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

IN THE COUNTY COURT AT MANCHESTER
TECHONOLOGY AND CONSTRUCTION COURT

		Manchester Civil Justice Centre, 1 Bridge Street West, Manchester M60 9DJ
		7 June 2017

His Honour Judge Stephen Davies

Contents

1	Summary	1 - 4
2	Introduction	5 - 14
3	Witnesses	15 - 25
4	Contract	26 - 47
5	Claims	48 - 147
6	Counterclaims	148 - 188
7	Payments	189
8	Conclusion	190 - 192

Summary

1. This is my judgment following a trial of a claim and a counterclaim concerning work undertaken by the claimant company in connection with the supply and installation of an integrated technology system (ITS) at the defendants' house. In short, the claimant claims that it has been underpaid on its invoices rendered in the sum (as updated at trial) of £112,477.18, whereas the defendants admit only that the much more modest sum of £27,032.98 (by the close of trial) is due and that they have a substantial set-off and counterclaim.
2. In order to resolve the issues it is necessary to determine the disputes on an invoice by invoice basis and on a counterclaim by counterclaim basis, although there are some common issues and there is also some degree of overlap between some of the claims and some of the counterclaims.
3. I heard evidence over 4 days from the 6 witnesses of fact and 2 expert witnesses and heard closing submissions on day 4, adjourning to produce this judgment. In producing the draft judgment I had regard to supplemental written submissions filed by the parties, principally in relation to the issue of VAT. Following circulation of the draft judgment I received a note from Mr Connolly for the claimant, inviting me to clarify or amplify my reasons in certain respects. I allowed Mr Charles to respond and Mr Connolly to reply and have addressed the points made in this final judgment to the extent I consider appropriate, bearing in mind the guidance given in English v Emery (Practice Note) [2002] EWCA Civ 605.
4. I am extremely grateful to both counsel for their helpful and detailed submissions, both written and oral, and for their agreeing and adhering to a timetable which allowed the case to be concluded within the time allowed.

Introduction

5. The claimant is a limited company based in Nelson, which specialises in the supply and installation of integrated technology systems. These are computer programmed and controlled systems for operating one or more of the lighting, heating, curtains and blinds, entertainment (TV and audio) and security systems found in many modern properties, both commercial and residential. The claimant is an authorised supplier and installer of ITSs. It is a reasonably substantial company with a number of employees and 2 showrooms, although it is owned and controlled by just one person, being Mr Nigel Pilling. It appears that this was one of the claimant's first forays into the residential sector, although it had substantial experience in the commercial sector.
6. The defendants are a married couple who hail from Bolton, where they run a successful business. In May 2008 they acquired a residential property in the Knutsford area which they planned to demolish and replace with a substantial new dwelling which they hoped would become their "dream home". In January 2009 they appointed a main contractor and works began in March 2009. They also separately appointed a contractor to supply and install the ITS, the details of which appeared in a written specification and in drawings. The original contractor's quotation provided for the lighting element of the ITS to be supplied by a company known as Lutron.
7. Unfortunately for the defendants the main contractor got into financial difficulties and had to be replaced part way through the project. The ITS contractor also got into financial difficulties even before any work was done, having already received a down payment of £10,000. After some difficulty and delay the defendants managed to find another main contractor to take over and complete the principal building works. By this stage they were also managing a number of trades directly including the electrical contractor appointed to undertake the electrical works.
8. The claimant was recommended to the defendants through mutual contacts. They asked the claimant to provide a quotation, giving it the specification, drawings and the previous contractor's quotation with the prices blanked out. The only difference of substance between the previous contractor's quotation and the claimant's quotation, so it appears, was that whereas the previous company had quoted for a Lutron lighting system, the claimant quoted for a full Crestron system, including the lighting element of the system, because they were authorised Crestron suppliers and had a trained Crestron programmer.
9. The claimant produced its first quotation in November 2009 and a number of revised versions subsequently. It appears that the defendants engaged the claimant in January 2010, although it was not quite clear whether that was on the basis of the quotation dated 16 December 2009 or that dated 20 January 2010. There are some issues as to precisely what was agreed outside of the terms of the quotation itself. By 18 October 2010 the sum quoted had increased from £75,000 to just under £95,000 due to changes in scope. The final written quotation was dated 10 December 2012, produced after the works had begun and was for a lesser sum of £65,385, but with a reduced scope, with no provision for a curtain track system, for CCTV, for automatic gates or intercom, or for LED lighting and with a reduced scope of TV supply. However it is clear that by this stage some of these items had already been the subject of at least some supply and installation, so that the final quotation cannot be said to be an accurate record of what had already been supplied and installed as well as what was remained to be supplied and installed. Moreover, by this stage there had already been a number of unrecorded changes and this continued to be the case. The end result is that the contract is a part written and part oral contract.
10. The main contractor completed its works and the defendants moved into the property sometime in 2013 according to Mrs Entwistle. The precise date is unclear. There is apparently a certificate of satisfactory completion issued by Zurich who were commissioned to produce this in lieu of an NHBC certificate although I have not seen it and do not know its date. In her oral evidence Mrs Entwistle initially said that they moved into the house in mid-2013. When she was asked about one of the claimant's invoices dated 20 January 2013, which implied that the electrical power supply was not connected at the point that the curtains and blinds track system was installed, she was unable to confirm or to deny what the position was in January 2013. She thought that the house was secure and that the defendants were paying council tax by that time. In my judgment on the available evidence the house was practically completed by the beginning of 2013 but not before. The defendants initially began living in the house only from Friday through to Monday and living in their old house in Bolton from Tuesday through to Thursday to fit in with their work commitments. They were only willing to allow the claimant and indeed other trades access to work on weekends, Mondays and Fridays, and when one or both had time off from work, which inevitably delayed matters. It was not until 2015 that they moved into the property permanently.
11. By 2013 the claimant had already undertaken the first and second fix works. The necessary hardware and cabling had been installed and the necessary connections with the lighting, heating and the like made. The next and final step was to programme the ITS and to commission, test and handover the complete system to the defendants. It is important to appreciate that the Crestron system was supplied as – effectively – a blank slate which required a full programming operation in order to ensure that it met the defendants' particular requirements. It involved ascertaining what the customers wanted it to do (for e.g. if they wanted a specific lighting "scheme" to be operated by one control, a decision needed to be made in conjunction with the customers as which lighting was to be included within that scheme, and which control in which room was to be used to operate it) and then the system needed to be programmed to operate in accordance with the customer's requirements. Thus the programming was a significant element of the works.
12. It is common ground that the claimant deployed its trained Crestron programmer to undertake this work and that he spent a considerable amount of time with the defendants to ascertain their specific requirements before beginning the programming phase. However in June 2013, before the programming was completed, he was dismissed by the claimant because he had, so it appears, been caught stealing money from the defendants. Although this was common ground between the parties, since there was no prosecution and hence no conviction and since I have not heard from the employee concerned himself, I do not consider it proper or necessary to make any positive finding to this effect or indeed to identify that employee by name. I will refer to him as "AB". The claimant had to obtain a replacement programmer for AB and, for reasons I shall need to determine, elected to appoint as a subcontractor a specialist Crestron programming company known as Ultimation Limited. Although Ultimation made use of the schematic plan produced by AB which identified what it was that the defendants wanted, for reasons which no-one criticises it decided that it was preferable to begin the programming from scratch. This added cost and time to the project, in relation to which issues arise. However, having programmed the system over the summer and autumn 2013 it was formally handed over to the defendants on 1 November 2013. Although the certificate of completion was not signed off by the defendants that is simply because they were not Ultimation's direct clients and Mrs Entwistle accepted in evidence that she was involved in the sign-off exercise and had no complaints at the time. There is no evidence that any further works were outstanding at that stage.
13. It was accepted by the claimant and agreed by the experts that an ITS such as that supplied and installed by the claimant would be expected to have snagging issues which would need resolution after sign-off. These snags might be due to problems with the items supplied or with the installation or programming or might simply be due to the defendants changing their mind about how they wanted the ITS to work once they had lived with it in their home for a while. It was accepted by the claimant that its quotation included for a reasonable number of return visits to iron out these snags. However after a while it became clear that whereas the claimant's view was that this had been done, so far as was reasonably practicable, the defendants' view was that significant items and problems remained outstanding and unresolved. The claimant was also becoming increasingly frustrated with what it perceived to be the defendants' failure to discharge its invoices, having previously made some payments on account and also paid for some items supplied. As tensions grew the personal relationship between Nigel Pilling and the defendants deteriorated. An attempt was made by the claimant's contract manager, Mr John Thompson, to act as an honest broker and to agree a reasonable solution as regards payment and further works, but to no avail.
14. The end result was the institution of these proceedings, issued in the County Court Money Claims Centre in December 2015 and subsequently transferred to the Manchester County Court, where directions were given after the parties had already produced a fully pleaded Defence and Counterclaim, Reply to Defence and Defence to Counterclaim and Reply to Defence to Counterclaim. The parties were each given permission to instruct an expert in ITS with directions for joint discussions and a joint report and for separate reports. In March 2017 the case, having already been listed for trial, was transferred to the Manchester Technology & Construction Court for trial.

The witnesses

15. I heard from the following witnesses:

Mr Oliver Hall

16. Mr Hall is the managing director of Ultimation. He was obviously honest. He was also extremely knowledgeable about the programming of the ITS system and I have no hesitation in accepting his evidence so far as it goes.

Mr Nigel Pilling

17. Nigel Pilling is as I have said the owner and in charge of the claimant company. He was involved in the contract negotiations and he was also involved in the administration of the contract. However he was not directly involved with the works nor did he regularly attend site, delegating the project management role to the contracts manager John Thompson. It appears that John Thompson would report back to him on matters requiring his authorisation, in particular financial decisions, and that he would liaise with the company bookkeeper as regards the raising of invoices and the like. Unfortunately, as he admitted, the company had difficulties with bookkeepers, dismissing one for incompetence and the replacement leaving subsequently. He was also ill at some point and had to delegate more responsibility to John Thompson and, presumably, to the bookkeeper. Although his witness statement dealt with the individual disputed invoices he appeared to have little detailed knowledge of their contents, indicative of the fact that he did not have a hands on role.
18. Although he was I accept an honest witness it was clear that his evidence was in a number of respects skewed to support his company's case. That was very clearly revealed by a note which he had clearly produced and attached to the Reply to Defence and Defence to Counterclaim to justify the claim for the system programming costs resulting from AB's dismissal and his replacement by Ultimation where he gave a number of explanations which were inconsistent with the true position and which were not supported either by John Thompson or by Graham Shallis. Although he rowed back somewhat from this evidence under cross-examination he still tried to avoid having to admit that the real reason for the involvement of Ultimation was because the claimant had only AB who was competent to undertake this work and was then left in the lurch once AB was dismissed. It follows that I approach his evidence overall with some caution.

Mr John Thompson

19. Until around 2011 John Thompson was an engineer employed by the claimant to undertake installation work and after that he was, and still is, a contracts manager with the claimant. He had no involvement in the contract negotiations or in the contract administration or financial side of the contract, save that towards the end of the project he became more involved in those matters due first to the absence through ill-health of Nigel Pilling and then due to the clash of personalities between Nigel Pilling and the defendants. As I have said he attempted –ultimately unsuccessfully – to procure a settlement between the parties.
20. John Thompson came across to me as an honest, decent and reasonably knowledgeable witness. However I do consider that in some respects his evidence was not completely objective or completely reliable, again being skewed towards the claimant's case, and there were also some significant divergences between his witness statement and his oral evidence. Accordingly I am unable to accept his evidence uncritically.

Mr Graham Shallis

21. Graham Shallis is an engineer employed by the claimant who undertook installation work on this contract. His evidence was supportive in general terms of the claimant's case, insofar as he was able to speak of the matters in issue, and he was subject to limited cross-examination. He was plainly honest and his evidence appeared genuine and broadly speaking reliable, although it was apparent when he was cross-examined about the temperature sensors that what appeared in his witness statement at [¶18] was not in fact evidence which he could give. It became clear that he knew or remembered far less of the detail than might have appeared to be the case from his witness statement.

