Construction News

Thu February 20 2020

Related Information

For goodness' sake, get it in writing

14 Jan 11 The claimant contractor claimed £1,226,552.45 damages plus interest allegedly sustained as a consequence of breaches of contract by the defendant, a development company, or alternatively, a quantum meruit for work carried out for the defendant.

The claimant built a number of houses for the defendant under a series of contracts between 2004 and 2005. None of the contracts were committed to writing, and the parties had what the court described as a “fluid” relationship.

 A Mr. Clegg, a quantity surveyor, was initially engaged by the claimant to prepare documents setting out the rates at which the claimant was prepared to work. These were described as being somewhere between a Bill of Quantities and a schedule. Because the defendant required an “open book” policy with those it worked with, the defendant had access to all the relevant data and documents which showed the basis upon which these rates were arrived at.

 The houses which were built were of the same design which enabled the defendant to pay the claimant in stages. Usually, there were five stages per house. There were regular site meetings, after which the claimant would issue the defendant with an invoice. Everything went swimmingly until Autumn 2006, when the parties’ relationship ended. The claimant alleged that the defendant had unjustifiably failed to make a payment of £350,000, and because of this its own cheques paid to subcontractors had not been honoured, compelling it to enter into a creditors’ voluntary administration. The defendant maintained that the claimant had been in financial difficulties for totally different reasons, and it had been approached by the claimant on a number of occasions seeking help with its cash flow.

 The claimant alleged a number of breaches of contract by the defendant:

 It had failed to comply with an agreement reached in or about April 2004, that there would be an annual uplift of 10% to the claimant’s rates for building the houses and for the site development works from Spring 2005;

 It had failed to comply with an agreement that the claimant would receive a “handling fee” in respect of white goods, including fireplaces and other materials whose installation had to be supervised by the claimant.

The judge remarked on how the parties’ relationship had been so amenable during the “years of plenty”, but how they should have realised that the conducting business in this way would be a recipe for disaster. Listening to Mr. Simms’ evidence, the judge said that he got the impression that he had been keen not to rock the boat by concluding negotiations and establishing firm agreements over things such as variations. The judge felt that Mr. Simms had been influenced by having had the opportunity to work on so many sites in a rising market whilst receiving substantial payments on account. It should be recognised that there was a need for certainty in working commercial relationships.

As it was, the burden was on the claimant to prove its claims on the balance of probabilities. The judge concluded that the claimant had failed to prove its claim that there had been an agreement that there would be an annual 10% uplift in building costs. The judge did not accept that Mr. Simms negotiated an across the board increase in building costs to £41.20 per square foot with Mr. Scott, the defendant’s Managing Director, in or about April 2006, that such an increase was made retrospective to April 2005 and was fully paid. That claim was rejected by Mr. Johnston, the defendant’s contracts/ construction manager, who was called as a witness in support of the claimant’s case, and who was referred to by the claimant as being a man who was “straight down the line.” For the same reason, the judge rejected the similar claim in respect of the site development costs.

Related Information

In the judge’s view, the agreement between Mr. Simms and Mr. Johnston relating to handling charges was limited to a fixed figure of £100 in respect of white goods only.

 

Simms Construction Ltd. v G. R. Homes Ltd.; 2 December 2010, [2010] NIQB 128

  

Special offer 

Save £10.00, plus Free UK Postage on the forthcoming edition of “Coulson on Adjudication”, the new edition of the best selling book on adjudication. Click Here to Read More.

Also in this week’s subscription bulletin

Got a story? Email news@theconstructionindex.co.uk

MPU
MPU

Latest News

Click here to view more construction news »