once he was satisfied that Congreve’s valuation was correct. The certification procedure between Congreve and Goldsbrough was unsatisfactory. What should have happened was that before issuing an interim certificate Congreve ought to have sent a valuation to Goldsbrough for him to check. If he was satisfied, the certificate could then be issued, Dunbar would be informed and its own surveyor would then inspect and report prior to release of the moneys. What actually happened was that Congreve issued certificates and sent the certificate and valuation to Mr Goldsbrough afterwards, on the basis that any comments he had would be taken on board before the issue of the next certificate. This meant that Mrs Saigol could not be sure of paying Cranley in time if Mr Goldsbrough did not give his unqualified approval to Congreve’s certificate and valuation. There would be particular difficulty where the final interim certificate was coupled with the certificate of Practical Completion. This was precisely what occurred.

The project soon got into difficulties. Mr Johnson formed the view that it was highly undesirable that Mrs Saigol should continue to occupy any part of the flat during the works. She declined to vacate and only did so at short notice in mid-April because the dry rot eradication works proved more extensive than Congreve had expected and made her flat uninhabitable. Cranley agreed to pay for alternative accommodation until the flat was made habitable again. Thereafter Cosmur had access to the flat on the 5th floor as well as the 6th floor. The 5th floor contained most of Mrs Saigol’s possessions which she had not removed. Although Cosmur were entitled to enter the 5th floor from the scaffolding, after the scaffolding was struck prematurely they entered by the front door to use the flat for a range of other purposes not authorised by the contractors and which incurred Mrs Saigol’s considerable displeasure. Even so, the first four interim certificates were issued and paid.

On 21 July 1988 Mr Johnson said that Mrs Saigol’s flat was ready for her to move back into and Cranley stopped paying for alternative accommodation. However, Mrs Saigol claimed that the flat was uninhabitable and that she was entitled to remain out of occupation at Cranley’s expense. She was said to have been late in paying her share of the Interim Certificate 5. When Interim Certificate 6 was issued on 8 August, it should have been for a sum appreciably less than that certified by Congreve and Mrs Saigol withheld her £35,495 share of it until she was satisfied that progress was being achieved towards making her flat habitable and accomplishing practical completion. The work was delayed and the causes of that were highly contentious. In the event practical completion was certified with effect from 21 September 1988 although it was eventually accepted by Cranley that the works were not practically complete. There was a major controversy as to how close to or far from such completion the works actually were. By this date relationships between the principal personalities had completely broken down.

Mrs Saigol attributes this breakdown to Cosmur ceasing work without contractual justification with the work still incomplete and with much defective work unremedied and to its subsequent failure to return to site without contractual justification. She was critical of Mr Johnson’s ability to manage the project, his failure to exercise any effective influence over Cosmur and his detailing errors. She was also critical of Mr Goldsbrough’s detailing errors.

All the other parties put the blame for the breakdown fully at Mrs Saigol’s door. She was said to be difficult and irascible in her dealings with all concerned. She vacillated and changed her mind as to her requirements. She refused to pay large sums of money which were due to Cranley for onward payment to Cosmur which arose out of Interim Certificate 6 and 7. Cosmur contended that they had reasonably reached the point where they were not prepared to do any more work in relation to either the common parts work or the Flat 6 work.

Certificate 7, as well as certifying practical completion, certified that Cosmur were entitled to be paid a further £80,843. This included the release of half the retention sum. It was later accepted that there was a substantial over-valuation by Congreve, and Cosmur were not entitled to half the retention sums. This certificate should have been for no more than £23,500 from which a set-off should have been deducted of £6,500 (£3,500 liquidated damages to which Cranley was entitled because of Cosmur’s delay, and a further £3,000 off as the cost of cleaning the flat once the works were completed). Mrs Saigol refused to pay her share of Certificate 7. The issue of the P.C. Certificate and its accompanying valuation triggered the final breakdown between the parties and placed Congreve in breach of contractual duties it owed to Cranley and Mrs Saigol. The Certificate enabled Cosmur to treat its contract work as finished and prevented Congreve from requiring Cosmur to complete all outstanding work and to give an appropriate allowance for any work which could only be done from the scaffolding which had been struck. Acting on the advice it received, largely from Congreve, Cosmur adopted the stance that they were entitled to the sum certified and that Mrs Saigol was wholly unjustified in not paying her contributions to those sums in full. Cranley, again apparently on the advice of Congreve, surprisingly took the view that until well into 1989, the only appropriate course was to recover money from Mrs Saigol. At a meeting in October 1988 Mrs Saigol indicated that she would pay her contribution to Certificate 6 if Cosmur made her flat habitable and completed the snagging. Cosmur had no intention of returning to site even if it was paid. No solution was reached. The upshot of the breakdown soon operated to Mrs Saigol’s disadvantage and was to lead to her losing her flat and to both her own and Cranley’s insolvency. By the early part of 1989 she was unable to service the substantial loan facility drawn down by her and provided by Dunbar and Lloyds.

