Scottish Court of Session Decisions

The pursuer is in part-time employment as a civil servant. She has a daughter born at about the beginning of 1997. She has little practical experience of the building trade. The pursuer's husband, Andrew Hunter, has been engaged in that trade for more than twenty years. For some three or four years ending in 1994 or 1995 he traded as a builder on his own account. He ran into financial difficulties and was ultimately sequestrated. He remained an undischarged bankrupt until March 1998. While Mr Hunter was still undischarged, the pursuer began trading as a builder under the style Allbuild Building Services ("Allbuild"). Banking services were provided by the Bank of Scotland at its Dalkeith branch where the pursuer had a number of accounts, including a business account in the name of Allbuild. The pursuer on occasion provided typing services for the business. However, its day to day practical operations, including the arrangement and the execution of its building contracts, were carried out by Mr Hunter who was the pursuer's sole employee. Building work was performed by the engagement of sub-contractors, commonly individuals, who were engaged for specific tasks. It is not disputed that all material actings by Mr Hunter in relation to the issues arising in this action bind the pursuer.

In 1996 the second defender and her husband, the now deceased Thomas Moffat, lived at Arden House, Musselburgh where the second defender operated a bed and breakfast business. Mr Moffat died in September 1998; his trustees and executors are now the first defenders in this action. Mr Moffat had prior to 1996 been engaged in a number of business activities in the course of which he had become familiar with building operations. He was also, as at late 1996, the owner of two pieces of ground which had potential for development, one at Monktonhall and the other behind the High Street in Musselburgh. It is not disputed that all material actings by Mr Moffat in relation to the issues arising in this action bind both the second defender and the first defenders.

The Moffats also banked with the Bank of Scotland at its Dalkeith branch. As at late 1996 their accounts with the bank in respect of the bed and breakfast business at Arden House and in respect of a furnishings business previously operated in Musselburgh were substantially in overdraft. Mr Moffat had from about 1995 experienced cardiac problems which restricted his working capacity. Mrs Moffat was suffering from asthmatic problems. By late 1996 consideration was being given to how those business debts might be reduced or eliminated. The piece of ground at Monktonhall had planning permission for the erection on it of a single dwelling house. Subsequently an application was submitted for permission to erect two semi-detached dwellinghouses. Mr Moffat contracted with a Mr Chapman for the sale to him of that ground but Mr Chapman failed to complete the bargain. In those circumstances Mr Moffat gave consideration with Mr Beswick, the Business Lending Manager at the Dalkeith branch, to a "work out strategy" for the Moffats' debts which would involve Mr Moffat developing the site at Monktonhall by the erection there of two dwellinghouses, selling them on completion, using the profit generated by those sales to carry out a housing development on the Musselburgh site and selling the houses completed there. In that context Mr Beswick mentioned to Mr Moffat the name of Allbuild as a building enterprise with appropriate expertise of the type of construction work envisaged at Monktonhall, namely, the erection of prefabricated timber ("kit") houses. Mr Beswick did not draw to Mr Moffat's attention that Mr Hunter was an undischarged bankrupt.

Some time thereafter (probably early in 1997) there was passed to Mr Hunter via Mr Beswick a series of drawings which had been prepared for the proposed Monktonhall development. Mr Moffat's architect was a Mr James Marshall. A letter on Allbuild stationery, dated 7 March 1997, typed by the pursuer and signed by Mr Hunter, was sent to Mr Marshall. It was in the following terms:-

Mr Hunter testified that he had been asked to give "costings" and that the "total cost" of £96,000 referred to in that letter included builder's profit - in effect, an indicative price (to the client). It was so understood by Mr Moffat and Mr Marshall. It was regarded by them as unacceptably high.

