England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MILTON KEYNES COUNTY COURT
(HIS HONOUR JUDGE MCINTYRE)

		Royal Courts of Justice Strand London WC2A 2LL
		11 April 2013

1. Lord Justice Treacy:

1. In some places the title of this action shows the respondent as if he were Mr Blacksmith. In any transcript the respondent should be identified as "Stephen Cheeld (Blacksmith)".
2. This is a second appeal, with leave given by Lewison LJ, from the decision of HHJ McIntyre sitting at the Milton Keynes County Court on 19 September 2012. Judge McIntyre allowed an appeal from Deputy District Judge Bennett in a small claim relating to the provision of a porch by Mr Cheeld, who is a blacksmith by trade, to the appellants as an additional feature of their home.
3. A brief history of the matter shows that the parties entered into an oral contract for the construction and installation of a metal porch on the front of the appellant's house. The contract price was £6,500. The appellants paid a deposit of £2,000. The appellants were dissatisfied with the porch and sought to reject it.
4. When the appellants failed to pay him any additional sum for the porch, Mr Cheeld, the respondent, claimed £4,250 as the balance due. That constituted a reduction of £250 on the contract price since the porch had not been completely installed. The appellants counterclaimed for the return of their deposit on the basis that they had rejected the porch as not being of satisfactory quality.
5. On 23 February 2012, Deputy District Judge Bennett rejected the appellants' contentions that Mr Cheeld had failed to replicate an iron framework depicted in a catalogue. She found that the design had changed as the contract progressed, and that the altered design had the full approval of the Alliotts. However, in relation to workmanship, the Deputy District Judge found that the respondent was in breach of contract. In general terms, she found that there was a lack of symmetry in the diamond latticework of the frame, and a lack of finish of the diamonds resulting in gaps between sections, and that welds had not been ground smooth. She held that the breach of contract as regards to workmanship amounted to a breach of warranty rather than a breach of condition.
6. The Deputy District Judge found that, after the structure had been completed, it was erected in situ on 28 April 2011. Mrs Alliott had had some reservations on that date, but had not raised them, although she accepted that was her opportunity to raise them. The porch was taken away for some additional work to be done and was finally installed, subject to a very minor matter, on 31 May 2011. It was common ground that no rejection was made at that stage. Indeed, the Alliotts then had the porch painted by a third party introduced by Mr Cheeld. It was not until 10 June 2011, or shortly afterwards, that the appellants indicated a rejection of the goods.
7. Deputy District Judge Bennett, who was dealing with the small claim on the evidence of the parties and without the evidence of an expert (a case management decision previously having been made to refuse an expert), ordered the appellants to pay Mr Cheeld £2,000. The Deputy District Judge had thus deducted £2,250 from the amount claimed to represent her assessment of the cost of making good the defective workmanship. In coming to this figure she had examined photographs of the defects and seen part of the metalwork in court.
8. Mr Alliott was dissatisfied and appealed to the Circuit Judge. His grounds were that (1) Deputy District Judge Bennett wrongly held that the breaches "constituted breaches of warranty", and that the appellants had no right to reject the goods; (2) that the reduction of £2,250 was a figure plucked out of the air without evidence to justify it having been placed before court; (3) the judge had wrongly held that changes to the design of the porch had been agreed with the appellants. This last matter does not seem to have been pursued in the light of the Deputy District Judge's clear findings.
9. HHJ McIntyre allowed the appeal on the basis that there was no proper basis upon which the Deputy District Judge could have assessed the cost of remedying defects in the sum of £2,250. The judge therefore made an order permitting parties to file evidence relating to the cost of remedying the defects in workmanship.
10. The judge rejected the appellant's contention that the Deputy District Judge was, as a matter of law, bound to conclude that the breaches of contract identified were breaches of a condition of the contract, and that they gave the appellants the right to reject the goods. He said that she was not bound to conclude that Mr Cheeld had breached a condition in having provided defective workmanship to the extent identified by the judge. In any event, even if she was bound to conclude that the defective workmanship amounted to a breach of condition, he did not see that such a breach necessarily gave the appellants the right to reject the porch.
11. We have to say that the judge's reasoning was sparse and unclear, and that he declined an invitation to give fuller reasons. The judge's last comment was later amplified when, in refusing permission to appeal, he stated that the Deputy District Judge found, or should have found, that the appellants had accepted the porch by having it painted by a third party, thus losing the right to reject it.
12. Although the appellants had raised the issue of the assessment of damages before the Circuit Judge, the appellant's grounds of appeal criticise him in that he directed that further evidence could be obtained by the parties as to the costs of remedying the defective workmanship. Whilst the judge ordered that any further issues arising out of the evidence were to be re-listed before a District Judge, he did not specifically leave open for reconsideration on that occasion whether or not the breaches were of warranty or condition.
13. The appellants' present stance is that a further hearing was unnecessary and disproportionate. It is said that the judge should have dealt with the appeal by holding that the breaches found were not warranties but breaches of condition. If, however, the judge was right in remitting the matter for further consideration, then he should have left open the issue of whether the defects were of condition or of warranty.
