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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/3446.html
Cite as: [2012] EWHC 3446 (Ch)

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Neutral Citation Number: [2012] EWHC 3446 (Ch)
Case No: OCF06502

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
CARDIFF DISTRICT REGISTRY

Swansea Civil Justice Centre
Caravella House, Quay West, Quay Parade,
Swansea, SA1 1SP
30/11/2012

B e f o r e :

MR JUSTICE MORGAN
____________________

Between:
KEVIN COMETSON
ANGELA TOVEY

Claimants
and


MERTHYR TYDFIL COUNTY BOROUGH COUNCIL
R & M WILLIAMS LIMITED
Defendants

____________________

David Hughes (instructed by Hugh James Solicitors) for the Claimant
Michael Brace (instructed by Silver Shemmings LLP) for the First Defendant
Hearing date: 14th November 2012

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Morgan:

    Introduction

  1. At all material times, the Claimants Mr Cometson and Ms Tovey have been the owners of a property at 22 Aberfan Road, Aberfan, comprising two ground floor lock-up shops and a first floor flat above the shops. The First Defendant is the Merthyr Tydfil County Borough Council ("the Council") which was the local housing authority for an area which included Aberfan. The Second Defendant is a building contractor but the Claimants' claim against the Second Defendant has been dismissed and I need not consider it.
  2. Starting in around 2005, the Council arranged for certain building works to be carried out to 28 properties in Aberfan, including the Claimants' property. The Council referred to the works as carried out pursuant to a Group Repair Scheme. The works were carried out by the Second Defendant. The Claimants say that the works to their property were done badly in a large number of respects and that they have thereby suffered loss and damage.
  3. There is a significant dispute between the parties as to the nature of the relationship between the Claimants and the Council and the nature of any responsibility which the Council might have had to the Claimants in relation to the defective works of which the Claimants complain. This judgment deals with preliminary issues which have been argued in order to determine the nature of that relationship and the nature of any such responsibility.
  4. The pleaded cases

  5. The Claimants claim damages from the Council for alleged breaches of a contract which the Claimants say they made with the Council by a written agreement of 8th November 2004. In summary, the Claimants say that the Council expressly contracted with the Claimants to arrange for building works to be carried out to 22 Aberfan Road. The Claimants say that a number of terms ought to be implied into that contract.
  6. In paragraphs 7 and 8 of their Particulars of Claim, the Claimants pleaded the following implied terms:
  7. "7. The following were implied terms of the Agreement.
    a. That any works would be carried out in a proper and workmanlike manner;
    b. That any works would be carried out with reasonable skill and care, and that any goods or materials used in carrying out the works would be of satisfactory quality;
    c. That the works would be;
    i. Commenced within a reasonable time
    ii. Completed within a reasonable time and without undue delay.
    d. That any works would leave the Premises in a reasonable state of repair (see the Housing Grants, Construction and Regeneration Act 1996, sections 60(1)(a) and 62(2);
    e. That any works would be compliant with any relevant Regulations or other statutory requirement;
    f. That any works would be such as to leave the Premises in an improved state;
    g. That any works would be performed in such a way as not to decrease the rent that the Premises was likely to command on the market;
    h. That any snags or defects identified would be remedied promptly.
    8. Further or alternatively, it was an implied term of the Agreement that the First Defendant would ensure that the works to be performed would be carried out consistently with paragraph 7 above."
  8. The Claimants then pleaded a large number of breaches of these implied terms. The matters which were the subject of these breaches included bad work to render (external and internal), the roof, the shop front, a dwarf wall, the joists, a staircase, waterproof tanking, windows and doors and the use of inappropriate materials. It is also said that the works were not carried out within a reasonable time and that certain other implied terms were broken. The loss and damage which is claimed relates to the cost of necessary remedial work and loss of rental income in relation to the two shops and the flat which comprise the premises.
  9. The Council served a detailed Defence and Counterclaim. It is not necessary for present purposes to refer to all of the matters there pleaded but I will refer to those which are material to the present issues. The Council accepted that by a written agreement of 8th November 2004 it had agreed to arrange the carrying out of building works. It was then stated that the sum of money to be paid by the Claimants to the Council was not in return for services provided by the Council to the Claimants but was on account of the Claimants' liability to pay a building contractor for works to the Claimants' property. It was pleaded that the Council was acting as the Claimants' agent in the matter. The Council denied that the implied terms relied upon by the Claimants were to be implied into the contract between the Claimants and the Council. It was next pleaded that the alleged breaches of contract were not referable to the contract between the Claimants and the Council. In its Counterclaim, the Council relied upon the written agreement of 8th November 2004 as being a contract between the Claimants and the Council and the Council alleged that the Claimants had committed various breaches of that contract.
  10. The issues