At a meeting held at the bank's premises at Dalkeith on 14 March 1997 and attended by the pursuer, Mr Hunter, Mr Moffat, Mr Marshall and Mr Beswick there was discussion about the financial basis for the Monktonhall proposal. It is reasonably clear on the evidence that various possible arrangements between the Moffats and Allbuild were discussed, including an arrangement whereby Allbuild would carry out the construction on a "cost" basis, being remunerated by a "fee" payable on the sale of the completed houses. The cost basis itself included a number of possible options dependent on the treatment of VAT. As goods and services to be supplied by Allbuild were largely, though not wholly, zero-rated and as Allbuild was registered for VAT purposes, Allbuild would be able on making its VAT returns to reclaim any VAT charged to it by its suppliers for goods or services ultimately used for the development. The retention by Allbuild of such reclaimed VAT was discussed as a possible component of Allbuild's fee.

There is an issue as to whether or not agreement was reached at this meeting on the financial provision for Allbuild in the event of this proposal for the Monktonhall site proceeding and, if so, what that agreement was. The only nearly contemporary written records of what occurred at the meeting are a file note dictated by Mr Beswick shortly thereafter and an application, with related appendices, dated 24 March 1997 prepared by Mr Beswick for submission to his head office with a view to authorisation of an advance to Mr and Mrs Moffat in connection with this proposal. Each of those documents contained a table which included a figure for "Build Costs" at a specified figure and an entry "Builder's Fee (payable on sale) £10,000". In each case the table brought out as its final entry "Net profit to T.R.S. Moffat £38,100". In the first document the table appeared in an appendix to which reference was made in the body of the document by the words "Projected income and costs have been submitted and are detailed on the attached appendix". In the second document the table appeared in an appended report under the heading "Viability"; immediately after that table in the second document appeared the words - "It has been negotiated with the builder that any VAT payable will be reclaimed and retained by the builder as a component of the fee".

Mr Beswick in giving testimony as to what occurred at that meeting was heavily dependent on those records. He sought in evidence to distance himself from the particular terms of any agreement between the parties, insisting that those were a matter exclusively for them. Mr Hunter maintained in evidence that, while various options were discussed, the meeting had ended with an agreement that a fee of £15,000 would be payable to Allbuild, the incidence of VAT apparently being ignored. The pursuer's testimony in this matter was not wholly consistent but the burden of it was that £15,000 by way of fee had been agreed, Mr Moffat's assent to that being with the words "I can live with that". Mr Marshall's evidence was to the effect that, after discussion of the various costs, it was accepted that a "performance payment" to the builder of £10,000 would be economically feasible with the builder reclaiming and retaining the VAT; the amount of that retention being estimated at about £4,000-£5,000, there would in effect be a total return to Allbuild of about £15,000. There was, of course, no evidence direct from Mr Moffat.

I shall have certain general observations to make later on the credibility and reliability of witnesses. Taking into account those general views as well as the particular factors referred to in this paragraph, my conclusion as to the meeting in March is that, while no firm bargain was entered into, there was a general accord that a working relationship in the nature of a joint venture would be possible between Allbuild and the Moffats for carrying through the proposed development. The return to Allbuild for its services was anticipated to be in the order of £15,000 but it was not settled that it would be in the form of a fixed sum in that amount. Although I have some doubts about the accuracy of certain aspects of Mr Beswick's notes (and he himself acknowledged in evidence that some matters were imprecisely expressed), I have no reason to doubt that those notes fairly record the general result of the discussion at this meeting. Mr Beswick had an interest, as the banking official immediately concerned with the funding of any proposal, to record the general scheme of its anticipated financing. I accept the evidence provided by those nearly contemporary records, in substance confirmed by the testimony of Mr Marshall, that Allbuild's return was anticipated as being partly by payment of the sum of £10,000 (on sale of the completed houses) and partly by recovery of VAT. The prospect of further work at Musselburgh was also an incentive to the builder. In so far as the evidence of the pursuer and of Mr Hunter as to what occurred at this meeting is to a different effect, I reject that evidence as not being reliable. I am accordingly unable to hold, as Mr Ross for the pursuer urged me to do, that at that meeting a firm agreement was reached between Allbuild and the Moffats that Allbuild would receive a fixed fee of £15,000 for its services in relation to that proposal.