14. In the appellants' submission the monetary value of the defects as assessed by the Deputy District Judge at a little over one third of the value of the contract should have itself have led to the conclusion that this was a breach of condition rather than of warranty. Moreover, by section 14(6) of the Sale of Goods Act 1979 (as amended), the term implied by section 14(2) that goods supplied under a contract of sale are of satisfactory quality is to be treated as a condition. Since breach of condition carries with it a right to reject the goods, it is submitted that the judge should have allowed the appeal by dismissing the claim, allowing the counterclaim and ordering a return of the £2,000 deposit, together with a payment of £150 representing wasted painting costs.
15. Before us, the respondent submitted that this was not a contract for the sale of goods, but a supply of skill and labour involving a transfer of property in materials. Reliance is placed on Robinson v Graves [1935] 1 KB 579 per Greer LJ at page 587. In addition, it was submitted that the Deputy District Judge's finding that the defects amounted to a breach of warranty was not a perverse finding and subsequently that this court should not interfere. It was argued that, in any event, a right to reject the porch had been lost by affirmation of the contract.
16. Finally, a submission was made that remission to a District Judge is generally undesirable in a small claims case, but was not plainly wrong in the circumstances of this case.
17. It seems to me that the appellants are correct in their arguments that the judge should not have dealt with the matter by remitting it for further evidence to be called as to the valuation of the defective workmanship. The matter had proceeded through the informal small claims procedure after a case management decision had been made not to permit any expert evidence as being disproportionate. The Deputy District Judge made her own evaluation based on the information before her, including the contract price, photographs of the work done and examination of part of the work done. In those circumstances, I would hold that the judge should not have acceded to the complaint made by the appellants in this regard. As already observed, the appellants have resiled from the position which they took before the judge below.
18. I then turn to the more central issues in the appeal as argued before us this morning, starting with the contention that the Deputy District Judge and then the Circuit Judge fell into error by failing to treat the defects found as amounting to a breach of a condition of the contract. It is common ground that not every defect in goods supplied will amount to a breach of a condition. The matter must be a question of degree. Matters of minor or lesser import may be categorised as a breach of warranty sounding only in damages. Under the Sale of Goods Act the issue of whether the goods are of satisfactory quality and thus a condition of the contract is to be assessed by reference to subsections (2A) and (2B), which require consideration, amongst other things, of what a reasonable person could regard as satisfactory and of matters such as price, appearance and finish.
19. In this case, the Deputy District Judge took specific note of the fact that the appellants expected and were entitled to expect goods of the highest quality as an ornamental feature at the front door of the appellants' substantial home. I do not consider that, for the purposes of this case, which is a consumer transaction, anything turns on the question of whether this was a sale of goods or a contract within Part 1 of the Supply of Goods and Services Act 1982. In that latter Act the terms to be implied are very similar to those implied by the Sale of Goods Act. This case comes very close to the borderline between the two types of contract, but it is unnecessary to analyse the position further in the context of this case. Whichever Act applies, I am satisfied that the nature of the defects as demonstrated, the costs of their rectification as found, the practicalities of rectification (which would involve substantial dismantling and reworking of the work done) and the contractual expectation of work of the highest quality leads to a clear conclusion of a breach of condition under either section 14(6) of the Sale of Goods Act or under section 4(2) of the 1982 Act.
20. I so conclude despite the respondent's argument that we should not disturb the Deputy District Judge's finding, ratified without amplification by the Circuit Judge, unless we found it to be clearly wrong.
21. The Deputy District Judge's approach was to say that there was "no fundamental breach of contract". That was a wholly insufficient analysis in the circumstances, and there was no further illumination from her or the circuit judge. It follows that I would uphold the appellants' complaint in this respect.
22. However, the respondent argues that even if there was a breach of condition, the appellant lost the right to reject the porch by reason of having affirmed the contract. He points to the gap of ten or eleven days between taking delivery of the porch and a later rejection of it, combined with the fact that the porch was painted by a third party in the interim. Although the Sale of Goods Act contains specific provisions relating to acceptance of goods and the loss of the right to reject (see section 11(4) and section 35) whereas the 1982 Act does not, in the latter case the general common law has developed analogous principles. Again, I consider that the question of which legislation applies is immaterial to the resolution of this case.
23. The problem as I see it with the respondent's submission is that it is one which has been pursued for the first time on this second appeal, a practice which is deprecated. The time for pursuing the issue was before the Deputy District Judge.
24. In any event, there is another important factor: the Deputy District Judge accepted that Mrs Alliott was an honest witness. Paragraph 10 of her witness statement described what happened when Mr Cheeld and his assistant delivered and installed the porch on 31 May. Mrs Alliott says:

"The porch was fitted on May 31^st. I am quite sure the man helping Mr Cheeld knew I was unhappy. I kept standing in the drive staring at it wondering what was wrong and I saw him turn to mutter something -- probably along the lines of 'she doesn't like it' to Mr Cheeld. Since it was still in shiny galvanised steel though, and very glaring, I decided this was probably the problem. I said this to them -- adding I was sure that it would look much better painted. I could now see that the diamonds were the wrong shape but hoped for the best. I wanted to see the finished product before passing a final judgment."

25. There is an ambiguity in that passage which was never explored below because the issue did not arise for decision. The passage is at least capable of meaning that Mrs Alliott was not accepting the goods unconditionally and was only accepting them on a provisional basis subject to the outcome of the painting and, importantly, that Mr Cheeld was aware of that at that time.
26. In all those circumstances, I do not consider it would be right for this court to deal with the matter on the basis that there was an affirmation of this contract leading to a loss of the right to reject the porch. I would therefore allow the appeal by setting aside the Circuit Judge's order regarding the obtaining of further evidence and by setting aside the judgment of the District Judge. The claim must be dismissed and judgment given on the counterclaim for £2,150, representing refund of the deposit paid plus money expended on painting. In addition, the sum of £2,000 paid to the respondent by the appellants pursuant to the Deputy District Judge's order must be repaid to the appellants.

Lord Justice Kitchin:

27. I agree.

Lord Justice Lloyd:

28. I also agree. It is unusual in this court to hear a second appeal in a case which started off before a District Judge in the small claims track, but, in my judgment, Lewison LJ was right to identify important points of principle and practice in the appeal, and therefore to give permission to appeal.
29. I agree with Treacy LJ as to his reasoning and as to the outcome of the appeal. I would only add this. I am, for my part (and I am sure I speak for the court), grateful to both Mr Alliott, who appeared in person, but is legally qualified, for the appellants, and to Mr Kohanzad, instructed at a very late stage for the respondent, for their concise, well-focused and sensible submissions, which has enabled us to deal with the case in the sort of timescale that is appropriate for a small claims appeal. Mr Kohanzad acts for the respondent under the Bar Pro Bono scheme. For that reason the court is all the more appreciative of the part he has taken in the appeal. The order will be as my Lord has said, allowing the appeal.

Order: Appeal allowed