  11. The court had given directions in this action on a number of occasions in the past. Pursuant to those directions, the parties had exchanged evidence from expert witnesses as to the breaches alleged by the Claimants. The parties had also received the report of a joint expert valuer relevant to the way in which the Claimants put their case for loss of rental income. The trial of this action was fixed for three days beginning the 14th November 2012. On 8th November 2012, I heard an application by the Claimants for further directions to deal with a difficulty which they said arose in the relation to the report of the joint expert valuer. That hearing gave me an opportunity to consider the best way to manage the trial of the many issues raised in this action. One difficulty was that it seemed to me that the three day time estimate was much too short. Another point was that the parties were fundamentally apart on the nature of any contract between the Claimants and the Council and as to the express and implied terms of that contract. In the end, with the support of the parties, I directed that the forthcoming hearing should be used for the trial of a preliminary issue or issues for the purpose of determining the nature of any contract between the Claimants and the Council and the express and implied terms of any such contract with regard to the carrying out of building works to the Claimants' property.
  12. The statutory background

  13. In case it is of assistance when determining the issues between the parties, I will give a short summary of the statutory background to the involvement of the Council in the works which were carried out to the Claimants' property, amongst other properties.
  14. Chapter II of Part I of the Housing Grants, Construction and Regeneration Act 1996 is headed: "Group Repair Schemes". By section 60(1) of the 1996 Act, a local housing authority had power to prepare a group repair scheme for the carrying out of works to put in reasonable repair the exterior of the buildings to which the scheme related or to render such buildings structurally stable, or for those purposes. By section 60(2), "building" was defined to include the whole or part of a terrace of houses or other units. Section 62(2) described what works could be specified in a group repair scheme. In the case of works the purpose of which was to put in reasonable repair the exterior of the relevant buildings, the works had to be works to the exterior of those buildings and, only so far as may be necessary to give satisfactory effect to such works, additional works to other parts of those buildings. In the case of works the purpose of which was to render relevant buildings structurally stable, the works had to be works to the structure of or to the foundations of those buildings or other works necessary to give satisfactory effect to such works. Section 62(4) defined "the exterior of a building" in more detail. Under section 63(1), when a group repair scheme prepared by a local housing authority was approved by the Secretary of State, the authority might with the consent of the persons participating in the scheme enter into agreements to secure the carrying out of the works specified in the scheme. Section 64 identified the persons who were eligible to participate in a group repair scheme. Section 65(1) provided that the persons who were eligible to participate did so by signifying consent ("scheme consent"), in accordance with the terms of the scheme, to the proposals to carry out the works specified in the scheme. Section 67(1) provided that the participants in a group repair scheme were liable to contribute to the cost, as notified to them under the scheme, of scheme works relating to the premises in which they had an interest, at a rate determined in accordance with section 67.
  15. These provisions of the 1996 Act do not deal with the nature of the relationship between the local housing authority and any third party who will carry out the relevant works. Section 63 of the 1996 Act refers to the local housing authority entering into agreements to secure the carrying out of the relevant works. That appears to contemplate that the local housing authority will itself enter into a contract with, for example, a building contractor for the relevant works. One would expect that the parties to such a contract would be the local housing authority and the building contractor, rather than the various building owners and the building contractor. That was the approach adopted (in relation to group repair schemes) in the VAT case of Ashfield DC v Customs and Excise Commissioners [2001] STC 1706 at [5]. That case did not itself involve a group repair scheme. Instead, it was a case of building owners contracting with a building contractor and receiving a grant from the local authority.
  16. The provisions of the 1996 Act, dealing with group repair schemes, provide for the local housing authority to obtain the consent of the relevant building owners to their participation in the scheme. By section 65, the building owners are to signify their consent "in accordance with the terms of the scheme, to the proposals to carry out the works specified in the scheme". The 1996 Act makes some provision for the terms of a group repair scheme. Section 67 makes the participating building owners liable to contribute to the cost of certain works. Sections 69 to 73 provide for certain "conditions of participation". Apart from these matters which are the subject of express statutory provision, it would seem that it is for the local housing authority to determine the terms of the scheme and to seek the approval of the Secretary of State to such terms.
  17. Chapter II of Part I of the 1996 Act was repealed by the Regulatory Reform (Housing Assistance) (England and Wales) Order 2002 (SI 2002/1860), article 11, schedule 3 paragraph 27, with effect from 18th July 2003. However, this repeal did not affect schemes under Chapter II of Part I of the 1996 Act which were approved by the Secretary of State before 18th July 2003.
  18. The Regulatory Reform (Housing Assistance) (England and Wales) Order 2002 was made on 18th July 2002 and the relevant provisions of it came into force on 18th July 2003. This Order conferred on local housing authorities a new power to improve living conditions in their areas. The new power enabled an authority to "provide assistance" in various ways including by means of the repair of living accommodation: see article 3. Assistance might be provided "in any form": article 3(3). By article 2, living accommodation was defined as a building (or certain other things which were not buildings) occupied or available for occupation for residential purposes and including certain appurtenances. By article 5(1), a local housing authority was not to provide assistance under this Order unless it was satisfied that the owner of the living accommodation concerned had consented to the carrying out of the works.
  19. The 2002 Order does not in terms refer to the local housing authority carrying out a scheme of works. Nor does the 2002 Order purport to prescribe the detail of the arrangements which a local housing authority might enter into with a building contractor or a building owner.
  20. As will be seen, before the repeal of the group repair scheme provisions of the 1996 Act, the Council began to prepare for such a scheme for an area which included the Claimants' premises. However, I was told that a group repair scheme was not approved for that area before the repeal of those provisions of the 1996 on 18th July 2003. Thereafter, the Council appeared to continue as if it was carrying out a group repair scheme. Some of the documents referred to the 1996 Act and some of them referred to the 2002 Order.
  21. The facts in detail

