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
		01 October 2007

 


HIS HONOUR JUDGE PETER COULSON QC:

Introduction

1. This is an application by the Claimants under CPR 25 for a substantial interim payment following the entering of judgment in default against the Defendant in August. Although well aware of both this application, and the date fixed for its disposal, the Defendant has chosen not to appear and he is not represented. Unavoidably, therefore, this judgment is handed down in his absence.
2. I set out below a very brief history of this matter before turning to assess the Claimants' claim in these proceedings, the Defendant's liability to make an interim payment; and the appropriate amount of that interim payment.

The Contract

3. The Claimants own a house at 16 Chepstow Villas, London, W11 2RB ("the property"). They engaged the Defendant to oversee and procure extensive refurbishment works at the property, which were estimated to cost in the region of £1,000,000. The basis of the contract was that the Defendant would manage and oversee the works, whilst at the same time procuring all the necessary professionals, subcontractors and suppliers and paying their bills as they fell due. He, in turn, was paid by the Claimants: he was reimbursed both the costs of the works, and an amount by way of an overall project management fee. The degree of formality surrounding this arrangement was negligible.
4. The relationship between the Claimants and the Defendant broke down irretrievably in the early summer of 2007 and the Defendant's contract was terminated. Proceedings were commenced in the TCC on 13th July 2007. Thereafter, there have been a number of court hearings concerned with the Claimants' (successful) application for a freezing injunction, the Defendant's precise financial assets and the risk of their dissipation. There has also been a committal hearing, which was dealt with by way of undertakings from the Defendant. All these matters have been dealt with, and so far resolved, by Jackson J. They remain of some relevance to the application before me.

The Pleaded Claim

5. A claim form was issued on 13th July 2007 and served on the Defendant on the same date. There is a certificate of service to that effect. The claim form was in the following terms:

"All account of all monies paid to and incurred by the Defendant in connection with the project management and construction works at 16 Chepstow Villas, London, W11 2RB.

Damages for breach of oral contract between the Claimants and the Defendant in relation to the project management and construction of works at 16 Chepstow Villas, London, W11 2RB.

Repayment to the Claimants by the Defendant of monies had and received by the Defendant in respect of which the Defendant has been unjustly enriched.

Delivery up of garden furniture and/or damages in respect thereof.

Value

We expect to recover more than £15,000."

6. The particulars of claim were served on 24th July 2007. Again, there is a certificate of service to that effect. At the heart of the pleaded claim is the assertion that, whilst the Claimants had paid about £913,000 to the Defendant, the only costs which could be verified as having been incurred by the Defendant totalled just under £128,000. The balance, namely £785,000 odd, together with £25,000 in respect of the advance payment of the fee, was sought as an overpayment in paragraphs 34 - 35 and 48 (1) and (2) of the particulars of claim.
7. In addition, there was a pleaded claim for almost £77,000 in respect of rental payments on alternative premises arising from the alleged delay in the completion of the works at the property; a claim for £30,000 for additional professional fees; and a claim for £15,000 in respect of garden furniture belonging to the Claimants and removed by the Defendant. Those figures, when taken together, provide a total pleaded claim in excess of £900,000. This doubtless explains the comment in the statement of 11.09.07 from Mr. Leaman, the Claimants' solicitor, to the effect that there is an "anticipated final judgment of at least £900,000".
8. In fact, as I pointed out to Mr. Lee during the course of argument, both the particulars of claim and Mr. Leaman's statement are based on something of an overstatement as to the overall value of the claim. This is because, as long ago as 12th July 2007, in an affidavit provided in support of the Claimants' application for a freezing injunction, Mrs. Fiona Jordan properly acknowledged that the Claimants had been advised that, although only about £128,000 could be accounted for as sums paid out by the Defendant, the value of the works that the Defendant had overseen/procured was, as at 18th May 2007, about £443,000 odd. Thus, so it seems to me, the principal item of the claim against the Defendant must be the sums paid by the Claimants, less the value of the works that they had received, namely £443,000 odd, not simply the £128,000 that could be identified as having actually been paid out by the Defendant. This necessary adjustment obviously has a major effect on the overall figures in the case but, for reasons that we will look at in a moment, it does not affect the amount of the claim for an interim payment, which is the next topic with which I have to deal.