The planning application for the erection of two dwellinghouses at Monktonhall was as at 14 March still outstanding, although it was expected to be granted shortly. Application for a fresh building warrant had yet to be made, though a fairly prompt submission and decision were expected, the substantive proposals having been submitted the previous year when a third party had been expected to acquire the site. The parties appear to have left the March meeting on the basis that matters would be taken further once the appropriate consents were in place.

In about April 1997 Mrs Moffat was admitted to hospital with asthmatic problems. At about this time she and Mr Moffat decided that, in view of health difficulties, it was not practicable to continue to operate on a long term basis the bed and breakfast business at Arden House. In discussion with Mr Beswick it was decided that the proposed development of two houses at the Monktonhall site would be given up and that, in its place, the earlier planning permission for a single dwellinghouse on that site would be implemented. That dwellinghouse was also to be of prefabricated timber construction. The intention was that on its completion the Moffats would occupy that house as their home, Arden House and its business being in the meantime sold. The plan ultimately to develop the site at Musselburgh was not, however, given up. It was hoped that the property at Monktonhall, once developed, would provide sufficient equity to allow borrowing to fund the Musselburgh project.

The pursuer and Mr Hunter learned of this change of plan in April 1997 at a meeting with Mr Beswick held to discuss their own banking arrangements. Mr Beswick suggested that Mr Hunter make contact with Mr Moffat and he gave to him Mr Moffat's telephone number. Mr Hunter telephoned Mr Moffat that evening when he was asked to go round to Arden House to discuss matters. Mr Hunter did so.

There is a conflict of evidence as to the timing and content of various meetings at Arden House attended by, at least, Mr Hunter and Mr Moffat. Three meetings there are of potential importance, though there were probably more encounters at Arden House over the period between about mid-April and the start of work on site early in June. Although Mr Hunter's evidence was that Mr Marshall was present at all three meetings, I prefer the evidence of the latter that he was not at the first meeting but was at the second. It is possible that he was also at the third.

At the first meeting Mr Moffat handed to Mr Hunter plans which had been prepared some time earlier by Mr Marshall for the single house development. This meeting can be dated as occurring shortly before to 17 April 1997, being the date of a quotation sent to Allbuild by the manufacturer of the timber frame house. That quotation had been obtained by Mr Hunter as a result of a request made by Mr Moffat at the first meeting. Mr Hunter was also at that meeting requested by Mr Moffat to provide other financial information in relation to the construction of the dwellinghouse. Mr Hunter testified that Mr Moffat wanted "net cost, excluding VAT and any monies to Allbuild". That request was not expressed in writing nor was any contemporary note made of its terms; it is unclear from Mr Hunter's evidence whether he was asserting that Mr Moffat had used those words in conversation or that this was what he (Mr Hunter) took to be Mr Moffat's requirement. Mr Moffat was, of course, not available himself to speak to it.

I am unable with confidence to make a finding as to what precisely were the terms of Mr Moffat's request. However, in furtherance of it, Mr Hunter prepared, and the pursuer typed, a document on Allbuild stationery. It comprised a single sheet and was dated 9 May 1997. It was headed - "BREAKDOWN OF COSTING FOR BUILD AT MONKTONHALL". It then listed twenty seven items with a figure opposite each item. At the foot appeared the words "TOTAL COSTING" against which was the figure "£74,956", being a summation of the itemised figures. The first item on the list was "Kit Price (ecl VAT)" against which appeared the figure £18,716, being the figure quoted to Allbuild in the manufacturer's quotation dated 17 April. The next thirteen items appear to be in respect of materials. The individual figures against them are rounded to at least the nearest tens of pounds. They range from "D.P.C's - £90" to "Central Heating - £3,000". Those items are followed by five items, a kitchen, three bathrooms and a cloakroom, against which figures of £4,000, £2,000, £1,500, £1,500 and £1,000 are put, each in parenthesis. The remaining nine items appear to be for elements of labour with round figures inserted against each.