Mrs Kay Entwistle

22. Mrs Entwistle provided the more substantial witness statement in this case and appears to have had as much if not more contact and dealing with the claimant than did her husband. She came across as an honest witness who, despite her strength of feeling about the claimant's performance of the contract, about Nigel Pilling, and about the merits of the claim, sought to give genuine answers to questions asked of her in cross-examination. In hindsight it is regrettable that this contract was not either procured as a subcontract to the main contract or administered by a project manager because it was always likely that the defendants, as non-construction professionals busy running their own business as well as managing the construction of a substantial new property, would find it difficult to do what was necessary in terms of the project management required for such a large project. The consequence was that many of the issues raised by the defendants are either not documented at all or only lightly documented. Mrs Entwistle's witness statement also dealt in only the most limited way with a number of the important issues in dispute. My view was that in a number of respects her recollection of the details was limited. Whilst I accept her as broadly reliable, nonetheless I have to accept her evidence as regards the details of disputed matters with some caution.

Mr Graham Entwistle

23. Mr Entwistle came across in similar manner to his wife. His recollection was not particularly clear; he had a tendency to say that he could not recall when asked about the detail of his evidence.

The experts

24. The experts gave evidence concurrently. The claimant called Mr Iain Poole, who had produced a written report dated 22 March 2017 and the defendant called Mr Chris Ramsbottom, who had produced a written report dated 27 March 2017. They had also produced a joint statement dated 12 April 2017. Mr Poole is an engineer with a company known as Kustomworks and a specialist programmer for Crestron systems. Mr Ramsbottom is the technical director of Sensory Energy and is involved in the design and supply of ITS, with familiarity with Crestron systems.
25. They were both knowledgeable and independent and I was assisted by their evidence. It appeared to me that Mr Poole had, as would be expected, more expertise in programming and, as regards that aspect of his evidence, he had the benefit of expressing similar views to those expressed by Mr Hall of Ultimation, who had similar in-depth expertise. In contrast Mr Ramsbottom did not have the same expertise in that respect, although he had obtained some input from his programming colleagues. On balance therefore I prefer Mr Poole's evidence on programming related issues. They appeared to have broadly similar expertise in the wider technical issues, and I reach my decision on these issues by reference to my assessment of their evidence on an issue-by-issue basis.

The contract

26. I have already referred to the circumstances in which the contract was concluded. I need refer only to some particular issues regarding the terms of the contract which apply to more than one area of dispute between the parties.

VAT

27. An issue has arisen in relation to the VAT element of the contract. The issue is whether or not the claimant's invoices must include VAT. It is commonly known that the construction of a new build dwelling is a zero-rated activity, but the issue here is whether some or all the goods and services supplied by the claimant fall within that activity. Under the relevant VAT legislation the position, in summary, is that VAT at standard rate must be charged unless the supply in question is zero-rated under s. 30 of and Schedule 8 to the Value Added Tax Act 1994, in which case "no VAT shall be charged on the supply" (s. 30(1)(a)). By virtue of Schedule 8 the supply, in the course of construction of a dwelling, of services related to that construction and the supply of building materials to be incorporated into the building as part of those services, is zero-rated. Notes (22) and (23) to Schedule 8 defines building materials as "goods of a description ordinarily incorporated or installed as fittings by builders in a building of that description", subject to certain exceptions, including electrical or gas appliances. These provisions are amplified in VAT Notice 708: buildings and construction.
28. The following points are material:

(a) The supply only of building materials is not zero-rated; it has to be the supply of building materials by the supplier of the services who is going to incorporate them as part of those services. If a self-builder purchases building materials from a retailer or builders merchant or any other supplier and either installs them himself, or pays for someone else to do so, then whilst he may be able to recover the VAT under a VAT refund scheme it must still be charged in the first instance. (Notice paragraphs 1.3, 2.2, 11.)

(b) The supplier is obliged to charge the lowest VAT rate applicable to his supply. He is not entitled to choose to charge higher rate VAT even where he is not required to do so. (Notice, paragraph 2.1.1.)

(c) Once the construction works are complete, further supplies are no longer zero-rated unless the services are "closely connected to the construction of the building" whether in terms of their nature or their timing. (Notice, paragraph 3.3.)

(d) To qualify for zero-rating, the building materials must be: (a) incorporated into the building, so that they cannot be removed without tools or causing damage; (b) of a type which would ordinarily be incorporated into a dwelling, whether large or small. They must not be electrical appliances. (Notice, paragraph 13.2.)

(e) Electrical appliances means most devices which are powered by electricity. (Notice, paragraph 13.6.)

(f) Given examples of materials which would ordinarily be incorporated into a dwelling include central controls relating to heat, light and ventilation, curtain poles and rails, light fittings including intelligent lighting and touch pads, and wiring including cabling (Notice, paragraph 13.8.1.). Given examples of materials which would not ordinarily be incorporated into a dwelling include appliances whether free standing or integrated, and audio equipment (Notice, paragraph 13.9.)

(g) There is no requirement for a contractor to hold a certificate for supplies in connection with a supply to a normal dwelling, or for a customer in such a case to issue a certificate. (Notice, paragraph 17.)

29. The position of the parties coming into trial was that whereas the claimant was contending that it was entitled to and was claiming VAT on all of the disputed invoices the defendants were contending that they had no liability to VAT on any of those invoices. VAT was addressed in detail in closing submissions and, by reference to the position under Schedule 8 and the Notice, both parties were prepared to accept that as regards some invoices the position was clear one way or the other. Nonetheless the VAT element in relation to many of the invoices remained contested.
30. In addition to the straightforward question, as regards each supply, whether or not it was standard or zero rated by reference to Schedule 8 and the Notice, each party raised other arguments. Thus the claimant submitted that there was a contractual obligation upon the defendants to provide the claimant with sufficient evidence to satisfy it that the supply was zero-rated, and that the defendants had failed to do so in this case, with the result that the supplies were standard rated. In addition to disputing this, the defendants also submitted that even if the supplies were zero rated under Schedule 8 and the Notice, the claimant had agreed as a matter of contract itself to absorb that VAT charge.
31. In short, I am unable to accept either argument, for the following reasons. As regards the claimant's argument, as Mr Connolly conceded in his supplementary written note neither the Act nor the Schedule nor the Notice required the customer to provide evidence, whether in the form of a certificate, or otherwise, to confirm that the supply in question was properly zero-rated. He submitted nonetheless that it was an express or an implied term of the contract that this is what should happen. He submitted that it was an express term by reference to the wording of the claimant's invoices, and submitted that it was an implied term because it was obvious that the means of knowledge as to whether or not the supply was zero-rated lay only with the defendants.
32. So far as the express terms of the contract are concerned, all that the quotations said were that "all prices are subject to VAT". There was no suggestion or evidence that this was the product of any express discussion or agreement. I am satisfied that it was simply a standard provision, and meant no more than that the claimant would be entitled to charge VAT on its supplies at the applicable rate only if those supplies were properly chargeable to VAT at that rate; it did not entitle the claimant to charge VAT whatever the true position as regards VAT even if its supplies to the defendants were not subject to VAT. Nor had I understood the claimant to argue at trial that it did. In his note produced after the draft judgment Mr Connolly reminded me that each quotation specified the full VAT rate applicable at the time, thus for example the first quotation said "all prices are subject to VAT @ 15%". He submitted that this made it clear that there was an express term that the claimant should be entitled to add VAT at the standard rate in force at the time, regardless of the true position. I am unable to accept that submission, for the same reasons as already given, and do not accept that it makes any difference that the standard rate was specified in the quotations.
33. The evidence is that the issue as to VAT arose in relation to the first invoice, where in June 2011 Nigel Pilling wrote to say that he was about to order the Crestron lighting equipment (this, as appears from the quotation, was the supply of the entire Crestron lighting/HVAC^[1] system at a price of £29,500) and was asking for payment in advance. Mrs Entwistle responded agreeing, but asking: "could you invoice without VAT as it is a new build" [4/524]. Nigel Pilling replied to say that "I have spoken with the VAT people and we are ok with not charging VAT on the lighting so the price will be £29,500". In my view the representative to whom Nigel Pilling had spoken came to the correct view; this system which was to be installed by the claimant clearly was zero-rated and in closing submissions Mr Connolly accepted that this was the case. However, he relied on the fact that when the claimant subsequently rendered its invoice number 6147 [3/367] although it did not claim VAT it also stated "VAT exemption certificate to follow from client, should we be able to claim back VAT content for new build project". It is not at all clear what this meant or, indeed, what Nigel Pilling intended to mean by this. Although I do not think that the claimant has disclosed the invoice from Crestron, it would I imagine have been the case that Crestron would have been obliged to charge the claimant VAT on that supply. It would also appear that the claimant would have been entitled to deduct input tax on that cost – see Notice, paragraph 2.3.1. However, there was – as I have said - no basis in the Act or the Schedule nor the Notice for the claimant to obtain a certificate from the defendant as a pre-condition of applying a zero-rating to the supply. From a glance through the subsequent invoices there are some references to VAT and VAT exemption certificates, but not in any identical or consistent manner. It is also rather difficult to accept the chronological accuracy of many of the invoices, some at least of which appear to have been back-dated – see for e.g. invoice 6147 where there is a subsequent invoice 6147A, in which the VAT is claimed, but ostensibly bears the same date as invoice 6147, which cannot be right. In short, not only were these invoices post-contractual, but there is no clear evidence of any consistent pattern such as might be said to reflect or effect some agreement in relation to VAT and the need for the defendants to provide some form of exemption certificate not required by the relevant legislation.
34. I am also satisfied that the exacting standard necessary to be met for implication of a term is not satisfied here either. The statutory regime requires the supplier to zero-rate if that is what the legislation properly applied required. It is known that in case of dispute that may be resolved through the tribunal system. If HMRC determine that standard rate VAT should be charged, that is what the contractor is obliged to do and the customer is obliged to pay, unless the contractor and the customer reach some separate agreement to the effect that the contractor will absorb the VAT himself. Moreover, it would have been obvious to the claimant that this was the construction of a residential dwelling. The claimant would also have known full well, or at least as well as the defendants, whether the individual supply qualified for zero-rating or not. Insofar as the claimant did not have pertinent information which the defendants did, a request for information could be made as necessary. If the defendants did not co-operate and if the result was that it was determined that standard rate VAT should be applied, then the claimant would have to charge it and the defendants would have to pay it. There is no basis to imply a term such as the claimant contends for. Indeed, it is not immediately obvious how it would help the claimant in its dealings with HMRC in any event.
35. I also however reject the defendants' submission that Nigel Pilling's email of June 2011 amounts to a contractual promise or assurance that the claimant would not charge VAT on that, or any other, invoice, if in fact – and contrary to the assurance apparently given by HMRC – standard rate VAT was properly chargeable on the supply. There is no evidence that this was anything more than the claimant passing on information, which it was neither warranting in terms of its accuracy nor proposing should vary the terms of the pre-existing contract, that VAT should be added if the supply was standard-rated.
36. I therefore approach the issue of VAT on the basis that it is simply a case, in relation to each supply, as to whether or not it is standard rated or zero rated by an application of the Act, the Schedule and the Notice to the individual supply.

The usual implied terms

37. It is common ground that the usual terms as to the quality of work and materials, implied by the Supply of Goods and Services Act 1982, apply in this case. Moreover, Nigel Pilling admitted in cross-examination, rightly and reasonably in my view, that this was an expensive, state of the art ITS and that the standard of the work ought to be judged accordingly, both in relation to its operation and in relation to its cosmetic appearance. He also agreed that the contract included for full installation, for making the system fully operational and also for an element of after care service, for e.g. making minor changes after a "bedding in" period during which the customers, using the system post installation, had decided which installed features they liked and which they did not and required removal or modification. He also agreed that the contract included for the provision of engraved keypads but that the keypads would not actually be engraved until after completion of the bedding in period and the final decision taken as to which control on which keypad would operate which part of the system.
38. In relation to the usual implied terms, two particular points emerge, one in the claimant's favour and one in the defendants' favour:

(1) The first point is that, as Mr Connolly submitted, since the claimant did not design the system it was not to be regarded as assuming any responsibility for any inadequacies or deficiencies in that design. It was asked to quote against a pre-designed specification, and did so, and was not asked to undertake a re-design or to warrant the existing design.

(2) The second point is that, as Mr Charles submitted, the claimant is responsible in contract for the acts and defaults of its subcontractors in the same way as the acts and defaults of its employees. Thus if and insofar as there was any defect in the items supplied or the work done for example by Crestron as the supplier of the system, or by SilentGliss as the supplier of the electronically operated curtain and blind track system, or by Ultimation as the replacement programmer of the system, the claimant cannot avoid responsibility for such defects.

