England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		St Dunstan's House 133-137 Fetter Lane London EC4A 1HD
		27 October 2005

Thursday, 27 October 2005

HHJ COULSON QC:

Introduction

1. The first defendant ("Cranbrook") owned shop premises at 8, Haymarket, in Leicester ("the property"). In November 1998 Cranbrook had engaged a contractor, a Mr George Parker, to carry out work to the felted areas of roof to the rear of the property. Mr Parker subcontracted some of the roofing works to the second defendant ("Mr Varnham"). These works involved the use of hot bitumen and blow torches. On 16 November 1998, a fire started at the property as a result of Mr Varnham's works, which spread quickly to the neighbouring properties and caused extensive damage.
2. The first claimant, Pizza Hut (UK) Limited was the leasehold owner and occupier of restaurant premises at 6, Haymarket, which were owned by the third claimant, British Land Universal Plc. The second claimant, Alliance & Leicester Plc, owned and occupied the premises at 4 Haymarket, also referred to as "The Clock Tower". All three claimants suffered extensive loss as a result of the fire and commenced proceedings against the two defendants.
3. On 15 June 2001, judgment in default was entered against Mr Varnham in favour of all three claimants, with damages to be assessed. On 21 January 2002, the claims against Cranbrook were compromised, with Cranbrook paying a total of £850,000, inclusive of costs, to the claimants, which sum was then apportioned between them. Interim payments have been ordered against Mr Varnham but they have not been paid. Indeed, he has provided a statutory declaration to the effect that he is unable to meet them. At the trial on quantum, Varnham did not appear and were not represented. This is the judgment relating to that trial on quantum.

Evidence

4. There are available to me five witness statements. These were:

(a) Two statements of Samuel J Boley, a loss adjuster appointed by Pizza Hut's insurers, both dated October 2005. This put Pizza Hut's total claim, including business interruption, at £1,451,161.68.

(b) A statement of Philip Beadsmoore, another loss adjuster appointed by Pizza Hut's insurers, and also dated October 2005. This statement contained more detail concerning the element of Pizza Hut's loss attributable to business interruption, which was put at £1,073,542.

(c) A statement of Kevin Dinsdale, a loss adjuster appointed by Alliance and Leicester's insurers, and again dated October 2005. This identified the sums paid out by the insurers to the Alliance in the total sum of £1,007, 621.10.

(d) A statement of Michael Wright, a loss adjuster appointed by British Land's insurers. This identified the sums paid out by the insurers to British Land in the total sum of £1,027,512.45. The principal element of this claim was £905,952.83, which was the cost of reinstating the building at 6, Haymarket.

5. By the order of His Honour Judge Havery QC dated 7 October 2005, these statements are admissible as to the truth of their contents. He also ordered that the attendance of the witnesses at the trial on quantum was not required.

Pizza Hut's Claim

6. Pizza Hut's claim breaks down as follows:

(a) Tenant's fixtures, including demolition, etc, £262,093.68;

(b) General contents, £109,267;

(c) Stock, £6,259;

(d) Business interruption, £1,073,542;

Total: £1,451,161.69.

I deal with each of these items in turn below.

7. As to the tenant's fixtures, the general contents and stock, these claims have been carefully scrutinised by Mr Boley. He supports them. Many of them are evidenced in one way or another by the supporting documents in file 3A. I therefore allow these claims in full.
8. That leaves the main item of claim, namely that for business interruption. This is a big claim, for over £1 million. The reason that it is so high is that Pizza Hut's claimed gross profit percentage is 76 per cent. I was iniatially rather sceptical as to this percentage. However, Mr Beadsmoore explained at paragraphs 6-17 of his statement how this figure was arrived at. He concludes that the 76 per cent figure is appropriate because the management accounts "show that in the 48 week accounting period preceding the date of incident, the applicable gross profit rate was 76%". Accordingly, it seems to me that I should accept that figure and I therefore allow that claim in full.
9. From the total claim of £1,451,161.68, the figure of £270,419.85 falls to be deducted to represent the amount already paid to Pizza Hut by Cranbrook. That leaves a net claim of £1,180,741.83, which I allow in full.
10. As to the interest on that amount, I decline to order interest from the date of the fire. That seems to me to be too early. In the circumstances I consider that the most appropriate date to take as the trigger date for interest is the date that the first payments were paid out. In the case of Pizza Hut that was March 1999. At 8 per cent (the judgment rate) the interest is then calculated in the total amount of £629,118.49.
11. Accordingly, I give judgment against Mr Varnham in favour of Pizza Hut in the total sum, including interest, of £1,809,860.70.