It seems likely that this document was delivered by Mr Hunter personally to Mr Moffat on the evening on which it was prepared and typed. There is a conflict in the evidence as to whether or not the meeting at which it was considered by Mr Hunter and Mr Moffat in the presence of Mr Marshall was held that same evening. I prefer on this matter the evidence of Mr Marshall who testified that, prior to the meeting he attended, he had spoken by telephone with Mr Moffat about the contents of the Allbuild costing. I conclude that Mr Hunter handed in the document on the evening of 9 May but that the meeting at which it was discussed occurred shortly, perhaps a few days, after that date. I shall refer to that meeting as "the second meeting".

What occurred at the second meeting is of crucial importance to the outcome of this case. Mr Hunter initially testified that in the course of it he had stated to Mr Moffat that "Allbuild's fee would stand as before" and that Mr Moffat had agreed to that; he later testified that he (Mr Hunter) had said that "it would be £15,000 as the site was still as big" and that Mr Moffat had not objected. In cross-examination he insisted that at that meeting there had been a verbal agreement with Mr Moffat that Allbuild would charge a fee of £15,000 ("the same fee") and that Mr Moffat would pay it. Mr Hunter's evidence was accordingly to the effect that at that meeting he had specifically raised with Mr Moffat that Allbuild, in addition to being paid the figure brought out in the document of 9 May, would be paid a fee and that that fee would be £15,000. Mr Marshall's evidence was to a directly contrary effect. He testified that Mr Moffat specifically raised with Mr Hunter whether the figure brought out in the document dated 9 May included Allbuild's profit and was assured by Mr Hunter that it did. He denied that there had been any mention of a fee or of £15,000 (whether as a figure or by reference to any earlier arrangement).

Resolution of this issue requires an evaluation of the credibility and reliability of Mr Hunter and of Mr Marshall. However, before attempting that exercise, I consider it appropriate to address certain other aspects of this meeting and also certain later events.

It is clear that at this meeting Mr Moffat introduced additional elements into the scope of the proposed work. The site at Monktonhall was situated very close to a railway line which made it necessary to install extra noise insulation in the structure and double and triple glazing in the windows. Mr Moffat also wished changes made to the front door and its frame and to internal doors. Those changes necessitated Mr Hunter seeking a revised quotation from the timber frame manufacturer. The revised quotation, in the total sum of £19,597, was submitted by the manufacturer to Mr Hunter on 11 June. The materials comprised in the revised specification were ultimately delivered and incorporated in the house. Mr Moffat also wished an increase in the size of the skirtings. He proposed to have a conservatory built for which he wished Allbuild to lay the foundations and to construct dwarf walls. The garage to be constructed was to be double walled rather than single walled and to have a different roof construction from that shown on the original drawings. Various other matters were also raised including slab-laying, fencing, landscaping, a gas fire and ornate cornices, though there is a conflict in the evidence as to how some of those were dealt with contractually. It is possible that some of those last matters were first raised or were further discussed at a third meeting held shortly thereafter at which a new boiler was specified. There were also changes made at Mr Moffat's request during the construction phase. However, although new matters were raised at the second meeting and there is a dispute as to how some at least of them were resolved, there seems no doubt that, by the end of that meeting, agreement had been reached between the parties that Allbuild would carry out the construction work for the single dwellinghouse. Moreover, on the evidence it is difficult to avoid the conclusion that agreement was then reached on the basis for payment. The issue is what basis of agreement was, on the acceptable evidence, then agreed.