39. Nigel Pilling also agreed, rightly and reasonably in my view, that any variations to the contract needed to be agreed orally in advance. I accept that as a matter of law it might still be possible to make a restitutionary claim for additional works which were not agreed orally in advance, if they were indisputably necessary and if they were clearly not covered by the original contract, and if the defendants did not have the option of accepting or not accepting them if their wishes were to be fulfilled, but that in my view would be the exception rather than the rule in such a case.

An entitlement to interim payments?

40. There was an issue joined on the pleadings as to whether or not there was a contractual entitlement to render claims for interim or on-account payments. It is common ground that there was nothing in the quotations to that effect. The payment regime applied by the Housing Grants Construction and Regeneration Act 1996 Act did not apply. Mr Connolly submitted that it was implied, whereas Mr Charles submitted that it was not. The importance of this argument however was significantly reduced when Mr Charles made it plain at trial that he was not seeking to contend that the claimant had failed substantially to complete the contract works – leaving aside the arguments about defects – so as to be disentitled to any payment. In the circumstances as I understand it the only continuing relevance of this debate would have been in relation to the date(s) from which any interest claim should run.
41. There was a dispute of oral evidence as to whether or not there was a prior oral agreement in relation to interim payments. What Nigel Pilling said in his witness statement was that he made it clear that it was agreed that the claimant should be entitled to payment up front for the principal items of equipment and should also be entitled to payment on completion of the various stages of the work. Mrs Entwistle disputed this in her witness statement. Nigel Pilling was not specifically cross-examined about it. Mrs Entwistle said that there was no such agreement, although the defendants were prepared to make ad hoc payments as and when requested and they believed it was appropriate to do so.
42. Whilst I accept I did not have the benefit of cross-examination of Nigel Pilling on this issue nonetheless on balance I do not accept his evidence on this point. I have already referred generally to my assessment of his evidence. More importantly, the absence of anything in the quotation, or other contemporaneous evidence of this as an agreement, persuades me that he is mistaken. Specifically, it is common ground that the defendants paid at least £20,000 as a general "deposit" on account at the outset. In my view this is inconsistent with an express agreement for payment up front for items of equipment or for interim payments for work stages done. At the outset, the quoted cost was well under £100,000 and the expectation was that it would be done relatively quickly. Thus, the commercial imperative for up front and interim payments was not present given the payment of a £20,000 deposit. I am satisfied that what happened was that due to the delay in the works, which was not the claimant's fault, Nigel Pilling began to ask for on account payments and at first the defendants were willing to pay them. However, I am not satisfied that they were contractually obliged to do so. The only exception is that I am satisfied that where the claimant was asked to and did supply items for example of lighting on a supply-only basis and as an extra, there is no reason why the claimant was not entitled to immediate payment for its invoices for those items. Otherwise I am satisfied that payment only fell due on substantial completion of the contract works, which I am satisfied occurred on 1 November 2013.

What was paid at the outset?

43. Until shortly before trial it was common ground that £20,000 was paid as an advance by way of 3 cash payments. The claimant produced what is headed "invoice 5984" dated 1 July 2010 which records the £20,000, being paid in one instalment of £10,000 and two instalments of £5,000,
44. However shortly before trial the defendants sought to rely upon a further invoice numbered 5164 and dated 1 February 2010, which reads "deposit paid for job 7389/6", in the sum of £8,511 plus 17.5% VAT, total £10,000.42. It bears what appears to be a handwritten note "paid" and an initial. It was suggested to Nigel Pilling that this must record an additional payment of that amount. Nigel Pilling denied this, although he was unable to explain how or why the invoice had been created, other than by error by whoever was then the company bookkeeper.
45. There is no reason in my view to regard this invoice as an error. The invoice number precedes the later invoice in its numerical order, and the job number coincides with the job number given on the quotation dated 20 January 2010. It seems fairly clear to me that it was an invoice produced to record and to regularise a payment of £10,000, by plucking a round figure to which when VAT was added came as close to £10,000 as possible, at a time preceding the discussion about whether the project would be zero-rated.
46. However, I accept the claimant's evidence that there is no compelling reason for considering that this invoice evidences the payment of an additional £10,000 by way of deposit. It appears unlikely that both the claimant failed to record 4 payments totalling £30,000 as opposed to 3 payments totalling £20,000 and the defendants failed to recollect the amount paid. I accept that payments in cash may be difficult to establish one way or the other if one is engaged in a substantial development. However the defendants did not give evidence that they habitually dealt in cash from sources which could not be recorded, whether legitimate or otherwise. Mrs Entwistle had said in her witness statement [¶13] that only £20,000 was paid. The defendants did not seek to adduce evidence to the effect that having seen the further invoice they had checked with their bank account and/or that of their business and/or their directors' loan account to confirm whether or not there were any cash withdrawals in 2010 which would be consistent with £30,000 rather than £20,000 having been paid.
47. In my judgment therefore the most likely explanation is that the invoice was simply provided as a pro forma invoice to regularise and evidence payment of £10,000, which was the same £10,000 as the first instalment recorded in the subsequent invoice dated 1 July 2010. I strongly suspect that the subsequent invoice is retrospectively dated anyway, since it refers to VAT at 20% being "n/a" when: (a) the rate did not increase to 20% until 4 January 2011 (and the quotation rev. 7 produced in July 2010 still showed the rate at 17.5%); (b) the discussion about VAT being zero-rated did not occur until June 2011. I am satisfied on the balance of probabilities that when the second invoice was produced it was not appreciated that the first had already been produced, so that it was not appreciated that there was a duplication.

The claims

48. I shall need to refer to and deal with each disputed invoice separately. An issue was raised by Mrs Entwistle for the first time in her cross-examination as to whether the invoices were raised and sent at the time they were dated. I have some sympathy with this argument, since I have already referred to two invoices (5984 and 6147A) where they are in my judgment retrospectively dated. However, since this point was not raised by the defendants in advance, so that there was no opportunity for the claimant to investigate and respond, I do not consider that I am able to make a finding that all invoices were similarly retrospectively dated, unless there is positive evidence in relation to the specific invoice which tends to establish that it was so dated. Fortunately, given the conclusion I have reached about the payment terms, this is not a point of any great significance in the case as a whole.
49. I refer to the invoices by reference to the item numbers as they appeared in the closing schedule produced by Mr Charles, for which I am grateful.

1. Invoice 6147 / 6147A

50. The sole issue, as clarified in cross-examination of Nigel Pilling, was the addition of VAT of £5,900. As I have said, it was conceded in closing submissions that VAT was not properly chargeable on the goods supplied and charged for under this invoice, therefore nothing is due under these invoices.

2. Invoice 6114 / 6114A

51. In cross-examination Nigel Pilling accepted that invoice 6114A was overstated and that the correct amount was that claimed under invoice 6114, which had been paid save in relation to VAT, which is what was remains in issue. He also made clear, and I accept that there is no duplication in relation to the claim between this invoice and invoice 6941 (see below). John Thompson, who clearly knew what he was talking about, was clear that the products on invoice 6114 at [3/370] and invoice 6941 at [3/393] are completely different products. I accept that the confusion reflects poorly on the claimant's administration and invoicing processes, but I also accept that the claim is properly made and is payable in the sum claimed of £475.58. There can be no doubt that standard rate VAT is properly chargeable on this supply only of light fittings.

3. Invoice 6562

52. It is clear from the evidence that this invoice was paid in full, and the only issue is whether or not the defendants are entitled to a refund in relation to the VAT element of the claim, since they contend the supply was zero-rated. The invoice is for the supply of the SilentGliss curtain system. I reject the defendants' case that this was properly zero-rated, because the curtain and blind track systems are the equivalent of curtain poles and rails, which are referred to as examples of items which are ordinarily incorporated. Whilst I accept that they are the equivalent, the difficulty with the claimant's argument is that they are also powered by electricity and hence fall within the category of electrical appliances, which is the decisive factor. According nothing is due either way.