  22. It seems that before the middle of 2003, the Council had identified the part of Aberfan Road which included number 22 Aberfan Road as suitable for inclusion in a group repair scheme. On 16th June 2003, the Council wrote to the Owner/Occupier of that property stating that it wished to carry out a detailed survey of each property in "the proposed Group Repair Scheme".
  23. At some point, Mr Cometson became aware of the possibility that 22 Aberfan Road might be included in a group repair scheme. He also said that he was aware of the possible scheme through "leaflets" prepared by the Council. Mr Cometson did not produce a copy of such a leaflet. The Council did prepare leaflets or booklets which described what was involved in a group repair scheme. Two of these were in the trial bundle. Mr Cometson was asked about one of these leaflets and he said that he had not seen that particular leaflet. He was not asked about the other leaflet in the trial bundle.
  24. I will refer briefly to the contents of the two leaflets which I was shown. Much of what appears in the leaflets is demonstrated by the documents which are directly relevant to this case and to which I will refer. However, although I will refer to the contents of these leaflets, I am not able to make a finding that those contents were in fact communicated to Mr Cometson.
  25. The first leaflet described a group repair scheme as a scheme organised and managed by the Council. This leaflet referred to the Council appointing a building contractor. When describing the "paperwork" associated with the scheme, the Council referred to a Scheme Consent Document and stated that this was a legally binding document which committed a participating owner to the scheme and its conditions. The leaflet stated that the Council would employ a clerk of works to oversee the works undertaken by the contractor. Residents' queries should be directed through the Council's Resident Liaison Officer who would liaise directly with the contractor on behalf of the residents. Residents were advised not to approach the contractor directly.
  26. The second leaflet to which I was referred included a flow chart describing the intended sequence of events. At an early point there was to be a meeting of residents to explain the proposed scheme. This was to be followed by a detailed survey of individual properties and then there would be a schedule of works produced by an officer of the Council with the approval of the residents. The Council would then put the scheme contract out to tender and tenders would be received and accepted. The Council would then provide residents with accurate individual costs whereupon residents would be asked to indicate formal acceptance to the scheme. The scheme would then proceed accordingly.
  27. Mr Cometson did not describe in his evidence the detailed steps in which he was involved of the kind envisaged by the flow chart to which I referred. He did say that he heard about the scheme and then had a number of conversations with an officer of the Council, Mr Mel Jenkins. Thus, the detail of the arrangements which Mr Cometson made on behalf of himself and Ms Tovey must be derived from the documents to which I will now refer.
  28. On 8th January 2004, the building contractors R & M Williams Ltd prepared a Health and Safety Plan for what they described as Group Repair Scheme 4. This plan must have been prepared for the Council. There was no suggestion that Mr Cometson was involved with this document at any stage.
  29. On 12th May 2004, Mr Cometson and Ms Tovey, with the assistance of Mr Jenkins of the Council, completed an application form which had the heading, Regulatory Reform Order 2002. The form referred to an application for an improvement grant or a common parts grant but the form as completed did not identify which grant, if either, was being applied for. At paragraph 1.15 of the form, the applicants answered that they agreed to any "grant approval" being paid to their builder. The applicants completed parts of Part 2A of the form which referred to an improvement grant. The intended work was described as "Group Repair". The form extended to 22 pages but most of the form was left blank. Mr Cometson and Ms Tovey signed the form to declare that the information contained in the form was correct. If that document were considered in isolation, it might be suggested that the proposed "grant" was to be a contribution to the cost of works being undertaken by Mr Cometson and Ms Tovey, otherwise at their own cost.
  30. Also on 12th May 2004, Mr Cometson and Ms Tovey signed one or more certificates. If there was only one certificate signed by them, then (in its original format) it referred to the two lock up shops and the first floor flat. The certificate stated that as part of an application for a group repair grant, they confirmed that it was intended that the property would be let as a residence. There may be a dispute as to whether Mr Cometson and Ms Tovey signed 1 or 2 or 3 such certificates. The copy certificate in the bundle has been adapted so that it relates to only 1 of the 3 units at 22 Aberfan Road. It is not necessary for present purposes to make any findings as to what alterations were made to the original certificate(s) signed by Mr Cometson and Ms Tovey nor who made those alterations.
  31. The trial bundle included an undated document called a "survey report" which was signed by Mr Cometson and Ms Tovey and by an officer of the Council. There was no material on which I could make a finding as to when exactly that document was signed. The document refers to the Local Government and Housing Act 1989 and describes 22 Aberfan Road as a first floor flat and 2 lock up shops. The document refers to a booklet "House Renovation Grants" and to a set of Guidance Notes. It was the Claimants' case that these documents were not provided to them although they signed the document to record that they had read and understood the Guidance Notes. The document referred to the quality of the intended works and stated that the works were to be carried out in accordance with current regulations, bylaws and codes of practice and the materials used and their performance specification were to be to the satisfaction of the Grants Section (presumably of the Council). The document referred to the procedure to be adopted for payment of a grant by the Council to the applicants for the grant; the procedure assumed that the applicants for the grant would have paid an invoice for the works in question and could produce certificates of guarantee in relation to the work. The document also contained some brief details as to the intended works.
  32. In August 2004, the Council put the works, to be comprised in Group Repair Scheme 4, out to tender. The tender document issued by the Council took the form of a tender to be completed by a contractor together with an accompanying Specification and Bill of Quantities. The preliminaries to the Bill of Quantities stated that the building contract would be in the form of the latest edition of the JCT Agreement for Minor Building Works. The Bills identified 28 properties (including 22 Aberfan Road) on which work was to be done. When specifying the work which was to be done, the Bills identified the categories of work and calculated the quantities for all of the properties. The properties were not dealt with on an individual basis, save that there were a number of provisional sums in relation to specified individual properties (not including 22 Aberfan Road).