Work began on site during the first week of June. Within a week or so thereafter Allbuild submitted to Mr Moffat an application for payment of £3,137.37. That sum was, following a meeting on site, paid by cheque on 12 June. There was no express provision in the contract for stage payments. There is a dispute as to the basis on which this payment and certain subsequent payments were made. Mr Marshall's position was that, in accordance with general practice in building contracts of this kind, payments would normally be made at certain stages, the first payment stage being when construction had reached floor deck level. That stage had not been reached when the first application was made and Mr Marshall advised his client not to pay. He later understood from Mr Moffat that the latter had in fact made payment because he (Mr Moffat) had been told by Mr Beswick that, unless Allbuild was paid weekly, the bank would not honour cheques drawn in favour of its suppliers. Mr Beswick denied having ever made any such statement to Mr Moffat, which he maintained would have been unprofessional. Mr Hunter asserted that the application was made and met because the contract was a "net cost plus" basis, entitling Allbuild to payment weekly of costs incurred by it.

Between about 26 June and 15 August seven further applications for payment were made and met. Although a large number of documents were lodged in process, there was no attempt in the course of the proof to link in the evidence the amount of any application made with the net amount incurred by Allbuild to its date i.e. the amount incurred by it under deduction of any VAT charged but reclaimable. In those circumstances there is no documentary support for the assertion that those payments reflect a pre-existing agreement that Allbuild would be paid on a net cost plus basis. Nor is it suggested that the contract was varied to such a basis after construction work had begun. Those payments are on the acceptable evidence consistent with payment having been made periodically to account of a contract price. They were so understood by Mr Marshall. It is unnecessary to decide whether or not Mr Moffat was put under any pressure by Mr Beswick to make payment to Allbuild more frequently than he otherwise might. There is no doubt that Allbuild's financial position was such that, notwithstanding it enjoyed a measure of trade credit, it would have been in serious difficulty if it had had to stand out of monies for any significant time. By 26 June Mr Beswick was reminding Mr Hunter that the bank should be placed in funds either prior to or simultaneously with the issue of cheques on its account. Its financial position earlier that month appears, from the relative bank statements, not to have been significantly healthier. Had Mr Moffat insisted on paying only at the stages advised by Mr Marshall, there was every prospect that Allbuild would not have been able financially to continue. Mr Moffat, who had contracted or was shortly to contract to sell Arden House and who may from one source or another have by this time acquired an appreciation of Allbuilds' financial situation, was no doubt anxious that the provision of accommodation for himself and his wife at Monktonhall should not be delayed.

The initial payment and the seven next payments totalled in amount a sum in excess of £76,000. In addition, the Moffats had paid directly to suppliers for various items, including kitchen and bathroom equipment and furnishings. Allbuild shortly before 18 August made a further application for payment, on this occasion in the sum of £15,000. Mr Moffat declined to pay it. In the event, a meeting was convened at Mr Beswick's office at Dalkeith on 20 August. In attendance, as well as Mr Beswick, were the pursuer, Mr Hunter, Mr Moffat and Mr Marshall. Although Mr Beswick's files include a note indicating that such a meeting had been arranged, no note of what transpired at that meeting was before the court. There is a conflict in the evidence as to what occurred. The pursuer and Mr Hunter gave evidence to the effect that, among other things discussed, was the matter of a fee of £15,000 to Allbuild and that Mr Moffat did not dispute that such a fee was payable. Mr Marshall testified that no question of a fee was raised at that meeting, it being concerned with the level of costs incurred and whether or not Mr Moffat should pay Allbuild's most recent application for £15,000 in respect of contract works. According to Mr Marshall, Mr Moffat's position at the meeting was that he was not prepared to meet that application, although, following a private discussion between Mr Moffat and Mr Beswick, Mr Moffat told him (Mr Marshall) that he had been persuaded that he should make the payment, as was subsequently done. Mr Beswick testified that he had no recollection of this meeting.

I have come to the conclusion that on this aspect also Mr Marshall's evidence is to be preferred to that of the pursuer and of Mr Hunter. A primary object of the meeting was to consider and hopefully to resolve what was to happen concerning the outstanding application for payment. As it happened, the amount of that application was the same as the sum which the pursuer contends was the fee agreed in May. On any view, that fee would not have been payable until the contract work was complete. As at 20 August it was still incomplete, albeit reaching its final phases. While £15,000 was undoubtedly referred to, at least the main focus of discussion was that sum as contained in the recent application. I am unable to accept that anything said by Mr Moffat at that meeting can be taken to have been an acknowledgement by him that Allbuild was entitled to a fee of £15,000.

