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

IN THE HIGH COURT OF JUSTICE
TECHNOLOGY AND CONSTRUCTION DIVISION
BIRMINGHAM DISTRICT REGISTRY

		Priory Courts 33 Bull Street Birmingham B4 6DS
		9th July 2010

1. This is a county court case. However, as it raises a point which appears not to have been considered before, I ordered that the case be transferred to the High Court for the sole purpose of giving judgment, the case remaining a county court case for all other purposes. Immediately after judgement was given the case was transferred back to the county court.
2. In July 2006 the claimants, Mr and Mrs Atwal, contracted with Mr Rochester, the defendant. Mr Rochester agreed to undertake extensive building work to White Lodge, Mr and Mrs Atwal's house in Wombourne. Work began in August 2006.
3. Mr Rochester had intended this to be his last job before his retirement. However, on 5^th April 2007 Mr Rochester suffered a heart attack and was taken to hospital. He subsequently underwent surgery in October 2007 for a heart bypass. He was advised not to return to work. Mr Rochester did not return to work at Mr and Mrs Atwal's house. He did not arrange for anyone else to do so. So the work came to an end in April 2007. At that stage the work was incomplete.
4. Mr and Mrs Atwal's case is that Mr Rochester was in repudiatory breach of contract. Mr Rochester's case is that the contract was discharged by frustration. Mr and Mrs Atwal claim damages by reason of the alleged repudiatory breach and Mr Rochester claims payment of a just sum pursuant to section 1(3) of the Law Reform (Frustrated Contracts) Act of 1943.

Background

5. Mr Rochester had been known to Mr and Mrs Atwal and their relatives for some time before the contract with which we are concerned. In his witness statement Mr Atwal sets out between paragraphs 2 and 7 inclusive the detail of that previous relationship. Briefly, Mr and Mrs Atwal first engaged Mr Rochester at their previous family home in about 1997. That was for the supply and fitting of a garden gate, a small task, but it was the beginning of a relationship which developed. Mr Atwal says that Mr Rochester came across as very pleasant, polite and friendly, someone you could grow to trust. Mr Rochester then undertook some kitchen tiling work for Mr Atwal's mother. He then undertook a major job for Mr Atwal's brother, Mr Avtar Atwal, who lived in Penn. That was construction of a single storey extension to Mr Avtar Atwal's house in Penn, which included a garage and a large rear living room. Mr Atwal was content to have been told in the year 2000, when he was considering the purchase of a property in Tettenhall, that Mr Rochester had undertaken the work which had been carried out to that property.
6. In 2000 Mr and Mrs Atwal considered purchasing a bungalow in Lower Penn. They intended to convert it to a dormer bungalow. Mr Rochester, at their request, looked at the property and discussed with them the likely cost of conversion. However, Mr and Mrs Atwal did not proceed with that purchase. Then, in 2001, they purchased their current property, White Lodge, the property with which we are concerned in these proceedings. They engaged Mr Rochester in 2002 to build a brick chimney in the hallway of that property.

Work at White Lodge

7. Mr and Mrs Atwal decided to extend White Lodge. They asked two contractors to quote for this. Dino's Building quoted a price of £186,590 and Walters Professional Services quoted the sum of £145,138. Mr and Mrs Atwal then approached Mr Rochester, who inspected the property and quoted a sum of £74,550. they decided to proceed with Mr Rochester.
8. The contemporaneous written record of the contract between the parties is very sparse. Mr Rochester provided a one-sheet document which summarised the work very briefly: work to building A: lounge and gym for the sum of £25,000; work to building B: kitchen and bedroom for £27,000, a canopy for £2,500, double garage for £10,800, retiling the old roof for £4,500 and work to outer walls for £4,750. (It is common ground between the parties that the proposed gym was omitted at an early stage.)
9. Mr Atwal wrote to Mr Rochester by letter dated 7^th July 2006. He began by saying:

"I know this sounds very formal, but given the size of the extension and the amount of money we are spending it is only right that I document some of the detail that was discussed and agreed on Thursday, 22^nd June, and list some further points for clarification."

