Building works – Breach of contract – Liability – First defendant council arranging for building works to claimants’ property – Claimants alleging contractor not carrying out work to proper standard – Whether first defendants entering into contract with claimants – Whether first defendants acting as agents of claimants – Whether first defendants responsible for quality and progress of works – Preliminary issues determined
The claimants were the owners of a property in Aberfan, comprising two ground-floor lock-up shops and a first-floor flat. The first defendant council was the local housing authority for the area.
The first defendants arranged for certain building works to be carried out to the claimants’ property pursuant to a group repair scheme. The works were carried out by the second defendant, a building contractor. The claimants complained that the works to their property had been done badly and that they had thereby suffered loss and damage. They brought an action for damages against the first defendants for alleged breaches of contract. A further claim against the second defendant was dismissed.
A dispute arose between the parties as to the nature of the relationship between the claimants and the first defendants and the nature of any responsibility that the first defendants might have had to the claimants in relation to the defective works.
The court directed the trial of preliminary issues for the purpose of determining the nature of any contract between those parties and the express and implied terms of any such contract with regard to the carrying out of building works to the claimants’ property.
The claimants argued that terms should be implied requiring the work to be done to a reasonable standard and within a reasonable time. Issues arose as to whether the first defendants were the agents of the claimants and whether they had assumed responsibility for the quality and progress of the works as a main contractor who had entered into business with a sub-contractor.
Held: The preliminary issues were determined accordingly.
(1) The first defendants had not entered into a building contract as agent for the claimants but had taken on an obligation to pay to a third party the moneys that it received from the claimants. They had taken on a contractual obligation to the claimants to organise the works involved. It was implicit in the arrangements created by the documents that the first defendants took on responsibility to the claimants in relation to the works to be done to the claimants’ property.
(2) However, the first defendants were not in the position of a main contractor with the building contractor as their sub-contractor. That was not how the relationship between the parties had been structured and the arrangements between the parties worked well enough on the basis that the first defendants took on the responsibility to the claimants for arranging for the implementation of the scheme in relation to the works to the claimants’ property. The obligations of a main contractor were much more onerous than that and would make the first defendants liable for all the defaults of the building contractor even if they were not directly responsible and could not have behaved differently from how they actually behaved: Liverpool City Council v Irwin [1977] AC 239 and Carmichael v National Power plc [1999] 1 WLR 2042 considered.
In coming to that conclusion, it was relevant that the relationship between the building owners and the first defendants was quite different from that of a typical employer and a building contractor under a building contract. With the typical relationship, the employer paid for all of the work that was to be done and the building contractor’s commercial interest was in its profit margin within the price payable. If the building contractor sub-contracted part of the main contract works, it expected to receive from the employer a margin on the price that it would have to pay to the sub-contractor. In the instant case, the first defendants’ interest in the scheme was as local housing authority. They wished to see the repair of properties in their area.
(3) The implied terms contended for by the claimants would be appropriate in a conventional building contract but the contract between the claimants and the first defendants was not such a contract. Those terms were all predicated on the basis that the first defendants were to procure the carrying out of the building works to the claimants’ property and were taking on responsibility for the quality and progress of the works as a main contractor who had entered into a building contract with a sub-contractor. Since the first defendants had not taken on that responsibility, none of those terms were to be implied.
David Hughes (instructed by Hughes James Solicitors, of Cardiff) appeared for the claimants; Michael Brace (instructed by Silver Shemmings LLP) appeared for the defendants.
Eileen O’Grady, barrister