Alliance and Leicester's Claim

12. The Alliance and Leicester claim for £1,007,621.10 is largely made up of building work and contents costs. There is a figure of £666,410.68 which represents the refurbishment works carried out to number 4, including some contents; the sum of £89,391.28 represents the costs of temporary accommodation at Charles Street, including a certain amount of loss of rent; and the figure of £40,623.35 is the cost of other premises in Coventry necessary to house the Alliance and Leicester's computer backup. In addition to these three claims, there are three other miscellaneous claims, namely a claim for £171,195 for computer equipment destroyed or damages in the fire, £15,000 by way of staff costs and £25,000 in respect of the policy excess.
13. The building work claims identified in paragraph 12 above should all succeed. It is not alleged that the work was excessive or unnecessary. It is certainly not said that the advice given to the Alliance and Leicester as to the appropriate scope of the remedial work was negligent. I deal with that principle in a little more detail below. Accordingly, the building work and contents claimed should be allowed in full in the total sum of £796,424.31.
14. As to the miscellaneous costs, the claim for £171,195 in respect of computer equipment is plainly recoverable in full, supported, as it is, by the witness statement of Mr Dinsdale. However, there is no evidence as to how or why Mr Varnham could or should be liable for the staff costs or indeed the policy excess. It seems to me, therefore, that I should exclude those two items. I therefore reject those two claims totalling £40,000.
15. Accordingly, I find that Alliance and Leicester are entitled to £1,007,621.10 less £40,000, giving an allowable net claim of £967,621.10. From that must be deducted the sum of £267,099.43 to reflect the sum paid by Cranbrook, leaving a total claim of recoverable damages on the part of the Alliance and Leicester of £700,521.67.
16. As to interest, I have again taken the judgment rate of 8 per cent from the date of the first payment, which produces a figure of £382,314.60.
17. Accordingly, I give judgment against Mr Varnham in favour of the Alliance and Leicester in the total sum, including interest, of £1,082,836.30.

British Land's Claim

18. British Land's claim is made up of two items: a claim for the reinstatement costs in the sum of £905,952.83 and a claim for loss of rent in the sum of £121,559.62. This makes a total of £1,027,512.45.
19. The reinstatement works to No.6 Haymarket were extensive. The work was designed by professional architects and engineers. The works went out to tender and the building contract was awarded to the lowest tenderer, JMS Seddon Ltd. The contract was administered carefully and certain design changes were made to achieve costs savings. In those circumstances, the figures claimed represent the actual cost incurred by British Land in respect of these refurbishment works. In the absence of any suggestion that the advice given to British Land as to the scope of those works was negligent, or indeed could be criticised in any way, the defendant, namely Mr Varnham, is liable for the cost of that work in full. That is the effect of a number of construction cases dealing with the recoverability of repair and refurbishment costs, perhaps best defined by the judgment of His Honour Judge Newey QC in Hospitals for Sick Children v McLaughlin & Harvey [1990] 19 ConLR 25. Thus the claim for £905,952.83 is proved in full.
20. The claim for lost rent covered the period from the date of completion of the refurbishment works to the date that Pizza Hut recommenced trading, in other words, the period of the fitting out work. British Land considered that the tenant was liable to pay rent from the time that the shell of the building was completed. I consider that as a matter or principle that is right. Accordingly, the claim for lost rent has been proved in the sum of £121,559.02.
21. Thus I find that British Land are entitled to the £1,027,512.45 claimed, less the deduction to reflect the Cranbrook payment in the sum of £269,321.95. That therefore leaves a net damages claim of £758,190.50.
22. As to interest, I again take 8 per cent and I again take the trigger as the first payment made. That produces an interest calculation in the total sum of £408,636.62.
23. Accordingly, I give judgment against Mr Varnham in favour of British Land in the total sum, including interest, of £1,166,827.12.
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