  33. On 6th September 2004, the building contractors, R & M Williams Ltd returned the tender documents for the proposed works. They tendered for the works at a price of some 590,000. I was told that no JCT contract was entered into by the Council and the contractors. The council simply accepted that tender and the work was carried out against the background that the tender documents had stated what the intended form of contract was to be.
  34. On 27th September 2004, the Council wrote to Mr Cometson (at 22 Aberfan Road) stating that access was needed to that property to allow contractors to carry out an asbestos survey of the property. Access for this purpose must have been provided because on 5th October 2004, the asbestos contractors certified that no asbestos was detected in that property.
  35. On 3rd October 2004, the Council wrote to Mr Cometson and Ms Tovey at 22 Aberfan Road, informing them that the building contract had been awarded to R & M Williams Ltd. The letter stated that the Council could only authorise a Group Repair Scheme once it received 75% participation from the residents who were encouraged to return the Scheme Consent Form. The letter also referred to a residents' meeting due to take place on 11th November 2004. There was a question as to whether Mr Cometson had seen the letter of 3rd October 2004 at around that time. However, he accepted that he knew at all material times that the works were to be carried out by a building contractor and not directly by the Council itself.
  36. On 8th November 2004, Mr Cometson and Ms Tovey signed a Scheme Consent Form. This form referred to the Housing Grants, Construction and Regeneration Act 1996. The form identified the relevant property as 22 Aberfan Road. The form contained the following terms:
  37. "We acknowledge that Merthyr Tydfil County Borough Council intend to undertake a Group Repair Scheme comprising the following properties:
    [Left blank]
    We acknowledge that the purpose of the Group Repair Scheme is to carry (sic) eligible works to all the participating properties included within it. (Eligible works are those works, which are needed to be carried out to the exterior envelope of the property to put the building into reasonable repair. The exterior envelope is defined as including any part of the building exposed to the elements such as roofs, walls, doors, windows and may also include works to the curtilage of the building. No internal works are carried out under the scheme unless they are a necessary adjunct to carrying out exterior works or are required to make good the interior following works to the exterior).
    We further acknowledge that with the issue of a Certificate of making Good Defects all such works will be deemed to have been completed.
    We hereby confirm that I (sic) wish to participate in the Group repair Scheme and as owner(s) of the above property (hereinafter called "the property") consent to Merthyr Tydfil County Borough Council arranging for the eligible works to be carried out to the property. We understand that the cost of the works to the property has been estimated at 22,417.53 and that a sum of 5604.38 is payable towards the cost of the works on demand prior to the commencement of the works. We understand that in reliance on the authorisation and consent contained in this document and subject to approval of the scheme by the Secretary or State for Wales, Merthyr Tydfil County Borough Council will enter into a contract for the whole of the works comprised in the Group Repair Scheme. By signing this form we agree to participate in the Group Repair Scheme and to pay an amount not exceeding 25% of the total cost of the works or sum determined by the notional loan."
  38. There was a further page which accompanied the Scheme Consent Form (or it may have been the reverse of the Form). This stated that by giving their Scheme Consent, participants agreed to the works being carried out and they became liable to pay an apportioned contribution towards the costs; they also became liable to the clawback provisions described later on that page. The clawback provisions, which were badly expressed, identified circumstances in which the Council could claim from a participant in the scheme the difference between the costs of the works attributable to his premises and the amount of his contribution towards that cost.
  39. The Scheme Consent Form bears the date 8th November 2004. Mr Cometson said that the date was not in his handwriting. It is likely to have been written by the Council officer who witnessed the signatures of Mr Cometson and Ms Tovey. It is not really in dispute that the Form was signed by them on or about 8th November 2004. I understand that the parties agree that the Scheme Consent Form was varied informally when it was agreed that the Claimants were not required to pay their contribution to the cost of the works before the works started.
  40. There is a further document dated 8th November 2004, signed by Mr Cometson and Ms Tovey. The heading to this document refers to the Local Government and Housing Act 1989 and the document is described as an Agreement to Pay Contribution. By this document, Mr Cometson and Ms Tovery agreed to pay the sum of 5,604.38 direct to the Council. The document also stated:
  41. "We understand that this sum of money is the amount that has been calculated as our contribution towards the cost of the works, and that the Council in acting as our Agent in this matter will pay this money to the builders and agencies involved in carrying out the works necessary."
  42. On 22nd November 2004, Mr Cometson and Ms Tovey signed a document called a Prior Declaration that a Property will meet Landlord Accreditation or Landlord Accreditation Plus Standard Following Group Repair Works. The document later referred to the Accreditation Plus Standard rather than the other standard. The document then included this statement:
  43. "I fully understand that should the property fail to meet the Landlord Accreditation Standard or the Accreditation Plus Standard (whichever has been indicated above) within the six month period following the completion of the Group Repair Works to my property, then I must repay all monies invested in my property by the Local Authority under the Group Repair Scheme."
  44. On 13th January 2005, the Council wrote to Mr Cometson stating that the building contractor intended to commence works on 21st March 2005. I have been shown a schedule of events which refers to the work on 22 Aberfan Road starting on 2nd June 2005. It is not necessary for present purposes to determine why that work only started at that time. The trial bundle includes a great deal of information about the progress of the work generally and the difficulties encountered in relation to 22 Aberfan Road. For present purposes, it is not necessary to make findings on those matters, save to say that the Council's officers and staff had regular meeting with the contractor's representatives during the course of the works.
  45. The Council has prepared a schedule of the work which it says was carried out to 22 Aberfan Road. The schedule identifies categories of work and then gives details of the works in each category. The categories are: Roofing Works, Fascias and Soffits, Rainwater Installations, External Elevations, Windows and Doors and Internal Works. The Internal Works include matters such as wall plaster, ceilings stairs, joists and flooring.
  46. Discussion