The Claim for an Interim Payment

9. The basis for the claim for an interim payment stems from the following heads of claim.

9.1 Overpayment

It is said that the Claimants have paid the Defendant a total of £988,000. The Claimants' case is that the value of the works carried out by the Defendant in exchange for this sum is £443,689.52; thus they claim an alleged overpayment of £544,310.48.

9.2 Delay

The Claimants allege that the works should have been completed by Christmas 2006 but that, because of the Defendant's default, they have incurred (and will incur) additional rental costs until 31st October 2007. That gives rise to an additional figure for rent of £76,984.23.

9.3. Additional Professional Fees

This claim is estimated at £30,000. It is not particularised.

9.4 Garden Furniture

This claim is estimated at £15,000. Again, it is not particularised.

9.5 Summary

Although in her original affidavit Mrs. Jordan uses these figures to arrive at a total claim value of £665,000 odd, paragraphs 4, 5 and 8 of the statement of Mr. Leaman, which is itself the evidential basis for the interim payment claim, limit that claim to the £544,310.48 referable to the overpayment (paragraph 9.1 above).

Applicable Principles

10. The relevant parts of the CPR provide as follows:

"25.7(1) The court may only make an order for an interim payment where any of the following conditions are satisfied. ---

....

(b) the claimant has obtained judgment against that defendant for damages to be assessed or for a sum of money (other than costs) to be assessed.

...

(4) The court must not order an interim payment of more than a reasonable proportion of the likely amount of the final judgment."

11. The Defendant did not acknowledge service of the claim form. He has never responded to the particulars of claim. Accordingly, on 9th August 2007, the Claimants sought judgment in default, and on the same day the court made an order in the following terms:

"The Defendant has not filed an acknowledgment of service to the claim and the time for doing so has expired.

It is ordered that the defendant must pay the claimant an amount which the court will decide and costs. ... "

Although the Defendant has been back to court on at least one occasion after 09.08.07, he has never made any attempt to have this judgment in default set aside. I conclude, therefore, that the judgment in default is a valid judgment against the Defendant pursuant to CPR 12, and triggers the relevant parts of CPR 25 identified above.

12. It seems to me that there is no material before the court which could lead me to conclude that I should not make an interim payment in favour of the Claimants. They are plainly entitled to an interim payment as a matter of principle, in accordance with CPR 25. That, therefore, leaves the question of the amount of such interim payment. From the commentary and the cases noted at paragraphs 25.7.15 to 25.7.20 of the CPR, I note the following points of principle which I consider to be relevant to the exercise of my discretion:

(i) The amount of any interim payment should be an amount that the court considers just in all the circumstances; it must not exceed a reasonable proportion of the likely amount of the final judgment.

(ii) The Claimant's ability to repay any sum ordered by way of an interim payment is a factor to be taken into account in fixing the sum to be paid: see Ultraframe (UK) Limited v. Eurocell Building Plastics Limited [2005] EWHC 2111 (Ch). Similarly, in accordance with the overriding objective, and in particular rule 1.1(2)(c)(iv), the financial position of the defendant may also be a relevant factor in the exercise of the court's discretion: see also British Commonwealth Holdings Plc v. Quadrex Holdings Inc. [1989] 3 All ER 492 (CA).

(iii) The Claimants are not required to demonstrate a particular need for a specific sum over and above the general need for Claimants to be paid their damages as soon as reasonably can be done: see Stringman v. McArdle [1994] 1 WLR, 1653 (Court of Appeal). Similarly the court is not concerned with what the Claimants propose to do with any money that they receive by way of interim payment: see Campbell v. Mylchreest [1998] PIQR P20.

With those principles in mind I turn to consider my assessment of the interim payment to be made by the Defendant to the Claimants.