4 & 24. Invoices 6608 and 7019

53. These invoices relate to the supply and installation of temperature sensors for the underfloor heating system. They are relatively substantial, amounting to £8,985.60 and £2,400 respectively. This is the subject of a claim and a counterclaim and has a somewhat complex and confusing history.
54. It is common ground that the system as initially specified and quoted for involved the provision of built in temperature sensors on the 34 lighting keypads to be supplied as part of the contract. The underfloor heating would be controlled by the ITS, with the temperature readings taken from the sensors being used for that purpose. Despite what Nigel Pilling said in his witness statement [¶27], which is fundamentally wrong in a number of respects, I am quite satisfied that the defendants were perfectly happy with this aspect of the system.
55. Nonetheless John Thompson said he decided at the point of fitting the sensors to check with Crestron. He said that this was because he was concerned that the keypad sensors might not work properly due to: (a) the keypad surround being changed from plastic to metal; (b) the underfloor heating in the principal living area having three separate zones. He says that he spoke to Chris Jay at Crestron who told him that "the Crestron software would not support that function": witness statement [¶36]. There is no independent evidence to support that evidence, whether from Chris Jay or anyone else at Crestron or otherwise. Moreover, in the letter written by the claimant's solicitors in August 2014 [4/559] it was said simply that the original specification was "outdated" and in oral evidence under cross-examination John Thompson said only that he was told that there would be "glitches with the software". The experts were unable to express any opinion about the change from plastic to metal surround but both agreed that three separate heating zones would not have presented a problem. Mr Ramsbottom added that his firm did not use keypad sensors due to the risk of heat from the electrical supply to the sensor distorting the readings. Although he accepted that this was not an industry wide approach I note that Mr Hall said that Ultimation adopted a similar approach. Mr Poole was unaware of any alteration to the Crestron software which meant that using a keypad sensor would be inappropriate, although he did not disagree that there was a potential problem due to heat from the electrical supply.
56. John Thompson said that he discussed two alternative options with Chris Jay. The first was to install wall mounted sensors and the second was to install ceiling mounted sensors. Chris Jay confirmed that the wall mounted option would have been the preferred solution. That is, as the experts agree, because: (a) a suitable point at wall height is the best place to measure the ambient temperature of the room; (b) there were a number of down-lighters already fitted in the ceiling and the heat emitted from the lights had the potential to affect the temperature recorded by the sensors, especially if the sensors were fitted close to the lights, as they had to be in some locations given the lack of "play" in the cables. However, the problem with the wall mounted option was that because the walls were already finished, it would have been costly and disruptive to fit the cabling to serve the sensors at that stage, since it would have involved chasing cable runs down the already decorated walls and then re-plastering and re-decorating. In contrast, because John Thompson had already taken the precaution of installing spare cabling in the ceiling void, it would be much easier and less disruptive to fit the sensors in the ceiling.
57. John Thompson also said that Mrs Entwistle would not countenance fitting wall sensors. However, his evidence was confused and confusing on this point. In his witness statement [¶36] he conveyed the clear impression that this is what she said at the time this problem was discovered and discussed. However, in oral evidence he clarified that this was a much earlier discussion, when he suggested fitting wall thermostats instead of keypad sensors. Although he also said that he raised it again as an option when the problem was discovered and discussed, he gave the impression in cross-examination that he already knew that it would not be accepted due to the view previously expressed by Mrs Entwistle. In re-examination, he suggested that it was more of a conversation which he had had with Mr Entwistle, saying to Mr Entwistle words to the effect that he knew that wall thermostats were not an option so that the best solution, although not ideal, was ceiling sensors to which he said Mr Entwistle responded to the effect: "if you need to do it then do it".
58. Mrs Entwistle and Mr Entwistle both disputed ever having being told anything about the problem with keypad sensors or the discussions about whether there should be wall or ceiling sensors until they first saw the ceiling sensors already fitted. Mrs Entwistle said that she had not been told that there was a problem with the keypad sensors or with the underfloor heating layout, about which she said the claimant was well aware at the point in time that the quotations were produced. She did however remember Chris Jay coming to the property to help AB programme the keypads because he was struggling with them. She said that she would have been quite happy with the keypad sensors but if John Thompson's advice to her had been that from a technical perspective wall sensors were required she would have accepted that advice.
59. On balance I am not persuaded that there was any discussion between John Thompson and the defendants before the ceiling sensors were fitted during which he gave any explanation about the proposal to change from keypad sensors to wall or ceiling mounted sensors. Even if there was some discussion I reject any suggestion that John Thompson had explained to Mrs Entwistle that there were two alternative options, namely wall mounted and ceiling mounted sensors, or explained to her that the ceiling mounted option had drawbacks, or that she nonetheless agreed on the basis that she would not countenance wall mounted sensors.
60. Mr Poole agreed that the ceiling was not the appropriate location for the sensors for the reasons already given, namely the heat from the down-lighters and the difference between the ambient temperature at the ceiling and at the appropriate point on the walls. The consequence is that the underfloor heating system does not work as it should. It is not suggested by the claimant that this is not a serious problem nor one which the defendants should not be entitled to take reasonable steps to address.
61. In his report Mr Ramsbottom had proposed the installation of wall mounted sensors at an estimated cost of £13,500. This was not broken down, although in evidence Mr Ramsbottom revealed that it included a lump sum of £4,500 for builder's and plasterer's work.
62. In the joint statement Mr Poole suggested the alternative solution of reverting to the initial keypad sensor approach, which he said was already covered in his pricing allowance to address other re-programming works, addressed in the counterclaim below. He had not however specifically investigated the viability of this option. In his evidence he said that he had made programming alterations previously to cater for any heat impact of the electricity supply upon keypad sensors, but did not provide further details. He had to accept that he had assumed that the existing programming already included provision for keypad sensors although he also had to accept that he did not know whether the decision to change to ceiling sensors had been taken before Ultimation became involved. In fact, since the invoice for the sensors is dated July 2012 whereas Ultimation was not instructed until a year later, than assumption would appear to be incorrect. He suggested that if more programming was required it would take no more than 2 days programming time at £500 per day. This however was evidence given by him "on the hoof".
63. In his evidence Mr Poole also suggested that it might be possible to overcome the problems with the ceiling sensors by measuring the difference between the heat at the wall and at the ceiling and the heat emitted by the down-lighters and re-programming the system to take this into account. However in my view this is an unrealistic solution, which is perhaps why it was not mentioned previously, since it would involve taking a large number of measurements in different locations and different situations, including individual measurements from each sensor by reference to its location relative to each down-lighter, with no guarantee of eventual success.
64. When asked about the cost of installing wall sensors Mr Poole suggested that it would be possible to fit sensors around 6" from the existing keypad which would avoid the risk of readings being affected by heat from the keypad electrical supply but require only minimal chasing to connect the sensor to the keypad. When asked to develop his costings he suggested that there would need to be 12 sensors at £336 plus VAT each together with 2 days building and plastering work, 2 days engineer's work and 2 days programmer's work. Assuming a programmer day cost of £500, an engineer day cost of £350 and a builder day cost of £220, the materials total is £4,032 and the labour total is £2,140, grand total is £6,172 plus VAT, total £7,406.40. Mr Ramsbottom, having emphasised that he had not had the opportunity to investigate this, expressed the view that it was not practicable and that his firm would normally only do this in conjunction with sensors located in the floor slab. However as I understood his evidence this practice appeared to be followed whether the wall mounted sensors were located close to the keypad or not, so that it did not seem to me to be a point against Mr Poole's solution. When pressed, he said that he was "50/50" as to whether or not it would work.
65. My conclusions are as follows:
66. I do not accept that the reason for changing from the original keypad sensors was that the original specification was invalidated by the defendants' decision to change the plastic surround or to install the underfloor heating in three separate zones. Nor do I accept that Crestron's software would not work with a keypad sensor. It may be that Crestron had begun to recommend against using keypad sensors perhaps because, as Mr Ramsbottom said, there was a perceived problem that the temperature reading was susceptible to being affected by heat emitted from the power supply to the keypad. I suspect that this, combined with the ready availability of cabling in the ceiling, led John Thompson to take matters into his own hands and make a unilateral decision – in the same way as he did in relation to the acoustic screen (see item 14 below).
67. That, as a matter of contract, was the claimant's problem and contractual responsibility. It had quoted for keypad sensors. If it was advised by Crestron to adopt another approach at an increased cost, it could not simply foist its preferred approach on the defendants at their cost or without their agreement. It was not the defendants' problem or responsibility that at the time the issue was discovered by John Thompson the walls were already plastered and decorated. As both experts agreed, and as I am satisfied, the most appropriate solution would have been to install wall sensors at the same level as the keypad sensors but at a sufficient distance from them to be unaffected by heat emitted from the power supply. That would have involved cabling which would not, prior to plastering and decoration, have been difficult or expensive to provide.
68. Although this was more difficult and more expensive after plastering and decoration, it was nonetheless the solution which John Thompson ought to have recommended on the basis that it would be at the claimant's cost. I am satisfied that what he did – no doubt at the prompting of Nigel Pilling to whom he said he had reported back, and who was already concerned about the cost of the project - was to choose the ceiling sensor option as a lower cost option and to provide an explanation to the defendants as to why they were needed which would enable the claimant to avoid incurring substantial additional installation costs and to seek to pass on the supply cost to the defendants.
69. What the claimant ought to have done, which was the solution which the defendants were entitled to receive at the claimant's expense, was to provide wall-mounted sensors if keypad sensors were not an option. I am satisfied that they would have accepted that recommendation if it had been properly explained to them. I am satisfied that Mrs Entwistle's objection was to old-fashioned large size wall mounted thermostats, not to small discreet wall sensors.
70. In the circumstances I am satisfied that the claimant is not entitled to claim for the cost of supplying and installing the ceiling sensors, since the cost of supplying and installing the keypad sensors is comprised within that part of the quotation which the defendants have already paid.
71. I am also satisfied that the defendants are entitled to recover from the claimants the cost of a reasonable alternative solution. As to this I am satisfied that the wall mounted sensor option propounded by Mr Poole in his evidence is a reasonable solution. It is effectively the same as Mr Ramsbottom's solution, save that it involves less cost because it makes use of the existing keypads to avoid large scale enabling and building / plastering works. I am not satisfied that reverting to the keypad sensor solution is realistic given the concerns which both experts expressed about the impact of heat from the electricity supply to the sensors. I am concerned that since Mr Poole has not conducted any investigation at all with Crestron as to the viability of this option it is effectively pure speculation on his part as to whether or not it would work. Whilst the claimant may say that this was the contractual specification which the defendants accepted, so that the defendants would obtain a betterment if they received damages based on Mr Poole's more expensive alternative, there are two answers to that in my view. The first is that this is only necessary anyway because the claimant chose to deviate from the original specification and recommended an unsatisfactory alternative solution to the defendants. It cannot now complain if the defendants are entitled to have a reasonable alternative solution. The second is that if the claimant had installed the keypad sensor option and it had not worked properly, because of incorrect readings due to heat from the electricity supply, it would have been the claimant's responsibility to remedy that problem because the equipment supplied and installed by them would not have been of satisfactory quality or reasonably fit for its intended purpose. Since there is no satisfactory evidence that reprogramming alone would have remedied the problem, the defendants would have been entitled to insist on proper remedial works being undertaken along the lines propounded by Mr Poole, so that in fact the defendants are in no better position now than they were entitled to be in at the time the contract was performed. In his note produced after circulation of the draft judgment Mr Connolly invited me to clarify or provide further reasons for this conclusion, but I am satisfied – as Mr Charles submitted – that this was in reality a poorly disguised attempt to re-open and re-argue the issue and I reject the invitation.
72. Accordingly I am satisfied that the claimant is entitled to nil and the defendants are entitled to succeed on the counterclaim in the sum of -£7,406.40.

5. Invoice 6585

73. In cross-examination Nigel Pilling accepted that there should be a credit against the claim made in this invoice for a CCTV column, because that was also claimed for under invoice 7023. In the draft judgment I said that this invoice had been paid, but having considered Mr Connolly's post draft judgment note I accept that this was a factual error on my part. Invoice 6585 is the first in time, and the sum claimed for the column in that invoice is £1,372.80 (net of VAT). The sum claimed in the later invoice 7023 is £695 (net of VAT). Mr Connolly submitted that the amount claimed in the later invoice should be credited on the basis that the court should infer that the amount claimed in the first invoice was more likely to be the correct amount. However that is not what Nigel Pilling said in his evidence and there is no evidence or explanation from the claimant, whether in the evidence of Nigel Pilling or elsewhere, as to why the higher charge should be applicable. Given the admitted problems with invoicing, and given the absence of any explanation as to why the same item was re-invoiced at all, let alone in a lesser amount, I do not think that I can safely assume that the first invoice must have stated the correct amount. It follows in my judgment that the claimant ought to be limited to the lower of the two sums claimed with the consequence that invoice 6585 should be reduced by the net difference between the two, namely £677.80.
74. It is clear that VAT is chargeable, so that the claim succeeds as to £9,651.76, being the reduced total of £8,043.13 plus VAT at 20%.
75. In cross-examination of Nigel Pilling the defendants also sought to challenge this invoice for the failure to credit for a TOA audio system which was not installed, but that was not a pleaded complaint or the subject of evidence from the defendants and Nigel Pilling explained, and I accept, that the claimant was unable to install it through no fault of its own, so that it was not required to give a credit.

6. Invoice 6615

76. The issue in relation to this invoice is whether the need for replacement of damaged lighting dimmers, supplied by the claimant to the defendants and installed by the defendants' electrician, was due to a fault in manufacture, which would have been covered by the manufacturer's warranty and hence the dimmers replaced free of charge, or due to incorrect wiring by the electrician, in which case the claimant would have no responsibility.
77. Nigel Pilling was unable to give first hand evidence. John Thompson said in his witness statement [¶41] "I accept that the product which was supplied was faulty and invoice 6615 should be credited". When asked about this in cross-examination he changed his evidence and said that in fact the dimmers had burned out on site. In re-examination he said that he had seen them black and burned, consistent with their having been mis-wired. He was asked about the fact that he had previously in negotiations agreed to credit this invoice. He said that this was simply a compromise he had offered in later discussions to achieve a settlement, although he did accept that at that stage he had believed that the dimmers were faulty. He did not explain how he had believed this in 2014 but had since then changed his mind. Furthermore, the claimant has not adduced any documentary or witness evidence from Crestron in relation to this.
78. Neither Mrs Entwistle nor Mr Entwistle were able to give any direct evidence. Mrs Entwistle said that she had asked the electrician about this on receipt of the invoice and he had denied responsibility, but there is no written evidence of this, nor was the electrician called to give evidence.
79. The experts had not been asked to give evidence on this point, perhaps not surprisingly since it is a historic issue about which they would have been unable to assist.
80. It is unsatisfactory to have to make a decision either way on such sparse evidence. Nonetheless and on balance I prefer the defendants' case. My reasons are that:

(1) Invoice 6615 dated July 2012 includes in the narrative for the cost of a "visit to test and install faulty units" (underlining added). That is as close to a contemporaneous admission as to the units being faulty, rather than the installation being faulty, as one can imagine. I appreciate that the invoice also states: "The original lighting dimmers had been wired incorrectly by the electrician and damaged beyond economical repair". However since the invoice is headed "proforma invoice 6615 copy" it is not entirely clear to me why and when this further narrative had been added. It is distinctly possible in my view that it was added subsequently. On any view the invoice is not completely consistent with the claimant's case.

(2) The statement that the original units were faulty is consistent with John Thompson's approach, not just at the later discussions but also in his witness statement. It is difficult to understand and he was unable to explain his failure to make any reference at all to the damage he said he had observed or his belief as to its cause in his witness statement, or how he came to make and to adopt his witness statement in his evidence when what was in his witness statement was so clearly inconsistent with his oral evidence.

(3) The absence of any evidence, whether contemporaneous or otherwise, from Crestron to support the claimant's case is telling.

(4) Whilst the defendants' failure to adduce evidence from the electrician is not ideal, the reality is that the faulty units were in the claimant's hands and then in Crestron's hands, and no explanation as to precisely what the electrician was ever said to have done to cause the failure has ever been provided, so that it would in any event have been impossible for the electrician to say anything more than: "I believe I wired the units in correctly", which is effectively what Mrs Entwistle has said that he did say when asked.

81. In the circumstances my conclusion is that nothing is due under this invoice.

7. Invoices 6616 / 6795

82. The issue here is the addition of VAT at £374 to these invoices for the supply and fitting of lighting rails and pelmets. As Mr Charles said, since the schedule attached to the Particulars of Claim shows that the VAT inclusive amount of these invoices was paid, the issue is whether or not the VAT should be repaid. The defendants' case is that this falls within light fittings in the Notice. The claimant's case is that they are standard-rated because they are: (i) not ordinarily incorporated; (ii) fitted furniture; (iii) fitted post-completion, which the claimant contends means post decoration. I prefer the defendants' case and reject the claimant's case because:

(i) The ordinary incorporation requirement is met, since whilst the lighting rails and pelmets may not be ordinary in every house, lighting and pelmets are ordinary, so that this particular way of providing lighting is akin to the example of the gold-plated tap given in the Notice at paragraph 13.4; a tap is ordinarily fitted so that a gold plated tap is covered as much as a chrome plated tap.