  47. The starting point is that both the Claimants and the Council say that there was in existence a contract between them. Indeed, both sides say that the contract was made on 8th November 2004. The Claimants say that the relevant contract was contained in the Scheme Consent Form. The Council says that the relevant contract was contained in the Scheme Consent Form and the Agreement to Pay.
  48. I agree that those documents have the appearance of having contractual effect. They are expressed in terms which are apt to impose obligations, at least on one of the parties. Further, they provide for the payment of a substantial sum of money by the Claimants to the Council. There is no reason in the background circumstances to hold that those documents lacked contractual force. For example, I do not think that it would be right to hold that the relationship between the Claimants and the Council sounded exclusively in public law.
  49. It is not unduly difficult to find in the two documents of 8th November 2004 obligations which were imposed on the Claimants. For example, the Claimants consented to the Council arranging for certain works to be carried out to the Claimants' property. The Claimants agreed "to participate" in the Group Repair Scheme. The Claimants acknowledged that the Council would enter into a contract (seemingly, with a building contractor) for the whole of the works in the Group Repair Scheme. Read in context, the Claimants' agreement "to participate" in the scheme carried with it the obligation to permit the Council to permit a building contractor to carry out the relevant works to the Claimants' property.
  50. The Scheme Consent Form did not specify the works which were to be carried out to the Claimants' property. The Form referred, in general terms, to works to the exterior envelope but it also referred to internal works, if they were required for various stated reasons. Under the Scheme Consent Form, the Claimants had to permit the Council to carry out works of the kind referred to in the Form. The detail of the works was to some extent under the control of the Council. It seems that the Claimants were, or ought to have been, involved in the specification of the works which were to be done. I do not have much evidence about what happened in that respect. If there had been disagreement between the parties before the work was done, as to what work was appropriate, then it might have been necessary to consider the description of the works to the exterior envelope and of the internal works in the Form. In the event, there does not appear to have been disagreement as to the work which the Council did. In so far as the Council carried out work to the Claimants' property, that work can only have been done pursuant to the Claimants' consent given in the Form. It is not suggested that there was any other basis on which the Council arranged for work to be done to the Claimants' property.
  51. Further, the Scheme Consent Form and the Agreement to Pay imposed a contractual obligation on the Claimants to pay the specified sum to the Council before the works commenced. However, the parties agreed that this term was informally varied so that the specified sum need not be paid before the works commenced. Nonetheless, the Claimants remained obliged to pay the specified sum.
  52. The two documents dated 8th November 2004 were drafted by the Council. Perhaps for that reason they deal with the commitments undertaken by the Claimants but they do not spell out the commitments, if any, undertaken by the Council. The documents use the language: "we acknowledge", "we confirm", "we consent", "we understand" and "we agree", and variants of such phrases, but the "we" refers to the Claimants and not the Council.
  53. Although the Scheme Consent Form does not spell out what, if any, obligation is undertaken by the Council it seems to have been implicit in the fact that the Claimants were to pay a sum of money to the Council that the Council would have some obligations. The key to what that obligation was might be said to be found in the reference to the Council "arranging for the eligible works to be carried out" to the Claimants' property. However, that reference does not provide all of the answers and in fact only gives rise to the next series of questions as to what was involved in arranging the works and what responsibility the Council would have to the Claimants in relation to the work.
  54. In its submissions, the Council relied heavily on the wording of the Agreement to Pay which referred to the Council "acting as our Agent in this matter". The Agreement to Pay also required the Council to pay to a building contractor the sum it received from the Claimants. This wording suggests that the Council had some responsibility, rather than none, to the Claimants. As a bare minimum, the Council agreed to pay to a third party the money received from the Claimants. Further, in some respect or other, the Council was to be an agent for the Claimants. In what sense was the Council to be an agent? Was the agency restricted to an agency as to payment of a specified sum of money to a third party or did it go further?
  55. The many questions which arise in relation to the meaning and effect of the two documents of 8th November 2004 cannot be confidently answered by considering only the express terms of those documents. In my judgment, it is permissible, in order to make findings as to the extent of the contract between the parties and as to its express terms, as well as its implied terms, to look more widely. The process involved is described in Carmichael v National Power plc [1999] 1 WLR 2042. In that case, there was a fairly basic letter referring to some parts of the relationship between the parties. Lord Irvine of Lairg LC said, at page 2047 C, that the terms of the contract were to be derived from the letter and what the parties said or did at the time or subsequently as to what they intended their relationship to be. Lord Hoffmann explained matters in a similar way at page 2049 C. He also described, at pages 2050 G to 2051 A, the role played by evidence from the parties as to what they understood their relationship to be.
  56. In the present case, I suspect that there could have been more evidence as to the discussions between the parties and other evidence of the kind contemplated by Lord Hoffmann. In the event, Mr Cometson did not give evidence of that kind and there was no witness from the Council. Accordingly, the material which might conceivably provide some assistance as to the contractual relationship between the parties is confined to the documents. In case those documents might be helpful, I have described them in detail earlier in this judgment. Further, the present case is one of those cases which fall into the fourth category of implication, described by Lord Wilberforce in Liverpool CC v Irwin [1977] AC 239 at 254 A, where the parties have not spelt out all of the terms of the contract between them and the court has to build up the terms of the contract from all the relevant circumstances.