The application for payment of £15,000 for contract works was met on 28 August. By the latter part of that month relations on site, where Mr Moffat acted in effect as his own clerk of works, were very poor. Ultimately and before work was fully complete, Mr Moffat on 4 September refused to allow Mr Hunter or the men engaged by Allbuild on to the site. Work under the contract accordingly then terminated.

Against that subsequent history it is appropriate to return to the second meeting in May. I have already had occasion to consider particular events as to which there has been a conflict of evidence. In general, where there has been a conflict between them, I have preferred the evidence of Mr Marshall to that of the pursuer and of Mr Hunter. I have done so partly because of the probabilities attending such events and partly because of the general impression I formed of those persons as witnesses.

Mr Marshall gave his evidence in a clear and cogent manner. Although initially he had some difficulty with dates, he had a firm grasp of the order of events and of their salient features. He was clear and unwavering in his account of what had been raised and agreed at the second meeting in relation to the financial basis of the contract, namely, that Mr Hunter had been asked and had confirmed that the costing made by him included Allbuild's profit. He flatly denied that a separate fee in any form had been raised, far less agreed. To reject this testimony would be to hold Mr Marshall to be an untruthful witness. No sufficient basis was established by the proof which would allow me to do so. Although some reliance was placed on the circumstance that some years ago Mr Marshall was excluded from membership of his professional body for misconduct (a matter to which he spoke frankly in the witness box), there is no ground on which I could properly hold that Mr Marshall was seeking deliberately to mislead the court. He has, so far as was demonstrated, no interest in the outcome of this litigation. His evidence was internally consistent.

There are certain external matters (apart from conflict with the testimony of Mr Hunter and, in so far as material, that of the pursuer) which require to be considered when assessing the credibility and reliability of Mr Marshall. Reliance was placed by Mr Ross on the testimony of Mr Keith Smith, a self-employed joiner who had been employed on site, initially by Allbuild for the erection of the timber house and for certain internal joiner-work and latterly directly by Mr Moffat for the erection of a roof to the conservatory. Mr Smith testified that, while he was erecting that roof, Mr Moffat had told him that Allbuild was to be paid a "bounty fee" of £15,000 at the end of the job. He had, he said, previously on site heard the same figure from Mr Hunter. Although Mr Smith continues to receive work from Allbuild, I saw no good reason on that account to disbelieve him. However, I found it impossible to give significant weight to his testimony. The circumstances of the conversation with Mr Moffat (which must have been in the latter part of August 1997) were not explored in evidence nor was there any explanation of what was meant or understood by the expression "bounty fee"; I am unable to conclude from the evidence that anything was said by Mr Moffat to Mr Smith amounting to an admission by the former that he was contractually obliged to pay to Allbuild a fee of £15,000. There may also be a confusion here with the £15,000 applied for (and ultimately paid) in respect of the contract works - an issue which must have been outstanding at about the time of Mr Smith's conversation with Mr Moffat. More importantly, however, I am unable to hold that what Mr Moffat, who according to the evidence was an unusual and possibly difficult man, may have said in late August to Mr Smith materially affects my assessment of Mr Marshall's testimony as to what occurred in May. Nor am I satisfied that the terms of a report compiled by Mr Beswick on or about 28 May (in which, under a calculation of the viability of the scheme, there is a reference to "Builder's Fee - £5,000" together with a reference to reclaimable VAT) point conclusively to an acknowledgement by Mr Moffat inconsistent with Mr Marshall's testimony. The provenance of the figures in that calculation is far from conclusively established. The level of the fee stated appears, from Mr Beswick's evidence, to have been inserted to achieve a reconciliation of the total of £90,000. The reference to VAT looks like a simple carry forward from the note relative to the previous proposal. Another factor which requires to be taken into account in assessing Mr Marshall's testimony is the content of the document dated 9 May 1997 considered at the second meeting. Some elements in it might prima facie suggest that it was intended to reflect the cost to the builder of providing the relative materials and labour. In particular, "Kit Price (ecl VAT)" is inserted at the price quoted to Allbuild by the manufacturer in its quotation of 17 April. Items are particularised and figures rounded rather than a single tender price being specified. The expression "costing" is used twice. However, Mr Hunter's use of language cannot be said to have been precise. He used the words "costings", "total cost" and "costing" in the letter of 7 March which brought out a figure intended to be a price (inclusive of profit). The circumstance that most of the figures are rounded goes only to these being estimated rather than exactly calculated. It is as consistent with a statement of price as with a statement of cost. All that, in the end, can be said about the significance of this document is that it was ambiguous as to the basis of the figures and would naturally lead to discussion as to what