(ii) These items cannot credibly be regarded as fitted furniture.

(iii) The invoices being dated July and November 2012 pre-date the date of practical completion as a whole; there is no magic in the date of completion of decoration in a modern house.

83. It follows that the defendants are entitled to a credit of -£374.

8. Invoice 6814

84. It was put to Nigel Pilling in cross-examination that the claim under this invoice is a duplicate for the claim under invoice 6114. He disputed this, explaining that there were two different supplies of two different products, maintaining this evidence when recalled after Mrs Entwistle had given evidence, and I accept his evidence on this point. His evidence is consistent in my view with the descriptions and quantities on the invoices. The claimant is therefore entitled to succeed in full in the sum of £10,589.22, inclusive of VAT, as to which there is no dispute.

9. Invoice 6815

85. This is an invoice for the supply of the automated gate system and access system. The defence appears to be that the claimant failed to supply the gate itself which was part of the scope, and also that the gate motors were returned, apparently because the defendants decided they wanted a different style of gate opening. In opening I refused the defendants permission to add a counterclaim to claim the cost of £5,750 for the supply and installation of a gate system at a cost of £5,750, including £2,490 for a hardwood gate.
86. The first quotation produced by the claimant included for automated gates and an intercom system at a total price of £2,700, with "hardwood gate to clients specification". The second quotation changed that to "hardwood gate by the Wooden Gate Company". That remained the same. The claimant's position and evidence was that the quotation made it sufficiently clear, in context, that the gate was to be specified and paid for as an extra cost item by the defendants, in circumstances where at the time of the first quotation the gate had not been specified. Mr Entwistle accepted in cross-examination that they thought that the quotation if it included for a hardwood gate was very low, but said he assumed that this was a deliberate pricing choice.
87. I am satisfied that the combination of the words used in the quotation, coupled with the cost quoted, made it clear on an objective analysis that the gate itself was not included. It is not credible that a hardwood gate plus the automation and access control system could have been quoted for £2,700, and whilst the wording is not as clear as it might have been nonetheless I am satisfied that in context that was made sufficiently clear.
88. There is no basis for the suggestion that the claimant ought not to be entitled to claim for this because the defendants changed their mind and wanted a different system, therefore I award the sum claimed in full, £3,240, inclusive of VAT as to which there is no dispute and which is properly chargeable.

10 & 11. Invoices 6598 and 6817

89. There is no longer any issue in relation to these invoices, which has been paid in full, including VAT as properly chargeable, thus nil claimed and allowed.

12. Invoice 6946

90. The only issue here related to VAT, which in closing submissions the claimant accepted was zero-rated as cabling, hence the claimant is entitled to the invoice net of VAT in the sum of £8,000.

13. Invoice 6947

91. There is no longer any issue in relation to this invoice, and it is now accepted that VAT at the standard rate ought to be applied to this as audio equipment, hence the claimant is entitled to the VAT inclusive sum of £11,502.

14. Invoice 6948

92. This invoice is for the cost of installing a home cinema system. The only basis advanced for non-payment is that an acoustic screen was specified but a non-acoustic screen was installed. In my judgment that would afford no basis for not paying the invoice as a whole since: (a) the home cinema system as a whole works perfectly well; (b) the defendants do not say that they cannot and do not use the home cinema system. It follows that the defendants cannot argue a partial failure of consideration in relation to this divisible element of the contract so that in principle the invoice is payable in full.
93. The real question is whether or not the defendants are entitled to recover the cost of replacing the screen with an acoustic screen, or otherwise entitled to damages for breach of contract and, in either case, what sum ought to be set off against the claim.
94. To explain, an acoustic screen contains a number of minute perforations which are designed to allow sound to travel through the screen but not to impair the visual effect. It is intended for use where the sound source (i.e. the loudspeakers) are located immediately behind the screen, so that the sound from them would be impaired if the screen was solid. Typically, acoustic screens are specified where, as here, there is a wall mounted TV and speakers with a drop down screen installed in front of the TV (for use when the viewer wishes to have a large screen viewing experience) so that the drop down screen would, when in use, be positioned immediately in front of the speakers.
95. When asked about the decision to change from an acoustic screen John Thompson said that once the design of the fireplace, TV and speakers evolved it became apparent to him that the location and distance between the speakers and the screen was such that an acoustic screen was unnecessary. Mrs Entwistle said that since the layout of the room, the wall of which was brick built, had not changed she was unable to understand what had changed to justify this decision. John Thompson said that as a result of the view he had reached he decided to replace the acoustic screen with a standard screen. He accepted that he had not discussed this with the defendants. He was unable to offer a sensible explanation as to why not, other than that he took the view that it was a technical decision which they could trust him to make. He accepted that when he told the defendants what he had done they were unhappy about the fact that he had made the decision without consulting them.
96. Nigel Pilling was asked whether or not the screen which was supplied was cheaper than the acoustic screen specified. He denied this, saying that a higher value screen was supplied. The claimant did not, however, disclose any documents to confirm this. That is notwithstanding the fact that John Thompson said that a purpose-built screen was provided, even though the experts were clearly bemused as to why this might have been necessary. I am afraid that I have formed the clear view that this was a simple cost saving measure, and the reason why John Thompson did not explain to the defendants what he was proposing to do to give them the opportunity of agreeing or objecting was that he was hoping that they would not notice and that the claimant could save some money as a result. Otherwise, it simply makes no sense whatsoever to divert from the agreed specification without obtaining client approval in circumstances where there is no suggestion that there was any urgency or difficulty in obtaining instructions.
97. It is however clear that the defendants have not in practice regarded the lack of an acoustic screen as a major problem since it was installed. They have not replaced the screen with an acoustic screen. It was not raised by them as an issue, whether overtly or in the context of the attempts to resolve the outstanding issues by negotiation, until included in an outstanding work list produced in August 2015. Moreover the defendants have never advanced a positive case to the effect that the sound quality is impaired as a result of the lack of an acoustic screen. Whilst I accept that it is not possible for the defendants to prove a negative, in the sense that they cannot prove that the sound quality would be demonstrably better if an acoustic screen was in place, unless they replace the existing screen and commissioned measurements before and after, it would have been possible for the defendants to lead evidence that the sound quality is demonstrably worse when the screen is lowered than it is when it is not. The most that Mr Entwistle could say was that his son would ask for the volume to be turned up when watching a film on the large screen. He frankly accepted in cross-examination that it was not a very serious issue in the great scheme of things; the defendants' case quite simply is that having specified an acoustic screen that is what they want. He said quite frankly that he had not been prepared to replace the screen with an acoustic screen at his own expense and that remained his position. In re-examination, he said that he would replace the screen if he had the money.
98. Mr Poole's opinion was that the sound quality was not adversely affected, which he ascribed to the fact that the screen as installed did not sit directly in front of the speakers and thus did not materially interfere with the sound. He accepted that this was his subjective opinion and that he had not undertaken any tests. He also accepted that it was not an "ideal" solution, but considered that an acoustic screen was not "necessary" in this situation. I did not find convincing his explanation that there were good reasons why an acoustic screen had not been used in this location, and preferred what Mr Ramsbottom said in this regard. However Mr Ramsbottom had not given any opinion as to his perception of the effect on the sound quality in his report and it seemed to me that his opinion was based more on a comparison between the sound quality with and without an acoustic screen than on a comparison with and without the actual screen. He did agree that the screen did not sit immediately in front of the speakers.
99. In terms of remedial costs, Mr Ramsbottom had estimated the cost of replacement at £8,200 plus VAT, but accepted that he had not provided a breakdown. Mr Poole had provided an alternative costing of £4,194 inclusive of VAT, which he explained was based on asking the manufacturer for a like for like replacement. Mr Ramsbottom accepted that his cost was based on the supply of what he described as a "superior" product, although in re-examination he explained that in his view it was standard in the context of a property such as the present.
100. I am satisfied that the defendants have established that the claimant was in breach of contract in not supplying an acoustic screen, when that is what was specified. I do not accept that it was open to the claimant unilaterally to vary the specification in this way.
101. The principal issue between the parties is whether or not it is reasonable for the defendants to recover damages based on replacing the existing screen with an acoustic screen. Both counsel have referred me to the leading authority of Ruxley v Forsyth [1996] AC 344. This authority is summarised in Chitty on Contracts at 26-036 & 37 as follows:

"26-036

… In a contract to perform services or for work and materials it will be assumed that the claimant will have the incomplete or defective performance completed or corrected and the damages will be assessed by the cost of getting this done; however, in Ruxley Electronics and Construction Ltd v Forsyth the House of Lords held that if the claimant will not have the work done or it would be unreasonable to do so, the damages will again be measured by the difference in value, which may be less than the cost of having the work done. The claimant is entitled to the reasonable cost of having the remedial work done if, in all the circumstances, it is (or was) reasonable for him to insist on having the work done. Factors which are relevant to the issue of reasonableness include:

(i) the claimant has actually had the work done; or

(ii) he undertakes to have it done (but such an undertaking will not, on its own, make it reasonable for the claimant to have it done); or

(iii) he shows a "sufficient intention" to have the work done if he receives damages on this basis: the claimant's subjective intention is relevant.

26-037

In Ruxley Electronics and Construction Ltd v Forsyth above, the House of Lords emphasised the role of reasonableness and held that where the cost of reinstatement was out of all proportion to the advantage to be gained by the plaintiff from reinstatement, it would be unreasonable for the plaintiff to insist on it. In this case, a swimming pool was not built to the depth specified in the contract but was sufficiently deep for diving according to normal standards so that the market value of the property was not reduced. It was held that it was unreasonable for the plaintiff to claim the cost of rebuilding the pool to the contractual specification. (However, the House of Lords did approve the award of £2,500 as damages for loss of amenity or loss of consumer surplus.) …"

102. As regards the "loss of consumer surplus" this is explained at 26-145 as follows:

"26-145

In Ruxley Electronics and Construction Ltd v Forsyth the House of Lords accepted that damages may be awarded for the "loss of amenity" suffered by the claimant where the purpose of the contract was to give him a subjective, even idiosyncratic pleasure or amenity. The defendant, in breach of contract, built a swimming pool whose depth was only six feet in the diving area, instead of the specified seven feet six inches. Despite evidence that a depth of six feet was perfectly safe for diving, and that the market value of the property was not adversely affected by the breach, the Court of Appeal had allowed the full cost of re-building the pool. Their Lordships reversed this decision and appeared to support the trial judge's award (not appealed) of £2,500 as substantial damages for "loss of amenity" because the purpose of the contract was "the provision of a pleasurable amenity". Two Lords agreed with Lord Mustill's speech: he upheld the award as representing the loss of the "consumer surplus", the personal, subjective gain which the claimant expected to receive from full performance - an advantage not measured by any increase in the market value of his property."

103. I have not found this an entirely easy decision. However in the end I am satisfied that it is reasonable for the defendants to replace the existing screen with an acoustic screen. This is a case where the defendants decided to spend a significant amount of money on a home cinema system with an acoustic screen. They were clearly upset when it was not provided. They are still vexed by the fact that they have not got what they contracted for and expected to receive. It would not be unreasonable for them to insist on replacing what was supplied in breach of contract with what they expected to obtain. Since it is clearly the case that acoustic screens are specified in order to ensure that the audio quality is not impaired, it is self-evident that all other things being equal there will be a difference. The claimant has not demonstrated by acceptable evidence that there would be no difference in sound quality if one was now fitted, by demonstrating by reference to published materials or the like that in the context of the actual layout of this room an acoustic screen would make no appreciable difference to the sound quality. The subjective opinion of Mr Poole as to the difference with and without the screen in place is, with respect to him, irrelevant to this issue, which is whether there would be a difference with and without the acoustic screen. This is not a case such as Ruxley itself where it could be concluded on the evidence that it makes no difference at all whether the screen is acoustic or not. I am satisfied that the defendants will all things being equal replace the screen with an audio screen if they are awarded damages in this respect. It is not surprising that they have not done so from their own resources at a time when they have been in dispute and then in litigation with the claimant. I accept it is possible that once all matters have been resolved in this litigation they may decide that their financial ability has been so adversely affected that they are no longer in the same financial position as they were when they originally contracted with the claimant or as they would have been had this dispute and litigation not ensured, and thus decide not to replace the screen, however I do not consider that this would be a reason for not awarding them damages based on the cost of replacement.
104. As regards the cost of a replacement, I accept and prefer Mr Poole's evidence that a reasonable like for like replacement cost would be no more than £4,194. That is a factor which supports my conclusion as to the reasonableness of the remedial solution, in the context that the original quotation for the whole home cinema system was £14,950 plus VAT. I am satisfied that the defendants are entitled to set off this amount against the claimant's invoice claim with the result that the claimant is entitled to £13,566. It follows from this ruling that the claimant is entitled if it wishes to have the existing screen returned to it. Insofar as that requires any works the defendants must permit access to the claimant to remove the screen, but the claimant must ensure that any resultant damage is made good at its cost.
105. Finally, and had I been wrong to award replacement damages, I would have awarded the defendants loss of amenity damages of £1,000, resulting in an entitlement of £16,760.

