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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Mayhaven Healthcare Ltd v Bothma & Anor (t/a DAB Builders) [2009] EWHC 2634 (TCC) (26 October 2009) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2009/2634.html Cite as: [2010] BLR 154, [2009] EWHC 2634 (TCC), 127 Con LR 1 |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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MAYHAVEN HEALTHCARE LIMITED |
Claimant |
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- and - |
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DAVID BOTHMA TERESA BOTHMA (Trading as DAB Builders) |
Defendants |
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Richard Stead (instructed by Curtis Solicitors, Plymouth) for the Defendants
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Crown Copyright ©
The Hon.Mr. Justice Ramsey :
Introduction
Background
Question of Law
Question 1
If a Contractor under a construction contract breaches that contract by wrongfully suspending the works, does such conduct amount to a repudiatory breach of contract?
"Mayhaven's primary case is that DAB's wrongful suspension of work on 20 July 2006, which was accompanied by a complete clearance of and withdrawal from site, amounted to repudiatory breach.
Alternatively, Mayhaven submits that DAB's entire conduct and breaches of contract up until 20 July 2006, including wrongful suspension, amounted to a repudiation of the contract"
"I would only add that it would be a regrettable development of the law of contract to hold that a party who bona fide relies upon an express stipulation in a contract in order to rescind or terminate a contract should, by that fact alone, be treated as having repudiated his contractual obligations if he turns out to be mistaken as to his rights. Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations. To uphold the respondents' contentions in this case would represent an undesirable extension of the doctrine. "
"DAB issued a Notice of Intention to Suspend on 12 July and suspended work on 20 July 2006.
This suspension was not valid under Clause 4.4.2 as set out previously.
Mayhaven on 20 July 2006, knowing DAB had received the money that they claimed, wrote to DAB's solicitors, bringing the contract to an end on the ground of wrongful suspension.
The Contract Administrator, also was aware that DAB had received the monies claimed and failed to inform DAB
DAB had expressed a willingness to complete the work in their suspension letter dated 20 July 2006
I have considered the matters raised by Mayhaven relating to DAB's suspension being a repudiatory breach and the additional justification set out in paragraph 115A and I find that at 20 July 2006 DAB's action was not a repudiatory breach."
"…there is no magic in the words "fundamental breach"; this expression is no more than a convenient shorthand expression for saying that a particular breach or breaches of contract by one party is or are such as to go to the root of the contract which entitles the other party to treat such breach or breaches as a repudiation of the whole contract. Whether such breach or breaches do constitute a fundamental breach depends on the construction of the contract and on all the facts and circumstances of the case."
"Refusal or Abandonment. An absolute refusal to carry out the work or an abandonment of the work before it is substantially completed, without any lawful excuse, is a repudiation."
"The law requires that there be assessed not only the party's conduct but also, "objectively considered," its impact on the other party.
…
The learned Lord Justice was, with respect, concentrating too much attention on one act isolated from its surrounding circumstances and failing to pay proper regard to the impact of the party's conduct on the other party".
"Short of such an express refusal or declaration, however the test is to ascertain whether the action or actions of the party in default are such to lead a reasonable person to conclude that he no longer intends to be bound by its provisions. The renunciation is then evidenced by conduct. Also the party in default "… may intend to fulfil (the contract) but may be determined to do so only in a manner substantially inconsistent with his obligations" or may refuse to perform the contract unless the other party complies with certain conditions not required by its terms. In such a case, there is little difficulty in holding that the contract has been renounced. Nevertheless not every intimation of an intention not to perform or of an inability to perform some part of a contract will amount to a renunciation."
Question 2
(a) Having found that:
(1) the Claimant had a fixed intention to house YPD patients in Phase 1 and that this was not subject to a "special contract" within the meaning of Victoria Laundry (Windsor) Limited v Newman Industries Limited [1949] KB 528 and (2) that the Defendants knew that the Claimant operated Down House as a business and a care home, did the Arbitrator err in assessing damages on a false basis, i.e. that the loss of profits arising from delay should be assessed on the basis that only elderly clients were housed in Phase 1?
(b) Further, or in the alternative, once loss of profits, associated with using Down House as a care home, was identified as "loss of a kind" that was within the parties' contemplation, does it follow from the test in Czarnikow v Koufos (the Heron II) [1969] 1 AC 350 HL, that a Claimant can recover the full extent of its loss of profits or is the Claimant's recovery limited to the Defendant's knowledge of that Claimant's Business plan?
"In this case, Mayhaven are developing a business plan, moving into the provision of care for YPD; in my opinion, this is not a special contract referred to in Victoria Laundry, nor are the circumstances similar to those in the Czarnikov case which related to a cargo of sugar. The circumstances relating to this case are a change in the provision of care to produce a significant increase in profit, to which Mayhaven were privy, and I find it is most unlikely that DAB could have discovered this possible change in Mayhaven's business plan."
"The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation."
"Referring to the words of Lord Reid in Czarnikow Ltd v Koufos as set out above, I do not consider that at the time when the contract was made, sufficient information was available to DAB, or a reasonable man in the same position to have realised "that such a loss was sufficiently likely to result from the breach…" or a loss of that kind should have been within his contemplation."
Question 3
Having found that delay in completion of Phase 1 necessarily involved delay in the commencement and completion of Phase 2 and that the Defendants were aware of the Claimant's plans to build Phase 2 after Phase 1, was the Arbitrator wrong to refuse to assess delay damages on the basis of the loss of profits consequent upon the delay to the completion of Phase 2?
"Mayhaven have expressed an intention as dealt with earlier, however, no tender/contract documents were adduced in evidence, which, in my opinion could have been expected if Mayhaven had intended to proceed as quickly as stated: the absence of this evidence highlights the fact that the true extent of the defects was not known at the time of contract termination."
Question 4
Under the terms of the JCT Intermediate Form of Contract 1998 Edition, is a Contractor excused from compliance with his contractual obligation to carry out the works in accordance with the Contract Drawings by reason of the Contract Administrator's failure to require the Contractor to remedy defective works?
(1) That Drawing 2241.25 was a contract drawing and it states "Form pad foundations to support structural columns to size and detail nominated by Structural Engineer." (paras 54.9);
(2) That DAB did not construct the foundations in accordance with the Structural Engineer's Drawing J2500.01 (para 54.2, 54.3 and 54.17).
"It seems to me most unlikely that the parties to the contract contemplated that the builder should be excused for faulty work at an early stage merely because the architect failed to carry out some examination which would have disclosed the defect.
…
For my part, to reach that result I should want to find quite clear words in clause 24(f) relieving the builder of liability.
…
I cannot see why he should be allowed to escape from the ordinary consequences of his negligence when discovered years later, a consequence which would undoubtedly flow if the building owner had not appointed an architect for his, the building owner's protection."
Question 5
When it is found that the Contractor is liable for significant structural defects, what test should be applied in determining whether the Claimant is entitled to the cost of demolition and rebuild as opposed to the cost of remedial works?
Conclusion
(1) The Arbitrator did not err in any question of law arising in respect of questions 1, 2(a), 2(b) or 3 and the appeal on those questions is dismissed.
(2) The Arbitrator did err on the question of law arising in respect of question 4 and the appeal is allowed on this matter.
(3) There is no error of law in respect of question 5 and whether the arbitrator comes to any different conclusion on this question in the light of my answer to question 4 is a matter for him to consider.