Contract – Breach – Remedy – Respondent refusing to pay contract price invoiced by appellant for works to football pitches – Claim for unpaid sum dismissed on ground that unsatisfactory works making pitches worse than before so as to amount to total failure of consideration – Whether judge wrong on that issue – Whether erring in allowing counterclaim by respondent for full amount of cost of alternative renovation works – Appeal allowed in part
The appellant was a partnership which specialised in ground work to sports fields. The respondent was a professional football club, which, by 2012, was playing in League 1 of the Football League, with aspirations to be promoted to the Championship. It engaged the appellant to carry out certain works to its pitches with a view to bringing them up to Championship standard. The appellant quoted the sum of £16,159.20, including VAT, for the works.
The appellant carried out the works in June 2012 in very wet conditions. However, the process which it was using to improve the drainage of the pitches was such that it would not work satisfactorily if the ground was wet. The respondent complained that the works had not been done to the requisite standard and refused to pay the appellant’s invoice.
The appellant’s claim for the unpaid invoice sum was dismissed after the judge found that the appellant was in breach of contract. The judge found that the standard of the pitch was worse than if the appellant had not done any work at all and that, accordingly, there had been a total failure of consideration. He not only refused to order payment of the contract price but also allowed a counterclaim by the respondent for damages representing the entire cost of renovation works to the pitches carried out by another company, which were said to have been necessitated by the appellant’s breach. His award of £21,494, plus interest, represented the amount, including VAT, invoiced by the company for the renovation works and £5,000 for overtime in respect of works carried out by the respondent’s own employees.
The appellant appealed. It contended that the judge had: (i) erred in finding that there was a total failure of performance justifying the respondent’s refusal to pay the contract price; and (ii) overcompensated the respondent by allowing the counterclaim in its entirety.
Held: The appeal was allowed in part.
(1) The judge had been entitled to find that there had been a total failure of consideration. Such a finding was not precluded simply by the fact that work had been done on the pitches and materials supplied. The performance for which the respondent had bargained for was one where the work was done with reasonable care and skill, and was a treatment capable of making an improvement to the playing surface. No part of that contractually agreed performance was in fact delivered. Although this was a contract where the performance was to be measured in terms of “input”, the vital elements of the input were that the work should comply with the term as to reasonable care and skill, and that it should be capable of making an improvement to the pitch. The judge was entitled to find that the breaches of these terms were so serious that the respondent had received no part of the contractual performance for which it had contracted. The significance of the finding of total failure of consideration was that Yeovil was discharged from its obligation to pay the contract price.
(2) However, that did not mean that the respondent was also entitled to insist on the appellant paying for the full cost of the renovation works by the other company. The appellant’s primary obligations under the contract were replaced by an obligation to compensate the respondent for the loss sustained as a result of the non-performance of the contract. Those damages could be assessed by reference to any additional cost to the respondent of arranging for the work to be done by someone else, but the appellant could not at the same time be denied payment and also rendered liable for the entire cost of obtaining a substitute performance.
(3) The renovation works by the other company went further than restoring the pitches to the condition that they would have been in had the appellant done nothing. Those works were in reality an alternative treatment of the pitches, aimed at achieving an improvement in them. Approaching the matter in that way, the most that the respondent could recover on the counterclaim was the amount by which the cost of the renovation works reasonably exceeded the contract price agreed with the appellant. That would be the proper measure of the damage which the respondent had suffered by reason of the appellant’s failure to perform the contract. The judge’s award of damages on the counterclaim in the full amount of the invoice for the renovation works could not stand since it over-compensated the respondent, by awarding the respondent the costs of a substitute performance of the contract when it was relieved altogether of its obligation to pay. Since the respondent had sought only to uphold the judge’s award of the full invoiced sum, it followed that the counterclaim should be dismissed.
(4) Further, as was now common ground, the judge had erred in allowing the respondent, which was registered for VAT, to recover compensation for the VAT element of the cost of remedial works. A party that claimed lost expenditure with a VAT element did not suffer a loss of the VAT when it was able to reclaim that VAT from the Revenue. Moreover, it was now accepted that the judge had erred in awarding a sum for overtime worked by the respondent’s own employees. The fact that employees of the respondent had done work to rectify the state of the pitch did not mean that they had earned overtime in doing so. The respondent had produced no evidence from which any overtime could be quantified.
Hugh Sims QC and Steven Ball (instructed by Clarke Wilmott, of Taunton) appeared for the appellant; Graeme Sampson (instructed by Lester Aldridge, of Bournemouth) appeared for the respondent.
Sally Dobson, barrister