15 - 17. Invoices 6949, 6950 & 6951

106. There is no longer any issue about these invoices, thus I allow £4,020, £1,380 and £82.08 respectively.

18. Invoice 6941

107. In cross-examination Nigel Pilling clarified that although there was a confusion between this invoice and a further version of invoice 6114 at [3/392], the latter was another bookkeeping error and the claim which was made, and I am satisfied is justified, is the claim for this invoice. I am also satisfied that this is properly standard rated for VAT, since it is a supply only item, so that the total allowed is £1,035.04.

19. Invoice 6942

108. Mr Charles submitted, and I accepted, that this could not be claimed since it had been pleaded as having been paid and, although the claimant submitted that – as pleaded in the Reply to Defence at [¶36] – this was simply an error because the credit should have been entered against a second duplicate invoice no 7012 instead, the difficulty for the claimant was that there was no evidence about this and the relevant documents had not been produced, with the consequence that I was not prepared to allow the claim to be amended to plead this invoice as not having been credited. Ingeniously, Mr Connolly submitted as a fall-back position that even if it could not be claimed as part of the claim it could be relied upon as a set off to the counterclaim. However I am not satisfied that it was pleaded in this respect either, since although the Reply to Defence was repeated in the Defence to Counterclaim, all that was pleaded in the latter pleading was that it would set any liability on the counterclaim off against its claims in the Particulars of Claim whereas, as I have held, invoice 6942 was not pleaded as part of the Particulars of Claim. Nor in any event am I satisfied that the case has been supported by evidence, since neither the invoice 7012 nor the credit note was produced at trial. Having – rightly – invited me to take a firm approach to the defendants' belated attempt to introduce new claims not pleaded or supported by evidence on the first day of trial, the claimant cannot complain if I take the same firm approach to its similar attempt.

20 & 23. Invoices 6956 and 7014

109. I deal with these together as they raise similar points. Both relate to labour charges for the installation of the curtain track system. The first invoice is said to be for the installation and for the testing of the track which at that stage was not yet electronically connected. The second invoice claims for the cost of additional visits to commission due to the mains not being live on original installation.
110. The first issue is whether or not the claimant was entitled to charge for the cost of installation as a separate item. Nigel Pilling accepted in cross-examination, rightly, that installation was included in the original quotation. In an attempt to avoid this difficulty he then claimed, notwithstanding the wording of the first invoice, that both invoices in fact related to the extra cost of returning to install and commission due to the lack of power on the first visit. Plainly this is completely inconsistent with the clear words of the first invoice, and I am unable to accept this new evidence. He also claimed that the defendants agreed to these extra costs in any event, although he could provide no details as to the conversation, and I reject that account as well.
111. John Thompson however supported Nigel Pilling's evidence that a number of separate visits were required due to the absence of a power supply on the first occasions. He accepted however that each test would normally take only between around 10 and 20 minutes per track and that what would have been required in any event was one test before the curtains or blinds were fitted and one test after they were fitted. He accepted that he had no direct involvement in this work or in reporting the extra time back to Nigel Pilling.
112. It is a curious feature of these invoices that they are both in the same amount, £1,650 plus VAT. There is no breakdown as to how they are arrived at or disclosure of timesheets or costings or the like and, by reference to the wording of the invoices, it is plain in my judgment that they relate to different attendances to undertake different work. It is difficult to avoid the conclusion, which I draw, that the amounts have been plucked from nowhere or, at least, that the second invoice has simply replicated the amount claimed under the first invoice which itself, as I have said, included for the original installation cost, but impermissibly so.
113. My conclusion is that whilst in principle the claimant would have been entitled to recover a properly claimed, properly itemised and properly supported reasonable amount for extra attendances above and beyond those which it was already contractually obliged to provide, what the claimant has done is nowhere near enough to discharge the burden of proving its case.
114. Whilst I accept that the defendants did not in their defence raise a specific case in relation to these invoices other than that installation charges were already included in the contract price and that the second invoice was a duplication, nonetheless the defendants did also – properly – plead in paragraphs 2(c) and 4 that the claims were insufficiently particularised or documented, and the claimant has failed to respond to those complaints – justified in my view as regards these invoices for the reasons I have given – or to provide any supporting detail in its own evidence so as to cure those deficiencies. In the circumstances the claimant cannot complain if it recovers nothing even if it might have had a legitimate claim for something had it been properly made and evidenced. In the circumstances the claimant recovers nil.

21. Invoice 6957

115. The claimant seeks to recover what are described on the invoice as the labour costs for installing 8 Samsung Smart TVs. Nigel Pilling said that the quotation included for the supply only of 8 TVs as provisional cost items, and no cost was included for installation because it was not possible to assess the amount of installation involved without knowing the TV to be supplied. However this was clearly wrong, because the quotation did specify the types of TV to be supplied, and although it did not mention installation specifically it is inconceivable in my view that this was not included. Indeed when confronted with this point Nigel Pilling admitted that installation was included, but then sought to explain the claim by saying that the smart TVs required much more installation than the original TVs specified. However I am unable to accept that it justified a claim for £1,400 plus VAT.
116. His evidence was inconsistent with that of John Thompson, who said that installing smart TVs was not particularly difficult. In his witness statement and in his oral evidence he had indicated that the claimant had obtained TVs for the bathrooms which the claimant had fitted for them. However, Nigel Pilling had said that these were fitted free of charge.
117. I am satisfied that there is no proper basis for claiming the installation costs as an extra. It is apparent in my view that the installation costs for 8 TVs were always included, and that the defendants were never told and thus never agreed either that there would be any extra cost for installing smart TVs or for installing the 3 additional TVs in the bathroom.
118. Although Mr Connolly submitted that it would not be surprising if the defendants had agreed to pay for installation at a time when relations were good, in my view it is equally if not more plausible that the claimant who had already contracted to supply and install 8 TVs would have been prepared to install 3 additional TVs in the bathroom free of charge.
119. Furthermore, and in any event, there is no breakdown or documentary evidence for the claim made, which seems excessive on either assumption.
120. Thus I award nil under this invoice.

22. Invoice 6958

121. This is now agreed at £720.

23. Invoice 7014

See 20 above.

24. Invoice 7019

See 4 above.

25. Invoice 7020

122. This is the claim for VAT on invoice 373, which is the cost for the supply of the SilentGliss curtain and blind system. For the same reasons as given in relation to item 3 above I am satisfied that since these are electrical appliances they are standard rated and, hence, that the sum claimed of £4,045.50 is due.

26. Invoice 7021

123. This is now agreed as claimed at £492.

27. Invoices 7030, 7031 & 7032

124. By these invoices which total £10,695 the claimant seeks to obtain payment for the costs which it incurred in paying Ultimation to undertake the programming of the ITS. The defendants contend that there is no basis for holding them liable to pay these costs, in circumstances where they say that the only reason why it was necessary to instruct Ultimation was because the claimant had no option but to dismiss AB for alleged theft and because it had no other competent programmer available to take over.
125. As I have already mentioned, in his evidence Nigel Pilling sought to suggest that in fact the need to instruct Ultimation was not due to the claimant's inability to undertake the works in-house, because it could have done so using Graham Shallis assisted by a Crestron representative if allowed a reasonable time, but due to the defendants' wish to expedite matters, where the only reason why expedition was necessary was because of the historic delays to the project which were not the claimant's fault or responsibility. As I have said however I reject this explanation. There is no doubt that Graham Shallis did not consider himself competent to undertake the programming work. There is no evidence that he, even if assisted by a Crestron representative, could have undertaken the work, either at all or within a reasonable timeframe. John Thompson, who had to make the decision in Nigel Pilling's absence through ill-health, did not even consider this as an option and I have no hesitation in preferring his direct evidence over the indirect evidence of Nigel Pilling in this regard. Moreover, the immediate cause of the delay at that point was, I am satisfied, that AB had already spent a considerable amount of time working on the programming by the time he was dismissed. Since it took Ultimation from July to November 2013 to undertake the programming, when it was a specialist Crestron programming company and when it was able to dedicate considerable resource to it (the evidence is somewhere between 3 and 5 operatives), it is unlikely in the extreme in my judgment that Graham Shallis assisted on an ad hoc basis by a Crestron representative could have completed the task in any reasonable timeframe.
126. Perhaps recognising the difficulty, Nigel Pilling also contended that Mr Entwistle had agreed that the defendants would pay the additional costs of engaging Ultimation. In fact, as was pointed out to him in cross-examination, that is not what his witness statement [¶16] said. ¶16 appears to represent Nigel Pilling's inference from what he said Mr Entwistle had said to him after he had told him that the claimant had already taken the decision to employ Ultimation, namely that the claimant should do whatever it thought necessary to get the job finished.
127. I do not accept that the conversation took place as alleged by Nigel Pilling. Mr Entwistle denied that any such conversation had taken place, and I accept that evidence as entirely credible; it seems to me to be most unlikely that any contractor in such a situation would have the gall to suggest to its client that it should pay for the additional cost of having to finish a job using a subcontractor because its own employee had been caught stealing from the client and even more unlikely still that any client would agree. Moreover if the conversation had taken place it is surprising that the invoices are dated August 2014, and thus rendered some considerable time after the Ultimation invoices, which were rendered in autumn 2013. If Nigel Pilling believed that Mr Entwistle had agreed to pay Ultimation's costs it is difficult to see why he would have waited so long and been kept out of pocket so long before issuing these invoices.
128. Even if I was wrong about that I do not accept that the words used would be sufficient to render the defendants liable for a cost which in fact and as a matter of contract law they were not liable to pay. It was for the claimant to absorb this extra cost, as a decision which it took in circumstances where it had no other option due to matters for which the defendants had no responsibility.
129. Accordingly, I award nil under these invoices.

28. Invoice 85371

130. This invoice amounting to £17,820 is closely connected with the previous 3 invoices. It is a claim for "additional Crestron programming costs incurred due to project being 2 years behind schedule, authorised by Mr Entwistle." It also says: "Please see additional sheet attached for explanation of works". It is rendered even later than the previous invoices, being dated February 2015. I am also satisfied that the document which the claimant claims was attached to the invoice [1/64] was produced by Nigel Pilling for the purposes of the claim and, as I said above when referring to his evidence generally, is a self-serving and unreliable document. Moreover, despite there being no documentary or other evidence as to how this invoice is made up, in cross-examination Nigel Pilling appeared to suggest that this included other costs claimed by and paid to Ultimation, as well as other unspecified extra costs. No further invoices from Ultimation beyond the 3 which were re-invoiced to the defendants as above have been disclosed. When pressed he was unable to provide any details in relation to this invoice.
131. In my view Mr Charles was right to describe this invoice in closing submissions as a "try on", and I have no hesitation in rejecting it both as regards any entitlement to make this claim but also as regards the complete lack of detail or supporting documentation. I award nil under this invoice.

