England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MOLD COUNTY COURT
HIS HONOUR JUDGE PHILIP HUGHES

		Royal Courts of Justice Strand, London, WC2A 2LL
		04/04/2017

Lord Justice Longmore:

Factual and Procedural background

1. This appeal from His Honour Judge Hughes sitting in Mold County Court concerns a building project at a property in Chester, 15 Hough Green. In 2004 there was an application for planning permission made by Amour Properties that would allow the existing building to be converted into two separate semi-detached residential premises. There would also be a development of eight new apartments in the orchard.
2. Planning permission was granted and the building was divided. Work was completed on one half of the divided property on 27^th November 2006. This case is about the other half of the building which became known as Lumley House. I will call it "the property". The developer then went into liquidation and did not complete the works on the property.
3. On 16^th August 2010 the defendants bought the property for £375,000. The claimant builder, Mr Nathan Cunningham, knew Ms Milner's father. Mr Cunningham was asked by Ms Milner and Mr Buckley (the defendants) to look over the property prior to purchase. In summer 2010 there was a site visit with the claimant, the defendants and estate agents. The defendants wanted the claimant's advice about the cost of completing work to the building. There was no written agreement.
4. On 10^th September 2010 the claimant was asked to obtain steel and arrange for certain work to be done. The request was made by text. On 14^th September 2010 the claimant sent an initial quote for £28,167 excluding VAT. The steel was then charged separately at a cost of £7,050. In due course, as the judge held, there was an agreed price of £35,510 plus VAT at the applicable rate, for the work which Mr Cunningham had agreed to do.
5. There were then a number of additional items of work requested from the claimant, who subsequently created four invoices totalling £57,000, but which the judge assessed at £37,750. The defendants paid only part of the sum Mr Cunningham said was due and counterclaimed for defective work which required to be remedied. The judge assessed that at £12,758. Other deductions brought the total figure due to Mr Cunningham to £44,018, to which VAT had to be added at whatever was the applicable rate.
6. The judge had to decide a great number of matters; permission has been granted to the defendants to appeal on two points only, first the judge's disallowance of the cost of "rectifying bi-folding doors" as counterclaimed and secondly the right rate for VAT. There is also one ground of cross-appeal for which permission has been given.

The Witnesses

7. The judge considered the evidence of Mr Cunningham and said that he was "straightforward and truthful". Mr Cunningham's account was that, before he instructed solicitors to recover sums due to him, the defendants never expressed dissatisfaction with his work and that, although Miss Milner promised to provide proof of any VAT exception, to which she had said the defendants were entitled, no such proof was ever provided (para 10). He denied that he was responsible for the bi-folding doors.
8. Mr Cunningham also called Mr Stephen Jones of Conservatories for You. He was engaged directly by the defendants and also worked as a sub-contractor to Mr Cunningham. It was he who fitted the bi-folding doors for the defendants' conservatory and he invoiced them for their fitting.
9. Both the defendants gave evidence. Mr Buckley said (para 53) that Mr David Robinson had carried out rectification works in relation to the defects that were the subject-matter of the counterclaim but Mr Robinson had never invoiced him; he also said that the costs of rectification had been agreed verbally and Mr Robinson wanted to be paid in cash. He (Mr Buckley) had apparently paid Mr Robinson over £26,000 in cash but had been given no receipts.
10. Mr Robinson also gave evidence but the judge said (para 65):-

"My impression of Mr Robinson was that he was not a builder of any worthy reputation, despite his claimed 27 years' experience. His approach to his business was shambolic. His record keeping was almost non-existent as he conceded and such records as he did keep were disorganised and unclear. I am afraid I concluded that his evidence was unreliable and that he was a poor and an unimpressive witness."

11. There was expert evidence from the single joint expert, Mr Tony Mancini. There were 3 Scott Schedules of which Schedule C contained the parties' contentions about 90 items of defective work. With Mr Mancini's help the judge considered that the amounts counterclaimed were excessive. The first issue on which permission to appeal has been granted is the bi-folding doors, item 75. Of this the judge said:-

"Item 75 - £3,800

This is a larger item, £3,800, which refers to the bi-fold doors and their installation. The responsibility lies with those who measured and fitted and I am not persuaded, having considered the conflicting evidence on the topic, that, on balance, the claimant was responsible. Therefore £3,800 is disallowed."