I am unable to hold Mr Hunter to be a reliable witness on the critical issues in this case. Mr Hunter is afflicted by a speech impediment which made the minutiae of his evidence at times difficult to follow; he also appeared to be somewhat nervous in the witness box. Giving due allowance for those factors, I formed the impression that his demeanour did not suggest a witness able to give a clear and coherent account. The substance of his evidence confirmed that impression. His grasp of historical sequence was seriously flawed. I formed the distinct impression that much of his "recollection" of events was a reconstruction of what he thought must have been said or done rather than actual recall. The documentary material tended to negative the assertion that a fixed fee of £15,000 was agreed at the second meeting. Mr Hunter was in fairly regular contact with Mr Beswick. In a file note of 26 June, following a telephone conversation between Mr Hunter and Mr Beswick, the latter recorded that "An end fee in the region of £10,000 to £15,000 will be payable to Allbuild Building Services on completion of this house". It was only following a telephone call between the same persons on 18 August that Mr Beswick recorded an anticipated building fee of £15,000. In an assessment of viability prepared on or about 28 May in connection with an application for an advance for building purposes to Mr and Mrs Moffat, Mr Beswick had brought into account a builder's fee of £5,000 and had also referred to reclaimable VAT being a component of the builder's fee. The stated sum of £5,000 was, as I have earlier observed, probably no more than the result of a reconciliation of figures; but it remains that there is no broadly contemporaneous documentary material to support an agreement as at May 1997 to pay a fee in the sum of £15,000. Although a figure of that order was indicated as potentially acceptable in relation to the two dwellinghouses proposal discussed in March, the burden of the evidence is that what was then envisaged was that the return would be partly made up by reclaimed and retained VAT. There is force in the submission made by Mr Mure for the defenders that, if what had been raised and decided at the meeting in May had been a cost plus fee basis, there would at that stage have been further discussion as to how the fee was to be composed. There is no evidence of any such discussion. I did not find convincing the unsupported evidence of Mr Hunter that, if Allbuild had been undertaking work other than on a cost plus basis, he would, prior to any commitment, have engaged the services of a Mr MacNeill, an estimator of his acquaintance. There is also a contra-indication, albeit of limited force, in the funding arrangements which the Moffats had made with the bank. Those were for an overdraft facility with a limit of £90,000. Out of that it was estimated that fees and interest in the order of £10,000 would require to be met. If, in addition to those outlays and to building costs of some £75,000, a builder's fee of £15,000 was to have been payable, the facility limit would inevitably have been exceeded.

In the whole circumstances I am unable to accept Mr Hunter's account of the second and crucial meeting in May. In particular, I reject his evidence that he then raised with Mr Moffat and secured his agreement to pay a fee of £15,000 to Allbuild in addition to the costed amount. On the contrary, I accept Mr Marshall's evidence that Mr Moffat at that meeting sought from Mr Hunter confirmation that his costings included builder's profit and that Mr Hunter responded by words which led both Mr Moffat and Mr Marshall to believe and reasonably to believe that they did.