The counterclaims

Cinema screen

132. This is addressed under claim item 14 above.

Head End AV Rack

133. This relates to the cable installations in the media room, which is effectively the engine room of the system. The current layout is that the data cables terminate in patch panels within data cabinets located on the wall, whereas the Cat 5 cables terminate in a patch panel located on top of an audio-visual (AV) rack which is intended to be portable so as to allow access to the data cabinets as necessary.
134. The defendants' position is that the cable installation is unacceptable and that the cable runs into the portable AV rack are too short to allow sufficient room to permit access to the cabinets to which access is needed for maintenance, repair and upgrades. In the joint report Mr Poole accepted that some tidying up and modification was required to address these issues, although he appeared to suggest that these were snagging type items as opposed to defective works. Insofar as there is a difference between the two, and since the claimant accepted that it had an obligation to undertake snagging works I do not think that there is, I am satisfied that the current situation is unacceptable and does amount to a non-compliance with the implied terms of the contract. In that respect it was also suggested by John Thompson in his witness statement [¶53] that the defendants were told that there was inadequate space in the media room and they ignored this, but I accept and prefer Mr Entwistle's evidence that there was an alternative and that it was the claimant's decision to locate the media room in that location because it was easier for them to run cabling and wiring into that location. I do not accept that if the defendants had been told that the room was unsuitable for the purpose they would have insisted on it being used nonetheless.
135. Mr Ramsbottom contends that a wall mounted cable connection rack is required for the incoming Cat 5 cables from which long service loop interconnecting cables should be installed to connect to the main AV rack to allow it to be moved and enable access. His cost estimate was £6,500 plus VAT. Whereas Mr Poole considers that this is not necessary, his view was that if a full re-wire and re-patch is required, as opposed to a more limited tidying up exercise, it would cost an estimated £3,804 inclusive of VAT. It appears that the main difference between the two costings is the amount of engineer's time required to provide a wall-mounted rack as opposed to a freestanding rack.
136. Mr Poole also considered that the tidying up exercise would take a day's engineer's time at a daily rate of £350 plus VAT, whereas whilst Mr Ramsbottom said that whilst he did not believe a simply tidy up exercise would be sufficient, if a proper tidying up exercise was found to be all that was necessary he estimated it would take around 2.5 days.
137. The claimant contends that the provision of a wall mounted cable connection rack goes beyond the specification, which simply states that "all data cables terminated to patch panels in data cabinet" and makes no reference to Cat 5 cabling also being terminated to a wall mounted patch panel which is separately connected to an AV rack. Mr Ramsbottom agreed, but maintained his view that this was the only sensible and workable solution to address the deficiencies which he perceived in the existing arrangement. Mr Poole considered that it would be possible to obtain sufficient access to the existing wall mounted data cabinets by taking the incoming cable snake into the AV rack at a different point, especially since it would be possible to remove rather than just open the cabinet doors to gain access. His full re-wire and re-patch solution, which involves providing a taller rack for better distribution of the system, does not permit the rack to be moved, but maintained his view that this would not be a problem in practice. Mr Ramsbottom maintained his view that the wall mounted rack would be the better solution, although he accepted that it was possible to gain access to the data cabinets by squeezing through.
138. In my view it is necessary to undertake more than just a limited tidying up exercise. I am satisfied that the existing arrangement is unsatisfactory and has the potential to lead to problems with bandwidth (as Mr Poole accepted) and access, with the risk of data cables coming loose as access is gained to the data cabinets. I agree however with Mr Poole that the provision of a wall mounted rack would amount to the provision of something which the quotation did not include for and which is not strictly necessary to address the problems which exist. I am satisfied therefore that Mr Poole's remedial costings are to be preferred, and I award the defendants £3,804 under this head of counterclaim. In his note produced post draft judgment Mr Connolly submitted that, since the claimant was always ready and willing to return to site to undertake this as snagging work, it ought now to be allowed to do so at its own cost with no monetary award being made against it. However the claimant's primary position had always been that all that was needed was tidying up and I have found against the claimant on that argument. Furthermore, this is not a case where the contract both requires and entitles the contractor to enter and remedy at its own cost defects becoming apparent and notified within a specified defects liability period. The claimant having failed to undertake or to offer to undertake the work which I am satisfied was reasonably required and, thus, placing itself in breach of contract, the defendants are entitled to have the work done by others at reasonable cost. I am not satisfied that it is unreasonable for the defendants in the circumstances to decline to allow the claimant to enter and do so itself.

Underfloor heating sensors

139. This is addressed under claim items 4 and 24 above.

System software

140. It is pleaded in the Defence and Counterclaim at ¶57 that there have been recurring faults in relation to the heating, lights, curtains and blinds, namely that: (a) the curtains open and close at various times for no reason and at intermittent intervals, sometimes staying open all night; (b) the lights go off and the external lights flash; (c) the heating turns off completely. It is pleaded that "this can only be a programming issue" and a claim is made for a full reprogramming of the system at a quoted cost of £19,720 plus VAT.
141. In her evidence Mrs Entwistle said that the "bizarre happenings with the curtains and lighting" began to happen around the end of 2012, and that the claimant's employee AB who was undertaking the programming at the time was unable to correct the system. Around this time she began to make diary entries, which are attached to her witness statement, which record the defendants' experiences with the system. There was no challenge to the accuracy of those observations. However it is plain to me that the defendants have not fully appreciated what Ultimation did, since although she said in her witness statement [¶37] that Ultimation did not "wipe the programme clean but reworked [AB's] existing programme", it is clear from Mr Hall's evidence that this is not correct and that Ultimation did begin programming again from scratch.
142. It is also clear that Ultimation was asked to investigate these faults and did so. Mr Hall was clear in his evidence that Ultimation had been unable to find any programming fault that could have been causing these faults, save for a timing issue which was due to a software bug which has now been the subject of a fix issued by Crestron which can be applied to the defendants' system without any difficulty.
143. As regards the problem with the curtains, Mr Hall accepted in cross-examination that since Ultimation did not attend site to investigate and since the information which could be obtained from remote access of the system as to the cause or extent of any re-booting was limited he was unable to provide much in the way of specific information as to the possible causes of this problem. As regards the problem with the lighting, Mr Hall referred in his witness statement to the problem being as he understood it being one of flickering, although he had never been to site to see it first-hand. He explained that when he referred to as flickering what he meant was extremely rapid on/off switching. He agreed that if the problem was more of on/off switching lasting a second or more, which is what the defendants are complaining of, that was unlikely in his experience to be due to a defective lighting load.
144. In her evidence Mrs Entwistle emphasised that there appeared to be some pattern to these events, so that the lighting or curtains would activate at the same time of the day and the same day of the week for a period, before changing to another time of day for another period, and so on. However, she also said in re-examination that more recently these patterns appeared to have disappeared and that the faults now appeared to be completely random.
145. It is common ground between the experts that there are some minor programming issues which can be resolved without undue difficulty and are the sort of issues which might be expected to arise in an ITS such as that which has been installed at the property. Mr Ramsbottom accepted in cross-examination that he would not rely on these alone as justifying a full re-programming exercise. The key issue between the experts is whether there are or may be more fundamental problems with the system which are due to defects with the programming and which render it necessary to undertake a full re-programming exercise at an estimated cost which Mr Ramsbottom assesses at £9,750. Mr Ramsbottom considers that there are, whereas Mr Poole disputes that this is the case.
146. In the joint report the respective experts summarised their position. Mr Poole's opinion is that the periodic flashing of the exterior lights is most likely caused by a fault outside the Crestron system, such as a faulty electrical installation, that the curtains opening and closing at incorrect times is most probably caused by the internal clock being set incorrectly (which is what Mr Hall referred to as the software bug now covered by the Crestron fix), and that the random opening and closing of the curtains and turning on and off of the heating is due to the system re-booting to default settings due either to the defendants turning it on and off in an attempt to fix a problem or to periodic losses of power. He reaches this conclusion having investigated and ruled out the possibility of faulty programming or defective hardware. He accepts that he would be in a better position to offer a more conclusive opinion by being present when symptoms occur so as to test the system at that point, but says that in the absence of such an opportunity he cannot agree with the defendants' position that the fault lies in the installation or programming of the system.
147. Whilst Mr Ramsbottom agrees with the difficulty in reaching a conclusive view due to not being able to investigate the system whilst symptoms are occurring, and whilst he recommended a more detailed investigation with unrestricted access to the system source code whilst on site to start that process, his opinion was that the random and high frequency nature of the symptoms, which can happen when the defendants are not present as well as when they are, coupled with the lack of any issue with other electrical equipment, makes an electrical fault unlikely to be the cause.
148. In cross-examination Mr Poole was at pains to emphasise that it was not possible for a programme to undertake a spontaneous alteration, so that any change had to be due to some external event, whether the intervention of a programmer or a reboot following a power failure restoring default settings or otherwise. Based on his expertise as a programmer I accept this evidence. It would follow, he said, that if there was some error in the writing of the programming it would already be present, and that he had been unable to identify any such error, and nor had anyone else. It also followed that a programming error that could not lead to events occurring on a random basis unless the programme was written whether deliberately or in error in such a way as to introduce events on what might appear to be a random, but was actually a pre-determined and programme triggered basis. He said that if there was some timed event of that nature written into the programme – for example that if an alarm sensor was triggered the external lights should flash on and off - he would have expected to see it on interrogating the system, but had not done so on his investigations. He said that it was possible that some external event was occurring in a non-random way which was itself causing the system to close down and then re-boot, but accepted that he had not investigated this. He explained that the intermittent pulsing of the lighting could be caused by a faulty electrical installation external to the ITS, resulting in an uneven current, or faulty hardware external to the ITS, resulting in an on/off, and reiterated his view that this should be investigated by the defendants. He emphasised that Ultimation was a reputable company so that it was unlikely in his opinion that a programming issue could be the cause. He said that when he had inspected the system he had noted that the lighting system had re-started 5 days previously and the whole house integration system had re-started 47 days previously. He said that the system only allowed him to see the date of the last re-start, as opposed to a historical log of re-starts, but that he was able to conclude that the re-start 5 days previously was not a programmed or remotely activated re-start or a system hardware failure, which left only a manual re-boot or a loss of power as likely probable causes. He accepted that Mr Hall had said in his witness statement that he had found no evidence of re-booting, which is why Mr Hall had said that he had found no evidence of power issues causing re-booting.
149. In cross-examination Mr Ramsbottom accepted that he did not have the same programming expertise as Mr Poole, but said that he sufficient expertise to express an opinion on programming as a cause. He accepted that he did not have evidence to contradict Mr Poole's evidence that the system version which was installed on the system was the same system version as he had been given remote access to. His position was that he could not rule out a discrepancy between the version held by Ultimation and the version installed at the property which was causing the problem, but he accepted that he had no positive evidence to suggest this was the cause. He also accepted that he had not found any evidence of a trigger in the programme or a programme fault which would explain the events reported by the defendants. As regards the possibility of an external electrical fault, he accepted that his firm recommended the installation of an UPS (uninterruptable power supply) as standard when installing an ITS and that a fault such as a spike or brown out (where the mains voltage dips below 220V) may cause a re-boot. He accepted that he could not rule out electrical issues being the cause of the problems, although in his view that was unlikely to be the cause of the rhythmic on/off flashing of the lights reported by the defendants, as opposed to the flickering referred to by Mr Hall in his witness statement at [¶26] and in his view persistent re-booting of the system was also unlikely to be the cause.
150. In short, the fundamental difference between Mr Poole and Mr Ramsbottom is that the former believes that it is necessary to test and rule out an external electrical fault before it can be concluded that there is a programming fault justifying a full re-programme, since external electrical fault is more likely than programming fault to be the cause, whereas the latter believed the reverse to be the case. Mr Ramsbottom also believes that if it is a programming fault it would be far more sensible and economic simply to rewrite the programme from scratch rather than to attempt further investigation to seek to ascertain the problem; I did not understand Mr Poole to disagree with that as a sensible economical proposal if it could be shown that the problems were being caused by some programming fault.
151. In my judgment Mr Ramsbottom has failed to demonstrate on the balance of probabilities that there are or may be such fundamental problems with the programming as would justify this full reprogramming exercise.
152. The immediate difficulty which Mr Ramsbottom faces is that there is no reason to think that there are any problems due to the programming undertaken by the former employee AB. That is because, as Mr Hall confirmed, Ultimation took the decision not to make any use of AH's programming, so that it started the programming exercise again from scratch. Although Mr Hall also confirmed that Ultimation had used the original information produced by AH as to the system layout in order to create schematics and begin the programming process, there is no evidential basis for suggesting that this might be a cause of the problems being experienced. Ultimation is a highly respected Crestron approved programming company and Mr Ramsbottom was unable to suggest any particular reason for considering that it might have undertaken the programming exercise so deficiently as to result in fundamental problems.
153. Mr Ramsbottom accepted Mr Poole's opinion that unless one was present at the property and connected to the system at the point when a fault occurred it was difficult if not impossible to understand the cause of the fault and, in particular, whether it was due to a programming fault or due to a power outage or even due to occupier error. Of course, the problem is that since these faults are intermittent and unpredictable, in the real world it would be impossible for either of these two experts to secure live access at such a time.
154. Although Mr Ramsbottom complained that it had not been possible for him or his programming colleagues to satisfy themselves that the programme as installed on the system at the property was the same as the system to which they had been afforded remote offline access, I did not find his explanations particularly convincing and preferred Mr Poole's evidence that sufficient access had been provided to reach a clear opinion as to the absence of faults and – as he said – the only further access which would assist in providing as definitive answer would be live access at the time of a fault. I was not satisfied that Mr Ramsbottom and his colleagues had not been afforded sufficient access to the system to enable them to undertake the same investigations and reach the same conclusions as Mr Poole. If he had believed that without significantly enhanced access he was unable to offer a proper conclusion then, whilst I accept that the timetable for expert evidence was truncated, it would have been possible for him to ask the defendants' solicitors to write accordingly and in default of agreement make a further application to the court seeking further access.
155. I accept that there is a question mark over what is causing what the defendants would describe as the non-random curtain and lighting events which are clearly causing them such disturbance and distress. However the difficulty for the defendants is that even on their case there is clearly a random element to these events and, as Mr Poole said, it is difficult to see how a fault in the programming could be responsible for changes to a non-random pattern without some external influence. It would not be entirely surprising if the defendants' frustration at these events had led them to search for patterns which in fact are not present, and as I have said on Mrs Entwistle's own evidence the current position is one of more random events. I do not therefore consider that this alone is sufficient to persuade me that there must on the balance of probabilities be a programming fault which is causing the problems.
156. Moreover, Mr Ramsbottom also accepted Mr Poole's opinion that it would have been sensible to rule out the possibility of power outage by providing an UPS (uninterruptable power supply) to the property to see whether that resolved some or all of the problems. Indeed he went further and said that his practice recommended that an UPS be installed whenever and wherever it supplied and installed an ITS for a customer. It is a matter of surprise to me that the defendants have so resolutely refused to do the same in this case, in circumstances where the claimant has through its solicitors made such proactive steps to persuade them to do so as a means of seeking to resolve this issue. Indeed in December 2014 the claimant's solicitors made a further alternative proposal that the parties should jointly instruct an electrical engineer at joint expense to inspect and provide a report on a non-binding basis as to the likely cause of the problems and the remedial works. The defendants were unable to give any sensible explanation for their failure to agree to this solution; it is clear that they were convinced that the problem was due to the claimant and were not prepared to countenance any alternative.
157. The fundamental difficulty this poses for the defendants' case in my judgment is that it is impossible for me to be satisfied on the balance of probabilities that the problems experienced by the defendants are due to programming problems justifying a complete reprogramming when the defendants have failed to establish by convincing evidence that what is on any view and at the very least an equally likely cause of power outages is not in fact causing the problem. The defendants have not adduced compelling evidence, whether by demonstrating that the problems continue even after an UPS is installed, or by evidence either from the electrician they instructed, or from an electrical expert, or from Mr Ramsbottom, which satisfies me that some electrical fault is not as least as likely as some fault in the programming. It is not suggested by Mr Ramsbottom that the cost or other implications of providing an UPS justify proceeding directly to the reprogramming option. If the defendants had undertaken this exercise and discovered that it did not make any difference so that their case that it was a programming problem was established, they would undoubtedly have been able to recover the cost of providing an UPS or of obtaining an electrician's report as a reasonable mitigation exercise.
158. It follows, I am satisfied, that the only remedial work which is necessary is that identified by Mr Poole. I am satisfied that it is remedial snagging type work which was included for in the claimant's quotation, so that there is no reason why it should not have been done prior to this litigation and prior to this trial. I do however accept that the principal reason why it was not done was the defendants' insistence that limited fixes would not resolve the problems of which they complained and that a full re-programme was necessary. On the basis however that the claimant was entitled to do the work, and there will be some overhead and profit element to the cost, I assess the saving on a rough and ready basis (and I appreciate without express evidence, but doing the best I can to produce a fair result as between the parties) as being 25%. I accept Mr Poole's estimate of 5-7 days' work for an engineer and a programmer, and his costings range (although I take his £350 engineer's day cost as the rate he agreed was appropriate in relation to claim item 4 above). I allow 6 days at £350 and £500 per day respectively, thus £5,100 plus VAT, total £6,120, less 25%, £4,590, which is the amount I award the defendants under this head of counterclaim. In his note produced post draft judgment Mr Connolly submitted that the claimant ought to be permitted to undertake this work itself at its cost and, if the defendants are not prepared to permit this, then there ought to be no monetary award. He also submits that a 25% deduction is too low because it does not reflect the fact that the work cost would form part of their overhead anyway. I do not accept these submissions since: (a) for the reasons given in paragraph 159 above this is not defects liability period work; (b) it is not unreasonable for the defendants in the circumstances of this case not to wish to allow the claimant to seek to undertake these works; (c) the claimant has never put forward a positive proposal that it be allowed to do these specific items of work at its cost in the period post-contract – these admissions have come largely as a result of the involvement of Mr Poole as its expert; (d) since there is no evidence from the claimant – or no evidence which I accept – that is has the in-house expertise to undertake this re-programming work in relation to programming work undertaken by Ultimation, there is no proper evidential basis for the submission that the cost of re-programming would be absorbed by its existing overhead – by which I assume it means its fixed labour costs; (e) the submission that it would be covered by its existing overhead also assumes that its existing labour has spare capacity to undertake this work at no extra cost to the claimant.