Ground 1: Bi-folding doors

12. The defendants' case was that the steel work into which the conservatory doors were to be fitted had been misaligned. But the judge records no evidence being given about the responsibility for the design of the steelwork and how the doors were to be fitted into that design. Mr Cunningham's case was that the measuring and fitting of the doors had been the responsibility of Conservatories for You and the evidence of Mr Stephen Jones and the invoice he raised supported that stance. Mr Mancini said in his expert advice recorded in the Scott Schedule:-

"I cannot advise who is responsible for the measuring or fitting of the actual glazed doors and screens, although it is normal practice in construction projects for the contractor to undertake site specific detailed dimensions once the structural openings have been formed."

13. Mr Philip Williams submitted that Mr Mancini shifted from this position in cross-examination by saying:-

"… there is a combination between the deficiency in relation to the structural steelwork and the window/doorframes. From what I have seen, the alignment of the structural steelwork was not put in correctly to receive the position of the new doors and screens. That is what the £3,800 is …. It is predominantly in relation to the alteration of the structural steelwork, which I understand was part of the claimant's work."

He was not asked why he was asserting that alteration of the steelwork was part of the claimant's work when his expert report had said he could not advise who was responsible for measuring or fitting of the doors and one is just left with something of a conflict on that point.

14. In these circumstances it is not possible to criticise the judge's finding that Mr Cunningham, on balance, was not responsible for measuring and fitting the doors. He had the evidence of Mr Cunningham and Mr Jones to that effect as well as the invoice from Conservatories for You. As against that evidence, there was the somewhat equivocal view of Mr Mancini who, in any event, was not in a position to say where legal responsibility lay – that was the province of the judge. The judge had evidence on which he was entitled to come to the conclusion he did and that has to be the end of the matter.

Ground 2: VAT

15. The issue here was whether VAT was payable at the normal rate of 17.5% or only at the rate of 5% applicable to work done in the alteration or renovation of buildings. The parties agreed that the judge had set the scene correctly in paragraph 88 of his judgment:-

"The relevant law is as follows. By s2 of the Value Added Tax Act of 1994, VAT is to be charged on the supply of goods and services by reference to the value of the supply at a standard rate at the relevant time, being 17.5 percent. An exemption is created by s29A of the Act to the effect that a reduced rate of 5 percent shall apply to a supply of goods and services which are specified in Schedule 7A of the Act. Those supplies specified are in categories or groups which are listed within an index at part 1 of Schedule 7A. There are two groups which have to be considered in the context of this case. Group 6 deals with residential conversions. Group 7 deals with renovation and alteration of dwellings."

The parties further agreed that, if the work did not come within Group 7, they would not come within Group 6 either. For Group 7 to apply, the building had to be empty for 2 years; more importantly, Note 4 to Group 7 in Schedule 7A provides that the supply of goods and services in the course of renovation or alteration works will not attract the 5% rate unless any planning consent needed has been granted and

"unless any statutory building control approval needed for the renovation or alteration has been granted."

16. As to this the judge said (para 99):-

"This topic was referred to many time in the evidence and there is no certificate or other written confirmation that such approval was ever given. In fact, such evidence as there was points in the other direction. Miss Milner told me in terms, "We have no certificate from a building inspector". Mr Buckley told me, "I did not apply for building regulation approval ever". Then he added, "I don't have any documentation from the building inspector. Therefore, you [and he was now referring to the claimant's counsel who was cross-examining him] have bought it to light. Clearly the works have never been passed". In the light of this evidence, it is unarguable that the group 7 exemption within schedule 7A of the Act does not arise. The VAT rate, therefore, is and always was chargeable at the full rate of 17.5 percent."