Assessment

a) The Starting Point

13. First, it seems to me that the Claimants are bound by the limitation in Mr. Leaman's statement (noted in paragraph 9.5 above), whereby the amount sought by way of an interim payment was expressly capped at £544,310.48. It seems to me that it would be inappropriate to consider in detail the matters noted at paragraphs 9.2 to 9.4 above, since those were not relied on by Mr. Leaman for the purposes of the application for an interim payment. Of course, I note that those matters comprise other claims pursued by the Claimants which will become relevant if and when there is a trial of this action.
14. The sum of £544,310.48 (paragraph 9.1 above) is arrived at by deducting the value of the alleged works (£443,689.52), from the sum paid by the Claimants in respect of those works, namely £988,000. In the absence of any evidence from the Defendant, how should the court assess the amount of the interim payment in accordance with the principles noted above?

b) The Sums Paid

15. First, I am entirely confident that the gross payment figure of £988,000 has been established by the Claimants. This is the figure that was identified in other evidence and in the hearings before Jackson J. Indeed he expressly refers to that figure at paragraph 6 of his judgment of 4th September 2007. I therefore take that figure as the starting point for the calculation of the alleged overpayment.

c) The Value

16. Secondly, as to the alleged value of the works overseen/procured by the Defendant, I note that the figure of £443,698.52 is taken from a report dated 20th July 2007 of Mr. Richard Vail FRICS, an independent surveyor engaged by the Claimants to undertake this task. I have no reason to believe that Mr. Vail's assessment represents anything other than his best effort at arriving at an objective assessment of the value of the works at the property as at 18 May 2007. Furthermore, as Mr. Lee made plain during the course of argument, it is right to note that, not only has there been no evidence provided in opposition to Mr. Vale's report (despite the fact that it was provided to the Defendant in mid-July), but it is also the case that, as long ago as May 2007, the Defendant himself instructed a quantity surveyor called Mr. Strangeway who was going to consider the critical question of valuation. Mr. Strangeway even met with the Claimants, and told them of the task that he had been instructed by the Defendant to perform. However, no report from Mr. Strangeway has been provided, either then or subsequently.
17. All of that said, I make the following specific comments as to Mr. Vail's valuation exercise:

(i) In the absence of any proper paperwork on the part of the Defendant and in the absence, therefore, of tender packages, contract rates or other relevant valuation data, Mr. Vail had a difficult task. He himself notes that at paragraphs 3.2 and 3.3 of his report, where he states:

"Very little data, however, has been produced by the defendant to support the tendering of packages or invoiced general items.

I have therefore valued the work on an ad hoc basis using what little genuine data the Defendant has provided and/or applying reasonable market rates and prices to my assessment of works completed."

In those circumstances I regard it as more likely than not that, should there be a full trial of this action, at least some of the rates and prices that Mr. Vail has utilized in his ad hoc assessment will be the subject of debate.

(ii) On a related point, I note that the rates and prices that Mr. Vail has utilized are often quoted in very round figures. In addition he does not identify the source(s) of those rates and prices: there is, for example, no attempt to build up rates by reference to Spon's, or some other well-known pricing book. I make it plain that this is not to be taken as a criticism of Mr. Vail, because he was undertaking a relatively limited exercise at the precise time that the relationship between the parties came to an end. If this matter were to go to trial, I have no doubt that he would produce a much more extensive report, in which he sought to justify in detail the rates and prices that he had used. However, this again demonstrates that it is more likely than not that there will be disputes about at least some of the rates and prices that Mr Vail has relied on. Therefore, some form of reduction is necessary to reflect both this point and the point at subparagraph (i) above.

(iii) I note that Mr Vail's valuation goes up to 18th May 2007. Although there is evidence from Mrs. Jordan that the Defendant had a further involvement with the property after that date, there is no evidence to suggest that any further work was carried out at the property after 18th May. In those circumstances, I am prepared to accept that 18th May is the relevant cut-off date and that no deduction should be made to reflect any further involvement on the part of the Defendant after that date.