He went on to suggest payment by stages and set out a proposal for that. He then listed items of work discussed at their meeting, that is work to bedrooms and kitchen, laundry, lounge, canopy and porch, garage, windows, external wall and other exterior work. He said:

"I asked whether a discount would be given for cash payment. You declined to offer this but agreed that some minor additional work would be undertaken while on site if the money due to you was paid in cash. Some of the items discussed are included in the above list."

He set out a start date of Monday, 14^th August, and estimated completion end of November, that is, a period of three and a half months.

10. Mr Rochester substantially agreed Mr Atwal's letter, save that they agreed a different schedule of payments, including an up front payment of £20,000 and some changes to work to the electrics, gas supply in the garage and removal of trees.
11. Mr Rochester began work on 14^th August 2006. He worked with Kevin. I am told that Kevin worked on the foundations and undertook bricklaying and roofing. Mr Rochester also worked with Terry and Darren, who were both described as labourers.
12. During the course of the work Mr Rochester suggested to Mr and Mrs Atwal that they consider converting the loft space into a living area. Mr and Mrs Atwal did indeed consider this and decided to go ahead. Mr Rochester quoted a price of £15,000. His case is that that was the cost of a shell only. Mr and Mrs Atwal's case is that the sum of £15,000 was to include a complete fit out internally to include first and second fix electrics, plumbing and plastering.
13. I accept Mr Rochester's evidence that Mr and Mrs Atwal told him initially that they would wait two to three years before completing the loft conversion as it was a cost which would fall outside their budget. However, Mrs Atwal became pregnant and they decided to make the loft space habitable. Mr and Mrs Atwal took some time to decide on the internal layout of the loft space.
14. I prefer Mr Rochester's evidence about the scope of the work to be undertaken by him to the loft within the sum of £15,000. It seems to me unlikely that the parties could have agreed a price of only £15,000 for a full fit out given the extent of the work that would be needed, or indeed that they could have agreed a price for a full fit out at a time when Mr and Mrs Atwal were not intending to use the space for a couple of years until their budget would allow for it and when the layout had not yet been identified.
15. The overall contract sum, therefore, including the loft shell, was £89,550. It is common ground that when Mr Rochester ceased work in April 2007 he had completed work which fell within the agreed scope of work to the value of £53,450. Mr Rochester says that he had, by that date, also undertaken extra work to a total value of £36,000. That is disputed.
16. Mr and Mrs Atwal say that by 5^th April 2007, when Mr Rochester became ill, they had paid him £71,850 in cash. Mr Rochester says that the figure is £72,000. The difference is small. On balance I consider that Mr and Mrs Atwal's figure is correct, that is, a sum of £71,850.
17. In May 2007 Mr and Mrs Atwal engaged Mr Dewey, a chartered building surveyor, to survey the work. Based on his survey they sought quotations from other contractors to complete the work. They say that the quotations were high and that they were unable to afford to engage other builders. At the end of 2007, or in early 2008, they began to undertake some of the outstanding work on a piecemeal basis. They subsequently contracted with D S Builders to complete outstanding work and they say that they spent £70,805 doing so.
18. Mr Rochester engaged a consulting engineer, a Mr Kelly. Mr Kelly produced a report in July 2008 setting out his views on the scope of the original contract, the work which had been carried out as at April 2007 and the scope of the variations instructed by Mr and Mrs Atwal. I should say that Mr and Mrs Atwal accept that they instructed some variations but not to the extent contended for by Mr Rochester. There was little disagreement, in fact, between Mr Dewey and Mr Kelly.
19. It is noteworthy that there was no suggestion by Mr and Mrs Atwal, or indeed by Mr Kelly or Mr Dewey, that there had been defects in Mr Rochester's work. It was not until he was giving evidence at the trial of this matter that Mr Atwal sought to suggest that there were some defects for which remedial work was required, but there is no extrinsic evidence to support that suggestion.
20. Mr Jewel FRICS, a chartered quantity surveyor, was instructed jointly by the parties as an expert in October 2009. He was asked to express an opinion on the following. First, the description and value of the work completed by Mr Rochester, as at 7^th April 2007. Secondly, an assessment of the balance of the original scope of the work not carried out at 7^th April 2007. Thirdly, the reasonable cost of completing the original scope of work as outlined in the documents which had been sent to him. Fourthly, as to the actual costs incurred by Mr and Mrs Atwal in completing the works with a new contractor, whether that work in fact undertaken was in accordance with the original scope of work, and if not to explain why. Fifthly, the difference between Mr and Mrs Atwal's actual cost of completing the work and the original contract price.
21. Mr Jewel had the benefit of the reports prepared by Mr Dewey and Mr Kelly. Mr Jewel produced an initial report. He gave the parties the opportunity to ask questions of him and he sought further information from the parties. His final report makes it clear that he took into account information which Mr and Mrs Atwal had provided to him as part of that process. Mr Jewel had little information to go on but he did his best on the information available to him to give an opinion on the questions he had been asked to address.
22. There had been little difference between Mr Dewey and Mr Kelly as to what had actually been undertaken by early April 2007. Mr Jewel assessed the percentage completion of different elements of the work. The question whether some of the work was within the original scope of work or had been undertaken as variations to the original scope was, as he put it, somewhat more problematic. Mr Jewel took a view, based on the information available, including that supplied by Mr and Mrs Atwal. He set out his assumptions as to what was original scope of work and what amounted to variations. He concluded that £53,450 was the value of completed contract work and that £36,000 was the value of variations. Mr Jewel assessed the value of the balance of the original scope of work not yet done as at 7^th April 2007 at £36,100. He approached the question what would be a reasonable cost of completing the outstanding work as follows: he calculated the cost of completing the original work at £43,320, by taking that £36,100 figure and adding 20% to reflect allowances for aborted costs, uneconomic working and reinstallation and retesting.

