Contract – Construction – Total cost of works – Appellant homeowner engaging respondent interior designer to refurbish property – Dispute arising between parties concerning proper construction of contract – Judge dismissing claim by appellant alleging overspend and delay – Appellant appealing – Whether reference to “total cost of works” was reference to total cost of works to respondent or to appellant – Appeal dismissed
The appellant owned a substantial flat in a late Victorian mansion block, Harley House, on Marylebone Road in London. The respondent company was in business as an interior designer. Pursuant to a written contract dated 7 April 2017, the appellant engaged the respondent to act as interior designer for the extensive interior refurbishment of the property. That primarily involved sourcing and arranging the supply of furniture and fittings.
The parties fell out. Having been paid a total of £774,561.92 in respect of the interior design works at the property, the respondent faced claims from the appellant, primarily in respect of alleged overspends and delay, in the sum £810,650.39.
One of many disputes between the parties concerned the proper construction of the contract. The appellant argued that the reference to “the total cost of works” was a reference to the total cost of the works to the respondent, and that therefore it was anticipated that, to the extent that the respondent obtained lower trade prices for furniture and fittings, those lower prices would be passed on to the appellant as a part of “the total cost of works”. In contrast, the respondent said that it was a reference to the total cost of works to the appellant by reference to the weekly estimates which the respondent prepared and which the appellant accepted and paid.
The High Court dismissed all the appellant’s claims. Permission was granted to appeal on the contract construction point only: [2020] EWHC 3393 (TCC)). The appellant appealed.
Held: The appeal was dismissed.
(1) The contract had to be construed against the surrounding circumstances, in order to ascertain what a reasonable person would have understood the parties to have meant; that should be done primarily by reference to the language that the parties used; and it was only if the meaning of the words used was uncertain or ambiguous that the court needed to have regard to other matters, such as commercial common sense or excessive literalism: Rainy Sky SA v Kookmin Bank [2001] UK SC 50, Arnold v Britton [2015] EGLR 53 and Woods v Capita Insurance Services Ltd [2017] AC 1172 applied.
(2) The starting point was the overall way in which the contract was intended to work. There were a large number of items of furniture, fittings etc to be selected, purchased and installed. Every week the respondent would provide the appellant with an itemised estimate. If the appellant agreed the figure for a particular item, that became the amount that the appellant would pay for that fitting or item of furniture.
The judge was right to emphasise the importance of the weekly estimates when construing the contract. It was also important that the appellant was not obliged to accept any figure in the estimates. The contract was not unfair; nor did it force the appellant to make choices that she did not want to make. On its face, the written contract reflected exactly the process adopted by the parties during its operation, and the judge was right to conclude that the respondent’s construction of the contract fitted most closely with its machinery.
(3) In some forms of building contracts, references to cost were to the cost incurred by the contractor undertaking the work: see Keating on Construction Contracts, 11th Edition, paragraph 4-029. That could give rise to separate disputes about whether or not the promise was to pay the actual costs, however unreasonable, or however they might have been incurred. But an assumption that the respondent here was the equivalent to a building contractor, and that that was some form of cost-plus construction contract, would be contrary to the terms of the contract itself, and give rise to other difficulties and inconsistencies.
It would involve rewriting the contract, at least to the extent of adding the words “to the respondent” after the reference to “total cost”. However, adding those words would be contrary to the general principles of construction; save in exceptional circumstances, the court should never add words to the contract so as to construe what was already there.
(4) Under the terms of the contract, the respondent had been careful not to incur any actual cost. The contract was clear that any sum due to a supplier was not paid out by the respondent until it had first been paid to the respondent by the appellant. At most, it might be described as the notional cost to the respondent in consequence of the placing of orders with its suppliers. If “the total cost of works” was intended to be a reference to the notional cost of those works to the respondent, that should have been spelt out in the contract, together with an explanation of how that notional cost was to be calculated.
Furthermore, this claim was based upon the appellant being entitled to take advantage of trade discounts and the like received by the respondent from its suppliers. There was no mention in the contract of any such entitlement, or a mechanism by which that entitlement would be ascertained. It would need clear words to require the respondent to provide a breakdown of each figure in the estimate. For commercial reasons, the respondent would not want to reveal the size or nature of trade discounts with its suppliers, unless the contract expressly required it.
(5) The appellant’s interpretation would wholly undermine the agreed process. Estimates for individual items were prepared by the respondent, offered to and agreed by the appellant on a weekly basis, and the respondent then acted on her agreement by placing the relevant orders. She did not need to be supplied with details of the trade prices or the quotation from the supplier to the respondent to decide whether or not to accept any estimate. The appellant knew precisely what she was going to have to pay for any given item: and what it would cost her if she agreed to the estimate. She had all the information she needed to make a complete choice. She did not need details of trade prices and the like. Therefore, the judge was right to say that the respondent was entitled to the sums invoiced to the appellant.
Simon Butler (instructed by TKD Solicitors) appeared for the appellant; The respondent appeared by its representative.
Eileen O’Grady, barrister
Click here to read a transcript of Alebrahim v BM Design London Ltd