The Litigation

Writs soon began to fly. On 21 November 1988 Cranley issued forfeiture proceedings against Mrs Saigol for the sums allegedly owing from her up to and including Certificates 6 and 7. Dunbar joined the action at its own request as second defendant. In February 1989 Cosmur sued Cranley for the unpaid balance due under Certificates 6 and 7. Cranley, on the advice of Congreve that Cosmur’s case against Cranley was very strong, entered no defence so that Cosmur entered judgment by default. In April the Master granted Cranley’s application for summary judgment against Mrs Saigol for £8,648 and gave leave to defend the balance of the claim. This Order was set aside in October when she was given leave to defend the whole claim. In December 1989 Cranley had Cosmur’s default judgment set aside and obtained leave to defend on condition that £50,154 was paid into court. In January 1990 Cranley, in Cosmur’s action, served a Third Party Notice on Mrs Saigol. Meanwhile, in September 1989, Dunbar had issued possession proceedings against Mrs Saigol in the County Court which were later transferred to the Chancery Division. By this time Mrs Saigol was defendant in two sets of High Court proceedings and Third Party in another. Mrs Saigol made various attempts to settle with Cranley. She commissioned reports from surveyors and asked for meetings between them and Cranley’s surveyors. Cranley instructed Congreve to meet Mrs Saigol’s representatives to discuss the works but Congreve made no attempt to comply.

After carrying out temporary repairs and cleaning at a cost of some £30,000 Mrs Saigol was able to re-occupy and place the flat on the market. However, disaster was to strike again. On 25 January 1990 a 4 tonne chimney stack (which had been part of the contract works) collapsed onto the roof, making occupation of her flat dangerous and forcing her and her son to vacate until the reinstatement was completed in September 1990. The repairs were paid for by Cranley’s building insurers who also paid for Mrs Saigol’s temporary accommodation. Mrs Saigol returned for a short period thereafter no part of her claim could be attributed to the chimney collapse.

The rent and other outgoings coupled with the costs of repairing and cleaning, of experts and legal fees in three separate proceedings severely undermined Mrs Saigol’s financial position and used up much of the substantial capital she had from her divorce settlement in her account with the Bank of Oman. She obtained legal aid in the Dunbar action in March 1990 and in the Cosmur and Cranley actions in May 1990. The chimney collapse effectively stopped the process of marketing the flat during the reinstatement works and the debt owed to Dunbar increased. On 6 November 1990 Dunbar’s possession claim was determined by Mervyn Davies J who ordered possession. Dunbar did not enforce the possession order for the time being. The learned Judge also ordered trial of preliminary issues raised by Mrs Saigol’s counterclaim in which she alleged Dunbar was in breach of an implied term of the lending agreement because of the negligence by its quantity surveyors in relation to Interim Certificates 1 to 5 (but not 6 or 7, for which Dunbar had advanced no money during the works). It appears that no further steps were taken to prosecute the counterclaim.

By the summer of 1991 Mrs Saigol and her children had moved home eight or nine times since leaving Cranley Mansion in April 1988. On 19 August 1991 Mrs Saigol was adjudicated bankrupt. Her claims in the three sets of proceedings vested in her Trustee, and on 15 April 1992 he assigned them back to her on terms that she would receive £25,000 out of the first £100,000 recovered, and any balance remaining after payment of creditors. The principal creditor was Dunbar, who had continued to charge interest after the bankruptcy. Dunbar repossessed the flat in October 1991 and in the following month by a Consent Order in the Cranley proceedings, Cranley granted Dunbar relief from forfeiture of the lease of the flat on Dunbar’s payment to Cranley of £38,414 for rent and service charge arrears, plus nearly £15,000 interest. Dunbar paid the total to Cranley’s solicitors and debited that sum to Mrs Saigol’s loan account. In June 1992 Dunbar sold the flat for £475,000 and after applying the net proceeds to reducing Mrs Saigol’s debt, there was a balance due of £393,909.

In August 1992, Mrs Saigol sought to join Cranley, Congreve and Goldsbrough as defendants in the Cosmur action. In January 1993 the proceedings brought by Cosmur and Cranley were ordered to be consolidated with Mrs Saigol as plaintiff and she was given leave to make direct claims against Congreve and Goldsbrough. Mrs Saigol’s claim against Congreve came to be called the ‘personal proceedings’. All other claims between the parties were to be made by way of RSC O.16, rule 8 Notices or counterclaims. Thereupon Cranley served a contribution notice against Congreve seeking an indemnity against Mrs Saigol’s claims against it. The notice also sought damages against Congreve but no particulars of loss were given. Mrs Saigol’s consolidated Statement of Claim was served in February 1993. By its
defence Congreve denied that it owed Mrs Saigol any duty of care to prevent physical damage to her flat or property, and denied it owed her any substantive duty in tort or contract.