Was the contract frustrated, or did Mr Rochester repudiate the contract?

23. The first question to decide is whether the contract was discharged by frustration or whether Mr Rochester was in repudiatory breach of contract. Frustration takes place when a supervening event, without default of either party, and for which the contract makes no provision, so significantly changes the nature of the outstanding rights and obligations from that which the parties could reasonably have contemplated at the time they made the contract that it would be unjust to hold them to the contract. I have been taken to Alan Auld Associates Ltd v Rick Pollard Associates & Anor [2008] EWCA Civ 655, Notcutt v Universal Equipment Company (London) Ltd [1986] 1WLR 641 and to the judgment in Condor v Baron Knights [1966]1 WLR 87.
24. Lord Justice Dillon in the Notcutt case, at page 646, starting at paragraph (c) said: "The principles that govern the doctrine of frustration are conveniently to be found in the speeches of Lord Reid and Lord Radcliffe in Davies Contractors Ltd v Fairham Urban District Council [1956] appeal cases 696." He quoted from the speech of Lord Radcliffe:

"So perhaps it would be simpler to say at the outset that frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which the performance is called for would render it a thing radically different from that which was undertaken by the contract. It was not this that I promised to do."

He went on:

"In the nature of things there is often no room for any elaborate enquiry. The court must act upon a general impression of what its rule requires. It is for that reason that special importance is necessarily attached to the occurrence of any unexpected event that, as it were, changes the face of things, but even so it is not hardship or inconvenience or material loss itself which calls the principle of frustration into play. There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for."