  57. As it turns out, many of the other documents are confusing on some basic points. An exception is the building contract between the Council and the building contractor. This contract was formed by the Council accepting the tender from the building contract. That contract was plainly between those parties. The Claimants were not party to that contract. It cannot realistically be argued that they were undisclosed principals. The Claimants were only interested in the works to 22 Aberfan Road, whereas the building contract related to 28 different properties and the works to 22 Aberfan Road were not dealt with individually. Accordingly, the Claimants had no contractual relationship with the building contractor. Although I imagine that some, probably most, of the dealings between the Council and the building contractor took place without any involvement of the Claimants, it was always clear that the building contract for the Group Repair Scheme would be entered into by the Council with a building contractor and the individual building owners, like the Claimants, would not be parties to that contract. This analysis provides the answer to one question: did any agency on the part of the Council extend to entering into a building contract as agent for the Claimants. The answer to that question is obviously: "No".
  58. As to the other documents, I have already described them as confusing. They refer to the Local Government and Housing Act 1989, the 1996 Act and the 2002 Order. I was told that the Group Repair Scheme in this case was not approved by the Minister before 18th July 2003 and so the works were not governed by the 1996 Act. Indeed, there is some doubt in my mind as to the application of the 2002 Order to the works to 22 Aberfan Road as that property included two shops and the 2002 Order appears to be restricted to living accommodation.
  59. The other documents are confusing in other ways. The documents which speak of a grant being made by the Council to the Claimants would suggest that the Claimants would do the building work (or get it done) and pay for it and then claim a grant as a contribution from the Council. Similarly, the documents which referred to the standards to be achieved by the completed work would make sense if the work was the responsibility of and under the control of the Claimants; those documents make little or no sense if the work is under the control of the Council.
  60. It is certainly the case that the documents about grants and about the standards to be achieved, taken on their own, suggest that it was the Claimants who had the responsibility to procure the doing of the work and to pay for the work. But that suggestion simply cannot be right if one considers all of the material.
  61. Thus far, I consider it is clear that the Council was not to enter into a building contract as agent for the Claimants but the Council did take on an obligation to pay to a third party the monies it received from the Claimants. The question then arises: did the Council take on any other obligations? If so, did they contract with the Claimants to arrange for the scheme to be implemented, to arrange for a building contract to be entered into and to supervise the doing of the work under that building contract.? Or did the Council's obligations go further, so that it effectively took on the responsibility to the Claimants for the works as if it were a main contractor who intended to have the works done by a building contractor as its sub-contractor?
  62. In my judgment, it is right to take the step of holding that the Council took on a contractual obligation to the Claimants to organise the works involved. That obligation could not have been an unconditional obligation as early as 8th November 2004. At that stage, it was clear that the Council would only do the Group Repair Scheme if it obtained a sufficient number of participating building owners. In the event, the Council did obtain a sufficient number of participants and it did proceed to implement the scheme. As contemplated by the Claimants and by the Council, the Council entered into a building contract with a contractor. The Council had obtained the commitment of the Claimants to allow the contractor to do work on the Claimants' property. Someone had to supervise the contractor. It was plainly not envisaged that the Claimants would have that responsibility or even that entitlement. The Council would wish to be able to give instructions to the contractor in accordance with the building contract. The Council would not want individual building owners intervening in those respects. In my judgment, it was implicit in the arrangements created by the documents that the Council did take on responsibility to the Claimants in relation to the works to be done to the Claimants' property.
  63. Should I go further and hold that the Council was effectively in the position of a main contractor with the building contractor as its sub-contractor? Such a relationship would not be an impossible one. Such a relationship would have had considerable benefits for the Claimants. If the terms of the main contract were held to match the terms of the sub-contract in relation to the scope and quality of the works, then a breach by the sub-contractor would also be a breach by the main contractor. If the breach caused damage to the building owner, then the building owner could sue the Council which could pass on the claim to the sub-contractor.
  64. In my judgment, I should not take this further step. Taking that step is not necessary in order to make sense of the arrangements which were made. Those arrangements can work well enough on the basis which I have already described whereby the Council took on the responsibility to the Claimants for arranging for the implementation of the scheme, at any rate in relation to the works to the Claimants' property. The obligations of a main contractor are much more onerous than that. Those obligations would make the Council liable for all the defaults of the building contractor even if the Council was not directly responsible and could not have behaved differently from how it actually behaved.
  65. In coming to this conclusion, I take into account the fact that the relationship between the building owners and the Council in this case was quite different from that of a typical employer and a building contractor under a building contract. With the typical relationship, the employer pays for all of the work which is to be done and the building contractor's commercial interest is in its profit margin within the price payable. If the building contractor sub-contracts part of the main contract works, then it expects to receive from the employer a margin on the price it will have to pay to the sub-contractor. In this case, the Council's interest in the scheme was as local housing authority. It wished to see the repair of properties in its area. It was to bear 75% of the cost of the works.
  66. I conclude therefore that the Council's obligations:
  67. i) did not consist of entering into a building contract as agent for the Claimants;