On 23 April 1993 a Consent Order was made in the Dunbar proceedings whereby Mrs Saigol’s counterclaim was dismissed in full and final settlement of all past, present and future claims of whatever nature either party might have against the other, and it was declared that Dunbar was debarred from proving in Mrs Saigol’s bankruptcy or pursuing any claim against her after discharge.

On 15 June 1993 Cranley’s creditors (i.e. the lessees and shareholders but excluding Mrs Saigol) approved a Company Voluntary Arrangement, and in July Mrs Saigol issued an application in the Chancery Division to have the CVA revoked. In the same month an Official Referee ordered all claims by or against Cranley to be stayed pending the outcome of Mrs Saigol’s application. Ferris J. held that the CVA was not binding on Cranley or any of its creditors. In September 1994 Cranley entered voluntary liquidation. Cosmur then obtained payment out of court of £50,134 (plus interest) paid in by Cranley when Cosmur’s default judgment was set aside. This meant that Cosmur had recovered all sums certified by Congreve up to Certificate 7.

Meanwhile, and thereafter, the consolidated proceedings moved on without Cranley. In August 1993 Congreve obtained an order that there be a trial of preliminary issues on the question of whether (and if so what) duties Congreve owed to Mrs Saigol in contract or in tort. This trial took place over five days in January 1994, when it was found that the contractual duties were so limited that Congreve was entitled to have Mrs Saigol’s claim against it struck out.

Mrs Saigol appealed to the Court of Appeal. Congreve argued that it was not fair, just and reasonable for any tortious duty to be imposed on Congreve because the position was governed by the letters of September 1987 and because Mrs Saigol was wholly protected by Mr Goldsbrough and had ‘an adequate remedy’ against him and, through Cranley, against Congreve regarding the common parts. The Court of Appeal in July 1995 accepted this argument but found that the contractual duty was wider than the Judge had found. Mrs Saigol’s claim against Congreve was reinstated and her pleadings re-amended. The principal criticism of Congreve was in relation to the issue of Certificate 7, and that the condition of the flat as itemised in the Scott Schedule was due to Congreve’s breaches.

On 1 December 1995, Cranley’s liquidator assigned Cranley’s claim against Congreve to Mrs Saigol in exchange for a release of her claim against it. In February 1996 Congreve successfully resisted her application to carry on under RSC O.15, r.7(2), but this was granted by the Court of Appeal on 7 May 1996. Mrs Saigol amended the grounds of Cranley’s pleading against Congreve to add further heads of damage. These proceedings came to be known as the ‘assigned proceedings’.

Congreve amended their defence in the personal proceedings and no longer claimed that Mr Goldsbrough was responsible for inspecting and supervising the flat work. They maintained however that the issue of Certificate 7 was fully justified, that the alleged incompleteness of works referred to in the Scott Schedule was due to Mrs Saigol’s failure to pay her share of Certificate 6, that the works were delayed by numerous variations to the contract instructed by Mrs Saigol and that generally Mrs Saigol’s loss was caused by her own negligence (including her failure to follow the advice of Mr Goldsbrough to pay on the Certificates), her failure to protect her belongings, honour agreements and to take advice. In June 1996 at a pre-trial review, it was ordered that the trial be adjourned until 2 October 1996 as a priority fixture. In August Mrs Saigol’s expert became seriously ill and had to withdraw from the case so the trial date was re-fixed for the 14 April 1997 to allow a new expert to be instructed.

At the trial before HHJ Thornton QC, the various allegations made by Congreve against Mrs Saigol went both to her substance and credit. They were adopted by Cosmur and Mr Goldsbrough. The Judge rejected them all, finding that they became weaker with each passing day:

"The conclusion is that none of the examples put forward as supporting the general proposition that Mrs Saigol’s evidence was neither reliable nor credible was made out. The reason for dealing with questions of credit at such length has been two-fold. Firstly, in refuting these examples, it enables me to confirm my initial assessment that Mrs Saigol was attempting to tell the truth but that the passage of time led to occasional, but inconsequential, factual errors. On the major questions, I was able to accept her evidence as both accurate and truthful. Secondly, the wholesale attack on Mrs Saigol’s credit, which was so wholly unjustified and unwarranted, pointed to the real possibility that Congreve’s case was unreliable and tainted with the very unreasonableness that it was alleged tainted Mrs Saigol’s case. Having seen Mr Johnson at length giving both expert and factual evidence, I am driven to the conclusion that that is a fair way of describing Congreve’s defence and its concomitant attack on Mrs Saigol.