25. I have also been taken to a passage in Chitty on Contract at paragraph 4.270, which considers the question of discharge from further performance by reason of death or illness of a party, namely:

"Where a contract is not personal in character the death of a party merely has the effect of transferring its benefit and burden to the executors or administrators, while the illness of a party in such a case will afford no excuse since it is always open to the party concerned to arrange for vicarious performance of his liabilities……….While it has somewhat readily been assumed in the past that construction contracts are not personal in character in this special sense it is suggested that this is in fact not invariably so and that in certain building and engineering contracts, at any rate, the personality of the contractor may be of vital importance to the owner."

Mr Rumney has referred me to a passage in Hudson's Building and Engineering Contracts at paragraph 4.270 and 4.272 which suggest that building contracts generally are not considered to be personal contracts.

26. Mr and Mrs Atwal say that they chose Mr Rochester because he was extraordinarily cheap. One can see that his quote for the work was very substantially lower than those given by Dino's Building Services and Walters. Indeed, Mr Rochester's price does seem to be extremely low for the scope of the work that he agreed to undertake. It is clear from the evidence from Mr and Mrs Atwal and Mr Atwal's brother Avtar  that the previous experience of not only Mr and Mrs Atwal, but also of their family, of working with Mr Rochester was important to them. It indicates to me a relationship of trust built up over a period of time.
27. Mr and Mrs Atwal also say that they chose Mr Rochester because they knew he had a team of people behind him and they refer to the fact that Kevin, for example, had worked with Mr Rochester on previous occasions. That particular point is not borne out in reality. Mr Rochester employed nobody. He had no employees. He was a sole trader. I accept his evidence that he had worked with Kevin two or three times. He engaged Kevin to assist, and he engaged labourers, to assist him when he needed them. If Mr Rochester was away from the site then he left Kevin in charge, but there was no formality to this and Mr Rochester indicated that that did not happen frequently. Mr Rochester engaged specialist sub-contractors on this project when he needed them, including plasterers, electricians and plumbers, but essentially he was a one man band.
28. It is unrealistic to suggest that Mr Rochester himself could have continued work after his heart attack. He was seriously ill and was advised that he should not continue to work. It is unrealistic also to suggest that Mr Rochester could have made arrangements to continue work after the heart attack. As I say, he had no employees, he had no site foreman as such. He personally knew what was needed to complete the work and I accept that it would have been difficult to communicate that to others – difficult, though not impossible. It seems to me that it is unrealistic to suggest that Mr Rochester would have been able to sub-contract the work. To do this he would have needed to be on site regularly, probably every day, and plainly he was too ill to do that. Simply, there was no way, in my judgment, in which he could have procured or supervised completion of the job.
29. Mr Rumney, for Mr and Mrs Atwal, submits as follows. The doctrine of frustration cannot apply here: the contract is not properly to be regarded as a personal contract; it was not a contract where the obligations could be performed only by Mr Rochester personally. Mr and Mrs Atwal did not contract with Mr Rochester because of the particular quality of his workmanship, for example, or his particular ability to manage the building work. If this were indeed a personal contract then Mr Rochester would have been in breach by sub-letting, or sub-contracting, any of the work, and indeed that, as I have indicated, is what Mr Rochester did in this case.
30. There is no authority directly on this point. I have referred already to the decisions in Notcutt and Condor. In both of those cases the individuals in question had been taken ill and in both cases were unlikely to be able to continue to work. In each of those cases the court concluded that the contract had been discharged by frustration. This case, however, unlike those cases, is not concerned with a master/servant or employer/employee relationship.
31. In my judgment this was a personal contract. Mr and Mrs Atwal chose to contract with Mr Rochester as a sole trader. They chose him personally because he was known to the family and had built up a personal relationship of trust. They chose him because his price was very substantially below the market price. With Mr Rochester, Mr and Mrs Atwal were getting almost twice as much work for the price as they would have done had they engaged other contractors. It must have been clear that Mr and Mrs Atwal were entirely dependent upon Mr Rochester's continuing in his role for the job to be completed. There was no one else to whom he could entrust the work if he was unable, himself, to continue to work.
32. There was no default on the part of Mr Rochester. He suffered a serious illness and that cannot be described as default. The contract made no provision for what was to happen in the event that Mr Rochester was taken seriously ill and unable to continue the job. It seems to me that the consequence of Mr Rochester having been taken so ill was that it so significantly changed the nature of the outstanding rights and obligations of the parties from that which they had contemplated when they entered into the contract that it would be unjust to hold them to the contract.
33. In my view, sub-letting and sub-contracting are not inconsistent with that personal relationship. Mr Rochester's task was to procure the completion of the job. Mr and Mrs Atwal were, in effect, relying on his skills to procure the work, to supervise the work – to procure it whether he was doing it himself or through others, and to manage the whole project. Those skills, it seems to me, were personal to him, given that he was operating as a sole trader.
34. I conclude therefore that the contract was capable of frustration and was, indeed, frustrated by Mr Rochester's illness, which resulted in his being unable to continue work. Given my conclusion on that point I therefore reject Mr and Mrs Atwal's case that Mr Rochester was guilty of repudiatory breach.
35. The consequence of that conclusion is that Mr Rochester is entitled, pursuant to section 1 of the 1943 Act, to payment of a just sum. Mr Rochester's case was that a just sum was £17,600, calculated as: £89,450 being his figure for the value of work carried out, less £71,850 which has been paid. Mr Rochester accepted at the hearing that Mr and Mrs Atwal were entitled to a credit of £4,050, which they had themselves paid for roof tiles, so that reduces his claim to £13,550. The figure of £89,450 comprises, as I have already set out, £53,450 for the value of the original scope of work completed, plus £36,000 for claimed variations. The £53,450 is not in issue, but the £36,000 is and I therefore deal with the question of variations.