    ii) did not involve the Council contracting with the Claimants that the Council would procure the doing of the works to the Claimants' property so as to be responsible for the quality and progress of those works;

    iii) did involve the Council contracting with the Claimants to arrange for the carrying out of the Scheme at any rate in relation to the works to be done to the Claimants' property.

  68. So far I have considered the nature of the contract made by the Claimants with the Council. I have reached my conclusions based on what I have considered was necessarily implicit in the relationship created as revealed by the documents and the background circumstances. There is another sense in which I need to consider what terms should be implied into such a relationship. In this context both sides referred me to sections 12 to 14 of the Supply of Goods and Services Act 1982.
  69. Sections 12 to 14 apply to contracts for the supply of "a service". I consider that the obligations owed by the Council to the Claimants involved the Council in supplying "a service". The service involved the arrangement of the building works; that included the supervision of the contractor engaged to carry out those works. The works themselves did not constitute the relevant service. The Council did not contract to do the works but only to provide the service which I have described.
  70. Section 13 of the 1982 Act provides that where a supplier is acting in the course of a business, there is implied into the contract for the supply of a service, a term that the supplier will carry out the service with reasonable care and skill. Section 18 of the 1982 Act provides that the reference to "business" includes the activities of a local authority. Accordingly, section 13 applies to the contract I have found to exist between the Claimants and the Council. Accordingly, there is to be implied into that contract a term that the Council will carry out the services which are the subject of the contract with reasonable skill and care. I stress that this is different from a contract to carry out building work with reasonable skill and care. Such a term would be an appropriate implied term in a conventional building contract but the contract between the Claimants and the Council is not such a contract.
  71. Section 14 of the 1982 Act implies into a contract, for the supply of a service by a supplier acting in the course of a business, a term that the supplier will carry out that service within a reasonable time (unless the time in question is fixed by the contract or fixed in a manner agreed by the contract or determined by a course of dealing). The exceptions to the operation of section 14 do not apply here. Therefore the term identified in section 14 is to be implied into the contract between the Claimants and the Council. I stress, as before, that the implied term is not to do the building works within a reasonable time; as stated more than once, the Council did not contract to do or procure the building works.
  72. I have referred above to the implied terms which are contended for by the Claimants. Those terms are all predicated on the basis that the Council was to procure the carrying out of the building works to the Claimants' property and was taking on responsibility for the quality of and the progress of the works as a main contractor who had entered into a building contract with a sub-contractor. As I have explained, I find that the Council did not take on that responsibility. Accordingly, I do not accept that any of the terms pleaded in paragraphs 7 and 8 of the Particulars of Claim are to be implied in this case.
  73. The overall result