My overall conclusion as to Mr Saigol’s evidence is that she attempted at all times to provide truthful and accurate answers to the questions she had to answer for an extended period lasting over 5 days in the witness box. I sought to keep in mind, in evaluating her evidence, the fact that she had been through a 9-year ordeal of unimaginable stress and that that could well have influenced adversely the accuracy of her evidence. She had suffered her Flat being turned into a building site; the bullying of the workmen who continuously misused the parts reserved for her; the overbearing, offensive and extremely unhelpful manner of Mr Johnson; the loneliness of combating the hostility of all others involved over the difficult months following the collapse of the scheme; the loss of her family life for several years; the loss of her Flat, capital and career; the suffering, for several years, of depression and general ill health caused by the works and their aftermath; bankruptcy; litigation of almost Byzantine complexity with an interlocutory history of Jarndycian proportions; and the indignity of it being suggested in cross-examination, conducted on instructions, of having committed perjury, of obtaining money by deception and of maintaining bogus claims. This has undoubtedly clouded Mrs Saigol’s recollection of some of the detail but this absence was made good by the contents of the documents. Mrs Saigol gave her evidence in a somewhat rambling and disjointed way, but that is her general manner. I remained impressed by her general cheerfulness and tenacity to battle through her adversities that she exhibited throughout her evidence and I remained satisfied that, in instances where documentary support was not available, I was able to rely on the general thrust of her evidence. ......

.... In my view, although this accounts for the nature and manner of her answers to many questions, these feelings did not entail her giving untruthful or misleading evidence. I was impressed at how, invariably, detail recounted by Mrs Saigol or found in documents particularising her claim were verified or corroborated by independent contemporary documentation."

The trial Judge recorded that the trial proved unusually difficult to conduct for both himself and all counsel involved. These difficulties were not caused by any shortcomings in the way the parties’ respective cases were presented but by the unusually detailed number of allegations required to be investigated in circumstances where the events had occurred nine years previously, the documentation was incomplete and the parties were confined by constraints in the amount of pre-trial preparation that could be undertaken and in the length of the trial with which they were all concerned. Moreover the diffuseness and lack of direction of the pleadings, which was the result of the extraordinary convoluted pre-trial history of the action, made everyone’s task even harder. (Para 104). On Day 24 the Judge gave the following ruling:-

"There are - - two stages to this case, and two questions of causation. Stage 1 is a consideration, in general terms, of the cause of the non-completion of the works – certainly of the works as envisaged by Mrs Saigol. Stage 2, in the light of the findings of Stage 1, is to consider whether the specific complaints of breach of duty and contract made against the individual defendants are, in legal terms, causative of the causes identified at Stage 1."

In the event, and in summary, the Judge found that Congreve were in breach of their contract with Mrs Saigol, the issue of the Certificate of Practical Completion and its valuation were pivotal in the breakdown of the building contract, and Mrs Saigol reasonably refused to pay her share of the sums certified in Certificates 6 and 7.

He also found that Cranley’s proceedings against Mrs Saigol, for forfeiture of her lease, and the disastrous state of Flat 6, made it impossible for her to sell the flat and re-pay Dunbar. Dunbar’s claim for possession of the flat was held to be caused by Congreve’s breach.

In the personal proceedings, the Judge found that Congreve owed Mrs Saigol a contractual duty to consult with Mr Goldsbrough over the issue of Certificate 7 which admittedly it breached. If he had been consulted the Certificate would not have been issued. If it had been withheld, then, notwithstanding the fact that the contract had all but broken down in August 1988, Cosmur would have finished the work satisfactorily or allowance would have been made for what it could not finish on the final account. Accordingly Mrs Saigol was entitled to be put in the position she would have been in had the contract been completed satisfactorily. She was not bound to give credit for the further sum she would have had to pay to achieve that result, since she had, in effect, already paid in full. Mrs Saigol was entitled to damages to compensate her for the lesser of repair costs or diminution in value of her flat, both to be assessed in October 1988 (when the works ought to have been completed). Diminution in value was here used by the learned Judge as shorthand for the difference between the value which the flat would have had, had the works been satisfactorily completed, and the value it actually had in the state in which it was left. He did not assess the diminution in the value of the flat directly. Instead he assessed the diminution in the value of Mrs Saigol’s interest in the flat combined with Cranley’s interest in the building. He found this diminution was £200,000. Since this was less than the total of the cost of repairs being claimed in the personal and assigned proceedings taken together, he found Congreve liable to pay this amount as damages. In the event, he awarded £90,000 in the personal proceedings as representing the diminution in the value of the flat and £110,000 in the assigned proceedings as representing the diminution in value of Cranley’s freehold interest.

Accordingly Mrs Saigol recovered:

1.