17. Mr Chacko now wishes to submit that building control approval was never necessary in the first place and that the judge never addressed that issue. He further submits that it is for Mr Cunningham to show that building control approval was necessary.
18. I would reject this submission. It appears that the VAT submissions were made after the evidence was closed. In response to Mr Cunningham's closing submissions, the defendants had said:-

"Para 1.7.4: The existence of any building regulation approvals is irrelevant to the determination of the VAT issue for the reasons set out in the defendants' submissions (as that issue is determined by the terms of the contract and invoices). In any case, the positive inspections showing in this very document indicate that all relevant approvals were in place."

The judge dealt with those submissions and rejected them, as he was entitled to do. If it was to be suggested that building control approval was not necessary, that would have to be pleaded and dealt with as part of the evidence, particularly as the evidence (para 23) was that Mr Lee Jones, the son of Mr Stephen Jones, expected that a building inspector would have had to inspect and pass the works and further (para 47) that a building inspector had visited the site.

19. If, moreover, the matter were to depend on any burden of proof, as between Mr Cunningham and the defendants, the burden must be on the defendants to establish the applications of Group 7 within the statute. As between Mr Cunningham and the Revenue, the burden would clearly be on Mr Cunningham, since he would wish to rely on it. So it must be the case as between Mr Cunningham and the defendants, since it is the defendants who wish to rely on it. This must be all the more so since the judge accepted that Miss Milner said she would produce the necessary evidence to show that 5% was the applicable rate but never did so.

The Cross-Appeal

20. Mr Richard Bradley for Mr Cunningham submitted that the defendants' counterclaim for defective work should have foundered because the judge rejected the evidence of Mr Robinson in relation to the cost of rectifying that defective work. Once the judge had found (as he did) that there was no reliable evidence about the cost of the rectification which did take place, he should have rejected the counterclaim in its entirety.
21. The judge did not take that course; he had evidence from Mr Mancini as to the reasonable cost of rectifying the defective work and decided to accept that evidence and quantified the counterclaim accordingly.
22. That was a view which the judge was entitled to take. Mr Bradley's submission amounted to saying that, although there was undoubtedly defective work, the defendants should recover nothing. That is an unattractive submission, particularly when the law says, in respect of a tortfeasor, that it does not matter whether rectification has taken place or not, see The London Corporation [1935] P.70. The law should be (and in my view is) the same in respect of breach of contract.

Conclusion

23. I would dismiss both the appeal and the cross-appeal and would pay tribute to HHJ Hughes for the careful and courteous way in which he dealt with the innumerable points raised by the parties in their entirely disproportionate litigation.

Lord Justice Lewison:

24. I agree.

Appeal No: B2/2015/0403

Case No: 1WX00074

IN THE COURT OF APPEAL

ON APPEAL FROM THE WREXHAM COUNTY COURT

HHJ PHILIP HUGHES

BEFORE: LORD JUSTICE LONGMORE LORD JUSTICE LEWISON BETWEEN: RUPERT BUCKLEY (1) HEIDI MILNER (2)

Appellants

and

NATHAN CUNNINGHAM
(t/a URBAN DEVELOPMENTS)

Respondent


ORDER

25. The appeal is dismissed.
26. The cross appeal is dismissed.
27. The Appellants do pay the Respondent's costs of and occasioned by the Appeal summarily assessed at £12,500.

DATED this 4^th day of April 2017

Appeal No: B2/2015/0403

Case No: 1WX00074

IN THE COURT OF APPEAL

ON APPEAL FROM THE WREXHAM COUNTY COURT

HH JUDGE PHILIP HUGHES

BEFORE: LORD JUSTICE LONGMORE

LORD JUSTICE

BETWEEN:

RUPERT BUCKLEY (1)

HEIDI MILNER (2)

Appellants

and

NATHAN CUNNINGHAM
(t/a URBAN DEVELOPMENTS)

Respondent

_________________________________________________

ORDER

_________________________________________________

Allington Hughes Solicitors,
10 Grosvenor Road,
Wrexham,
Clwyd, LL11 1SD.

324490 30.3.17.T