  74. I have now described the contractual relationship between the Claimants and the Council. I have held that the terms set out in sections 13 and 14 of the 1982 Act are to be implied into that contractual relationship in relation to the "service" which the Council was to provide to the Claimants. The 1982 Act does not lead to the implication of any other term. Although I heard submissions as to the terms to be implied at common law if the contract obliged the Council to procure the doing of the building works, I did not hear any submissions as any other term being implied at common law in the event that I held that the contract between the parties was of the kind I have described above.
  75. The parties will need to consider their respective positions in the light of this judgment. If the Claimants wish to contend that the Council acted in breach of the express and implied terms which I have found then it seems likely that the Claimants will need to amend their Particulars of Claim to identify the respects in which the alleged defects in the building work and the alleged delay in relation to that work can be said to involve a breach by the Council. The question of a possible amendment to the Particulars of Claim was mentioned in passing at the hearing before me. I did not then, and I do not now, give any indication either way as to the court's reaction to an application to amend the Particulars of Claim.
  76. At the end of the hearing, I indicated that it would not be necessary for anyone to attend the handing down of this judgment. Any consequential matters should be agreed if possible. If it is not possible to agree them within a short period to time, than any consequential applications are to be made to me in writing, unless it is said that such applications cannot conveniently be dealt with in writing, in which case I should be informed of the position and I will consider what directions can usefully be given.


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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/3446.html