ON APPEAL FROM SOUTHAMPTON COUNTY COURT
MR RECORDER GIBNEY
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE RICHARDS
LORD JUSTICE HUGHES
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Mr Stuart Kennedy (instructed by Messrs Dutton Gregory) appeared on behalf of the Respondents.
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Sir Anthony May:
"I certainly think it would shorten matters if I identified one or two matters about which I can express firm views irrespective of any other evidence that is forthcoming."
And the three matters were the contracting parties, whether there was a contractual cap of £200,000 and whether the contract was on a costs plus 5% basis. He then said:
"I am content that those three findings feature for the purpose of your closing submissions but I indicate now that what constitutes costs plus may yet require further elucidation by both of you."
He a little later went on to say this:
"Which is why I had some reservations about the third point. Obviously I have expressed that in an ex tempore way. If one or either of you through your instructing solicitors care to reduce that as the preliminary indications given, that can feature as part of your skeleton arguments and obviously arguments addressed around those with that final caveat that I indicated to you. I apprehend that it may or may not be necessary, but I suspect it will be, that there will be argument as to what constitutes costs plus in the context of this case."
"I do not consider that I gave an ex tempore judgment on this issue on 23 October 2009 but rather I made preliminary findings of fact I do of course recognise [and then he quotes from a case] As a general rule tribunals should be careful to ensure that the parties have an opportunity to make submissions on any matter that affect the outcome of the case."
"I have no hesitation in preferring the evidence of Messrs Grant and Warren on this issue."
And he went on to indicate why in quite some detail in paragraph 22, which I will not read out in detail. He said that Mr Stent he found to be "quite unreliable and inconsistent and Mr Clark remarkably vague" and those were, in the main, the contending witnesses. This was, in my view, an unimpeachable evaluation of oral evidence which speaks for itself; there is no basis for this court disturbing it. The fact that the Recorder anticipated this finding before the conclusion of the trial and for the reasons that I have given provides no basis for this court to reach a different conclusion.
"(vii) The Defendants are under a duty to take all reasonable steps to mitigate their losses and if they fail to do so their damages will be reduced accordingly…
(viii) The burden of proof is on the Claimant to show that the Defendants could reasonably have mitigated their loss and what the loss would have been had they done so."
And then this final subparagraph:
"Where the Employer fails to give the contractor an opportunity to rectify defects in the work, that amounts to a failure to mitigate the losses."
And the case of Maersk Oil UK Ltd v Dresser-Rand (UK)  EWHC 752 TCC is referred to for that last proposition.
"The Defendants do intend to repair their roof. Although anxious to ensure that the job was done within their means I am satisfied that they would not want to leave the family home with an unsatisfactory roof. Although I consider that Mr Whitehorn's offer to repair was genuine I do not consider that the Defendants acted unreasonably in refusing it. Past experience of Mr Whitehorn's roofers and no enforceable guarantee justifies an insistence on third party contractors."
"As regards the snagging and other patent items identified on the Scott Schedule I find on the evidence that:
a) the Defendants were aware of the 'snagging' and other patent items (because they were in occupation of the house and the claimant was not);
b) the Defendants failed to notify the Claimant of these items;
c) the Claimant had the resources to remedy the defects;
d) the Claimant was not given the opportunity to return to site to rectify these items;
e) the Claimant was denied the opportunity to request his own work as sub-contractors to return to the site to rectify defects in their own works;
f) therefore, the Defendants failed to mitigate their losses in respect of these items (ie those items which were reasonably apparent to the Defendants in the occupation of the house)."
That, so far as it goes, is a straightforward application of the law except in one respect, which I have indicated and which the Recorder correctly set out, about mitigation of loss, and he is there making findings of fact, the effect of which was that he held that the defendants had failed to mitigate their losses and that there would have been no cost to them if they had given the claimant the opportunity to rectify the defects. He then went on to say that "In the circumstances, the Defendants are not entitled to recover more than the amount it would have cost for the Claimant to rectify the defects", and he refers to Pearce and High Limited v Baxter  Building Law Reports, page 101.
"In my view there is a fallacy at the heart of Mr Rainey's argument. It jumps from the true proposition that no remedial costs have yet been incurred to the false proposition that no loss has yet been incurred. The loss was incurred on 3 July 2001 and the fact that in the end the judge – correctly so we are holding – favoured a computation of most of the loss by reference to the cost of a restoration not yet conducted does not alter the date of the loss. Informing therefore the judge's exercise of discretion to award interest under s. 35A of the Act of 1981 should have been "the basic principle … that interest will be awarded from the date of loss". So said Robert Goff J. in a passage undisturbed on appeal in BP Exploration Co (Libya) Ltd v. Hunt (No. 2) 1 All ER 925 at 975j; and he proceeded to add that "the mere fact that it is impossible for the defendant to quantify the sum due until judgment has been given will not generally preclude such an award.
So far so good for the proposition advanced that the interest on the counterclaim should be awarded from the date of completion, that is to say the date of the loss the Recorder in fact awarded it. Wilson LJ went on to say:
"The basic principle is, of course, not immutable. Had the evidence enabled him to do so, Mr Rainey might have argued that the costs of restoration included in the award were calculated by reference to figures which obtained in 2005 and thus that an award of interest would duplicate an allowance already built into it. But he never so argued. On the contrary it was Mr Young who, as part of his application for an award of interest, argued – apparently without challenge – that such costs were calculated by reference to figures which obtained in 2001 and which had indeed been finally presented to Thames Water as early as 2003."
Lord Justice Richards:
Lord Justice Hughes:
Order: Appeal allowed in part