Variations

36. Mr and Mrs Atwal accept that they instructed some variations to the original scope of work, but the extent of these is in issue. They say that they agreed with Mr Rochester that he would undertake variations on the basis that he would charge only the cost of materials and not for labour or profit in return for their agreeing to pay him in cash. There is no documentary evidence to assist with this, save for the very broad brush comment made by Mr Atwal in his letter of 7^th July 2006 to which I have already referred.
37. Mr and Mrs Atwal rely on the fact that Mr Rochester did not, at the time, mention or claim labour charges in relation to the various items which he claims as additional work. At the time he asked only for payment for the cost of materials. In my judgment that is not unusual and is not a matter of surprise. Many builders wait until preparing their final account before identifying the labour costs and profit element of items such as variations. In my judgment it is inherently unlikely that a builder would agree to do additional work on the basis that he would be paid only the cost of materials and not for his labour or any profit. I do not accept that the parties agreed payment for variations as Mr and Mrs Atwal contend. I conclude, therefore, that Mr Rochester is entitled to be paid more than simply the cost of materials for any variations which are so found.
38. The next question is what variations were instructed, and I deal with these in turn. Mr Jewel has costed these items and I accept his figures. Mr and Mrs Atwal referred to a list which Mr Rochester's son had prepared, suggesting that if items had not been included on that list then it must follow that Mr Rochester had not considered such items to be variations. There is no merit in that suggestion. Mr Rochester's son compiled the list at a time when he was trying to help his father. He compiled it from information which his father gave him during the period when Mr Rochester was very ill. The fact that some items were on the list and some were not is of no assistance or relevance in my judgment.
39. So I take the claimed variations in turn. First is loft dormers. I conclude that the three dormer windows built into the roof space were additional work, additional to the scope of work which Mr Rochester was to undertake to the loft conversion.
40. Fit out of the loft. I have already indicated earlier that the £15,000 agreed was for an internal shell only. Accordingly the work of supplying and installing plasterboard and plastering, electrics and plumbing was extra and should be paid for as a variation.
41. Mr Rochester fitted additional insulation as part of the loft conversion, as the building inspector required this. Mr Rochester accepts that he was obliged to meet the costs of supplying and installing this insulation. This does not amount to an extra. Mr Jewel has assessed the cost of the internal fit out of the loft and dormers, but excluding the cost of insulation, at £16,000.
42. The increase in the size of the garage. Mr and Mrs Atwal suggest that this should be limited to a value of £350, that being the material cost which Mr Rochester asked for to make the footings. I have already concluded that there was no agreement that Mr Rochester would do variations for material cost only. Mr Jewel values the additional work at £2,500.