Keypad engraving

159. It is common ground that this work formed part of the quotation and was included in the price of £29,500 which the defendants have already paid. It is also common ground that it would be work which would be done at the end of the works, once the defendants had begun using the system and with the benefit of that experience made their final decisions as to which button in which keypad would control which function.
160. There was some investigation in the course of the trial as to whether the defendants had failed to reach a clear decision within a reasonable time as to their requirements in this respect, which explains why the claimant had not undertaken this work. Without going into the minutiae of the correspondence, it is reasonably apparent that the defendants' position was that until the problems of which they were complaining were resolved it was premature to do so. However in terms of programming I have expressed myself satisfied that all that is required are relatively modest fixes and there is no suggestion that it would be necessary to allocate different functions to different buttons as a result. It follows in my view that it cannot be said that the claimant is or has been in breach of contract in this respect.
161. The question arose at trial as to whether or not the defendants would be happy for the claimant to undertake this work even at this late stage. Perhaps not surprisingly the defendants' position was that once the re-programming they considered necessary to be done was done they would prefer the company undertaking the re-programming to arrange for the keypad engraving so that there could be no risk of crossed wires. As I have understood the evidence, the engraving itself would be undertaken not by the claimant itself in any event, so that the defendants' only justification would be the concern, which they expressed, about responsibility if any mistakes were made.
162. Although there is no obvious reason why the claimant should not undertake this process, and certainly no reason why the defendants should be entitled to recover any greater cost than would be incurred if undertaken by the claimant, on the evidence before me this debate is academic anyway, since there is no evidence from anyone that the cost would vary depending on whether or not it was undertaken by the claimant or any other company. This is not a case where the claimant can say that it would only cost it "£x" to undertake the work in-house at costs, whereas it would cost a much larger amount for the defendants to procure it from a third party. Moreover, the experts were agreed as to the estimated cost of £5 per button, with 480 buttons, thus amounting to £2,400.
163. In my view the defendants are entitled to a credit for the saved cost of this work. On the same basis as above that leads to a discount of 25% or £600, so that £1,800 is the amount the defendants are entitled to under this head. In his responsive note to Mr Connolly's post draft judgment note Mr Charles suggested that the evidence was that the £2,400 was purely the charge which the claimant or any other contractor would incur from Crestron and pass on to the defendants, so that there was no justification for applying a 25% discount in this case. However whilst I agree - and have already recorded at [182] above - that my understanding of the evidence was that the actual engraving would be undertaken by a third party, it was not my understanding of the evidence that it was common ground that the £2,400 only represented the direct cost of that work, so that there was no margin. Thus I maintain my decision to reduce the claim by 25%%.

Redecoration

164. The defendants' case was that the claimant was responsible for leaving the rooms in an unsatisfactory state, and that as a result they had to have redecoration undertaken in 2012 to a number of rooms due to their state in a total amount of £2,968 plus VAT, as appears from the invoice dated 31 October 2012 at [3/411]. The supporting detail is at [3/509], and shows that 8 rooms have been re-emulsioned due to "dirty marks from other trades, plaster patching, pencil lines from curtain fitters, settlement and heating cracks".
165. John Thompson was prepared to accept that some marks were caused by the works undertaken by the claimant and its subcontractors. He made the point that it was not entirely the claimant's fault, since they had to undertake this work out of sequence through no fault of their own. Mrs Entwistle was more critical of the claimant's workmen for failing to take reasonable precautions. In my view there is some truth in both positions. Moreover, it is clear from the supporting detail that the need for the work cannot by any stretch of the imagination have been said to have been wholly due to the claimant. In my view this supports John Thompson's assessment that a reasonable apportionment of the cost for which the claimant should be held responsible was between £500 and £1,000. In my view that was a reasonable assessment, but given that I have already concluded that he was inclined to adopt a position in his evidence supportive of the claimant's position overall I take the higher figure and award £1,000 plus VAT, total £1,200.
166. Mr Connolly noted that the invoice was addressed to the defendants' limited company and queried whether or not the loss could be said to have been suffered and hence recoverable by the defendants, but I accept their evidence that it was simply allocated to their directors' loan account for convenience, so that they have incurred a genuine cost and liability sufficient to allow them to recover this sum.

Other matters

167. There were a number of other counterclaim items which the defendants sought to raise on the first day of trial but, having heard full submissions as to whether or not they were pleaded and if not whether or not it would be just to allow amendment for them to be raised given the state of the evidence, I ruled that the defendants should not be permitted to raise those items. There were also certain allegations made in the Defence to the effect either that certain items supplied by the claimant was either defective (Defence ¶12, 16, 19, 22, 36) or that the claimant had caused damage during installation (Defence ¶16, 36) and there was also a list of defective work at ¶48 comprising 48 separate items. The substantial allegations are addressed above in relation to the individual invoices or counterclaim items. The remainder were not pursued in closing submissions and did not feature in the closing schedule produced by Mr Charles. That is either because the experts did not substantiate them or because there was no pleaded case or evidence to substantiate an award in relation to those items, whether by way of set off against individual invoices or by way of counterclaim.

Payments

168. It is common ground that payments totalling £66,265.37 have been made which are relevant to the current accounting process – see the closing schedule produced by Mr Charles with the £10,000.42 invoice 5164 deducted.

Conclusion

169. Assuming my calculations are correct, the end result of the above is as follows:

Item no	Item (claim / counterclaim)	Amount allowed (£)	Subtotal / total
	Claim invoice
1	6147	0
2	6114	475.58
3	6562	0
4	6608	0
5	6585	9,651.76
6	6615	0
7	6616 / 6795	-374
8	6814	10,589.22
9	6815	3,240
10	6598	0
11	6817	0
12	6946	8,000
13	6947	11,502
14	6948	13,566
15	6949	4,020
16	6950	1,380
17	6951	82.08
18	6941	1,035.04
19	6942	0
20	6956	0
21	6957	0
22	6958	720
23	7014	0
24	7019	0
25	7020	4,045.50
26	7021	492
27	7030, 7031, 7032	0
28	85371	0
	Total due to the claimant on claim		68,425.18
	Payments made by the defendants		-66,265.37
	Net amount due to the claimant		2,159.81
	Counterclaim items
1	Cinema screen (taken into account in claim item 14)	0
2	Head end AV rack	-3,804
3	Underfloor heating sensors	-7,406.40
4	System software	-4,590
5	Keypad engraving	-1,800
6	Redecoration	- 1,200
	Total due to the defendants on counterclaim		-18,800.40
	Balance due to the defendants		£16,640.59

170. It follows that although the claimant succeeded as to the modest amount of £2,159.81 on its claim since the defendants have succeeded on their counterclaim and are entitled to set off the counterclaim against the claim they are entitled to recover net damages in the sum of £16,640.59. Although Mr Connolly made a point in his closing submissions as to the level of fee paid by the defendants on filing the counterclaim, given my conclusions I do not understand that this is a relevant issue.
171. As to interest, following circulation of my draft judgment the parties very sensibly acceded to my suggestion to avoid adding to the cost of this case by raising arguments about what would at best be modest entitlements to interest on claim and counterclaim items, so that I need not address that issue in this judgment.

Note 1    Short for heating, ventilation and air conditioning.    [Back]