It is unnecessary to determine why Mr Hunter acted in that way. But Allbuild was looking for work and the prospect of a future more lucrative contract at the Musselburgh site no doubt served as an incentive. It may indeed be that Mr Hunter, notwithstanding his actings, somehow harboured a belief or hope that Allbuild would receive a fee for the Monktonhall project along the lines of the earlier proposal. At some stage after work had begun, the pursuer and Mr Hunter prepared an undated proposed contract document which, if accepted, would have entitled Allbuild to a fee of £15,000 payable in two instalments of £7,500. That document was never signed by either party and I am unable to accept Mr Hunter's testimony to the effect that Mr Moffat, on being shown it, simply dismissed it as unnecessary.

I am prepared to accept that when he spoke in October 1997 with Mr Orr, the quantity surveyor instructed by the bank, and when fifteen months later he gave evidence before me, Mr Hunter genuinely believed that he had made a bargain with Mr Moffat which included provision for a fee. On the acceptable evidence, however, I am unable to accept that any such bargain was in fact made. On the contrary, I hold that a contract was made to the effect that the sum referred to in the document of 9 May 1997 constituted the price (inclusive of any profit element) at which Allbuild would execute the works identified in that document. Although Mr Marshall anticipated that the parties' agreement would be reflected in a revised document to be prepared by Mr Hunter (which he did not in the event prepare), that circumstance did not suspend agreement as to the financial basis of the contract. In these circumstances no question arises of parties having entered into a bargain but without an agreed basis for payment having been reached. There is thus no question of there being an entitlement to payment on a quantum meruit basis.

I should add that although the pursuer and the second defender were peripherally involved in the relevant history, neither actively participated in negotiations or was able to give evidence which materially bore on the critical issues. I have already held that in respect of certain matters I felt unable to accept the pursuer's evidence.

It remains to determine the scope of the works which Allbuild, through Mr Hunter, undertook to carry out for the stipulated sum of £74,956. It is agreed that the figures in parentheses were allowances against the related items. It is agreed that provision for the construction of foundations and dwarf walls for a conservatory was included, as was provision for a garage in accordance with the original single leaf/two-roof design. It is also agreed that certain slabbing and paving work was included in that figure. Various other matters were raised in the course of the evidence, such as the provision of ornate cornices, of a gas fire, of fencing (including gates), of certain walls and, for an additional sum, the carrying out of landscaping. I accept Mr Marshall's evidence that the ornate cornices, the gas fire and a small wall between the house and the garage were agreed to be included in the price of £74,956. In the case of landscaping, an allowance of £4,000 was made. Fencing and other boundary provisions were not then settled. The kit frame figure must be regarded as subject to adjustment in light of the improved specification for that item which was requested and subsequently supplied. It appears that a number of other changes were made as construction work progressed; but it is not possible on the evidence led to particularise those with confidence. The arrangements for payment by the Moffats for some items through the contract and for others direct to suppliers of goods and services appear also to have been somewhat eccentric.

The issue in respect of which parties were by the interlocutor of 18 December 1998 allowed a proof before answer was "the parties' contractual relationship as averred on record". My conclusion on that issue is that by a contract entered into in May 1997 the pursuer, trading as Allbuild, undertook to carry out for Mr and Mrs Moffat, for the price (including any profit to Allbuild) of £74,956, the work specified in Allbuild's document dated 9 May 1997, under explanation that the items against which figures in that document appear in parentheses were allowances against those items, that within the said total price there were encompassed materials and labour for the construction of (1) foundations and dwarf walls for a conservatory, (2) a garage of single leaf/two-roof design, (3) slabbing and paving in accordance with drawing 3044-04, (4) ornate cornices, (5) a gas fire and (6) a small wall between the house and the garage and that an allowance (not a fixed price) of £4,000 was agreed for landscaping. Such variations to the scope of the works as were subsequently agreed to and were in the event executed fall to be paid for as such.

The case will be put out By Order on Thursday 4 March 1999 at 3pm to determine further procedure against the above findings.

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