43. Driveway. The existing driveway to White Lodge was narrow. When he began work Mr Rochester widened the driveway then laid hardcore to create a useable surface rather than leaving a mud finish. That work enabled him to drive in trucks and to take in large skips which he needed to do to effect the building work. Mr and Mrs Atwal always intended to increase the width of the drive, and that indeed was what was finally done. I conclude that this is a variation. There was no reference to this work being part of the original scope in either Mr Rochester's quote or Mr Atwal's letter of 7^th July 2006. In my judgment it does not constitute temporary works of the sort for which a contractor must bear the cost. Mr Jewel assesses the value at £2,500.
44. Window replacements and radiators. The only issue here is whether Mr and Mrs Atwal are obliged to pay only the material cost or for labour and profit as well. I have already concluded that Mr Rochester is entitled to his labour and profit costs.
45. Replacing the concrete slab in the kitchen. I accept Mr Rochester's evidence that as work progressed he discovered that a concrete slab, which had to be taken up in order to build the new kitchen, was in fact reinforced concrete so more work was needed to remove this than would have been the case had it not been reinforced. It seems to me that this was an unforeseen element of work not included in the original scope of work. The risk of that unforeseen item is Mr and Mrs Atwal's. Mr Rochester is entitled to be paid the extra for dealing with that slab.
46. Replacement of existing drains and water supply. These items are linked to the work to create the new kitchen. I accept that the work that was required amounted to a variation. It formed no part of the original scope of work for Mr Rochester to undertake work to this part of the drainage system.
47. Removal of old kitchen units. Mr Rochester was asked to remove four wall and floor units from the existing kitchen to facilitate the fitting of a new kitchen by others. Mr Rochester undertook, as part of the original scope of work, removal of some walls and he disposed of the units which had been fixed to those walls, but the work of removing the four units was additional to the original scope of work and he is entitled to be paid for this.
48. Work to the downstairs utility and WC. I conclude that the work of moving the WC was not part of the original work so Mr Rochester is entitled to be paid for this as an extra.
49. Mr Jewel has valued all of the variations at £36,000 and I accept his figure. It follows, in my judgment, that Mr Rochester is entitled to be paid a just sum for what he had completed prior to the discharge by frustration and I calculate that as £13,550, being the £89,450 for work completed less £4,050 for the roof tiles and less £71,850 paid by Mr and Mrs Atwal.
50. Given my conclusions it is not necessary to consider Mr and Mrs Atwal's claims for damages for repudiatory breach, but I do add a few comments in case it assists. Mr and Mrs Atwal failed to provide clear evidence of the costs that they say they incurred in completing the work. Had I concluded that Mr Rochester had repudiated the contract and that Mr and Mrs Atwal were entitled to damages for repudiatory breach, then a critical examination of the damages claimed by Mr and Mrs Atwal would have been necessary and I would have undertaken that as part of this judgment.
51. Mr and Mrs Atwal also claim damages for distress and inconvenience for the period from April 2007, when Mr Rochester left site, until July 2008, when D S Builders began work to complete outstanding work. There is no entitlement to these damages as I have concluded that there was no repudiatory breach, but even if I had concluded that there had been such breach then, apart from any other factors to have taken into account under this head of claim, I should have considered that a period of over 12 months between Mr Rochester's finishing work and D S B beginning work was excessive.
52. In all the circumstances Mr Rochester is entitled to judgment on his claim in the sum of £13,550.