18. Accordingly, in order to calculate the amount of the interim payment based on Mr. Vail's figures, I have taken into account the points at subparagraphs (i) and (ii) above, so as to reduce the sum claimed by way of an overpayment, and to arrive at a figure which is a reasonable proportion of the likely amount recoverable at trial. I consider that, for the purposes of the interim assessment, a fair figure to reflect the value of the work done is £525,000. That would provide an overpayment of £463,000 (that is to say, the £988,000 paid by the Claimants, less a value received of £525,000). I derive some support for that approach, and that overall figure, from the other documents in the case: they make it clear that, speaking very generally, the proposed works were about 50% complete when the Defendant's contract was terminated. If the overall value of the works originally was (or should have been) £1,000,000, then this assessment (to the effect that just over half of that value has so far been provided) seems to me to be broadly just and equitable.

d) The Parties' Respective Financial Positions

19. Having arrived at a possible figure to be paid by way of interim payment of £463,000, I then have to consider the question of the respective financial positions of the parties, in order to see whether those financial positions should make any difference to my assessment. As to the Claimants, there is no evidence whatsoever to suggest that, if the Defendant paid the Claimants £463,000, the Claimants would be unable to repay any part of that sum to the Defendant, should it ever become necessary for them to do so. I note that on the evidence the Claimants own two properties -- one in London and one in France -- said to be worth a total of £9 million. Thus, on any view, it is wholly inappropriate to consider making any adjustment to the £463,000 figure on the basis of the Claimants' financial position.
20. As to the Defendant's financial position, and its potential relevance to the assessment of the interim payment, the position is a little more complex. On the basis of the evidence, and in particular by reference to the material set out in the judgment of Jackson J, given at the end of the committal hearing on 4th
    September 2007, it might be thought that the Defendant had rather modest means, certainly compared to the assets which he claimed in July. On that basis, it is difficult to see how he could easily repay a substantial sum ordered against him by way of an interim payment. On the other hand, given the way in which the Defendant has repeatedly shifted his position as to the value of his own assets, Mr. Lee asserts, not unreasonably, that the Defendant's conduct means that he may well have assets in excess of those to which he is now prepared to admit. In other words, given the fact that the Defendant's evidence as to his assets has been, to put it neutrally, unreliable, it would be wrong for the Claimants to be prejudiced in their application today because of the suggestion by the Defendant that his assets are, after all, very limited. In addition, I have to remind myself that the Defendant has received almost £1,000,000 of the Claimants' money and has, on the basis of the evidence before me, retained about half of it without procuring or overseeing any work in respect of that half. This huge sum has simply never been accounted for. Again it seems to me it would be unjust not to make an order requiring a substantial repayment, no matter how uncertain the Defendant's financial position might be.
21. In all the circumstances, therefore, in the absence of any specific evidence from the Defendant as to his up-to-date financial position and its relevance to the application for an interim payment, I have concluded that it would be wrong to place too much emphasis on his financial circumstances. First I am not convinced that his evidence as to those circumstances is reliable. Secondly, it seems to me that it has little ultimate relevance to the amount of the interim payment. There is no evidence to suggest that, if I ordered the Defendant to repay £250,000 he could do so, but that he would be unable to repay the £463,000. Further, as Mr. Lee points out, again I think correctly, the Defendant has made plain that he only has one other ongoing project at the moment, so it would be very difficult for the Defendant to say that a substantial interim payment would have an adverse effect on his ongoing business.
22. In all those circumstances, therefore, I do not consider that the financial position of the Defendant in this case makes any difference to the amount of the interim payment which I must order. For the reasons noted above, I have identified the appropriate sum as £463,000.

Other Matters

23. In the course of his careful submissions, Mr. Lee asked me to note that both before and after 13th July 2007 the Defendant has behaved in what could be described as an underhand manner in a variety of ways, including bouncing cheques paid to suppliers; denying that he was the Defendant when the freezing injunction was served on him; continually changing his case as to his assets and their value; and failing generally to cooperate with the various court orders that had been made against him. It seems to me that again, in terms of the general exercise of my discretion, it is appropriate to take those matters into account in determining that the Claimants are entitled to a substantial interim payment.

Summary

24. For all those reasons, therefore, I conclude that the appropriate amount to be paid by the Defendant to the Claimants by way of an interim payment is £463,000. That sum should be paid within 14 days, that is to say by 4pm on Monday, 15th October 2007.
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