Building contract – Damages – Summary judgment – Claimants suing defendant building contractor for damages following fire in house – Claimants applying for summary judgment – Whether parties entering into oral agreement in respect of building works – Whether claimants proving causation with requisite degree of certainty – Application granted
A fire which started in the roof destroyed a large house which was in the course of construction in Poole Harbour, Dorset. The fire claimant owners brought proceedings against the defendant building contractor claiming damages in excess of £3,500,000. They contended that the fire originated in the roof space in the area where the chimney passed through the roof and was caused by a combination of defects in the manner in which the chimney had been installed. The defendant argued that it did not have a contract with the claimants in respect of the installation of the chimney since the work had been subcontracted to a third party at the claimants’ request.
The defendant had tendered for phase 1 of the works on the basis of a document entitled “Specification for Phase 1”. Although there had been talk of a letter of intent being issued, none had been forthcoming and no written contract was executed until well after practical completion of the phase 1 works. However, the specification for phase 1 stated that the JCT Intermediate Building Contract with Contractor’s Design 2005, Revision 2, 2009 would apply and, even before the contract for the phase 1 works was executed, the parties conducted themselves as if the terms of the standard form of contract applied. Despite clear references to letters of intent for phases 1 and 3 of the works, none had been issued.
The claimants applied for summary judgment pursuant to CPR 24 for damages to be assessed and for a substantial interim payment.
Held: The application was granted.
(1) Since no contract in writing had been executed, any contractual consensus must have involved either an oral statement of offer or acceptance or conduct which, viewed objectively, demonstrated that consensus had been reached. Where parties had carried out works and been paid, the court would scrutinise with care a suggestion that they did so without a contract being in existence. The fact that the transaction had been performed on both sides would make it unrealistic to argue that there was no intention to enter into legal relations. It would also be difficult to submit that the contract was void for vagueness or uncertainty. In a case of contracts for future performance over a period, where the parties might desire or need to leave matters to be adjusted in the working out of their contract, the court would assist the parties to do so in order to preserve rather than destroy bargains, on the basis that what could be made certain was itself certain. That was especially the case where one party had either already had the advantage of some performance which reflected the parties’ agreement on a long-term relationship, or had had to make an investment premised on that agreement. For those purposes, an express stipulation for a reasonable or fair measure or price would be a sufficient criterion for the courts to act on. But even in the absence of express language, the courts were prepared to imply an obligation in terms of what was reasonable. Applying those principles to the present case, the parties had clearly entered into a contract which incorporated the terms of the JCT Intermediate Building Contract with Contractor’s Design 2005, Revision 2, 2009: G Percy Trentham v Archital Luxfer Ltd [1993] 1 Lloyds Rep 25, Mamidoil-Jetoil Greek Petroleum SA v Okta Crude Refinery AD No 1 [2001] EWCA Civ 406 applied.
(2) Letters of intent were typically sent where the parties were not in a position to enter into a projected contract towards which they might have been working, but the employer instructed the contractor to take certain steps that would be included in their projected contract if it had been concluded, whether by executing formal contract documents or otherwise. The issuing of an instruction by a letter of intent was itself capable of giving rise to a contract, which was separate from the projected contract. The court had to assess whether or not a contract had been formed applying the same objective approach to the primary facts and to the factual matrix as applied in any other case. For there to be a contract there needed to be sufficient certainty about necessary terms, but lack of precision or certainty about peripheral matters need not prevent the formation of a contract. Where the nature and established terms justified it, the court might hold that the contract included implied as well as express terms. Thus, although the fact of a letter of intent would generally show that a projected contract had not yet been concluded, it did not follow that the relations between the parties when services were performed pursuant to the letter were subject to no contractually binding obligations at all. In the present case, the instructions given by email gave sufficient certainty for the conclusion of a contract: Diamond Build Ltd v Clapham Park Homes Ltd [2008] EWHC 1439 (TCC) and Twintec Ltd v Volkerfitzpatrich Ltd [2014] EWHC 10 (TCC) applied; Mamidoil-Jetoil Greek Petroleum SA v Okta Crude Refinery considered.
(3) Since the defendant had not advanced a case that either the chimney or its installation had been inadequately designed, the claimant’s workmanship case against the defendant was overwhelming. With the certainty necessary to justify summary judgment, the court had concluded that the fire had been caused in the roof space as a result of defective installation of the chimney and that there was no realistic prospect of any other explanation or cause being established if the case went to trial.
Richard Wilmot-Smith QC and Julian Field (instructed by DAC Beachcroft LLP) appeared for the claimants; Stuart Catchpole QC and Karim Ghaly (instructed by Clyde & Co LLP) appeared for the defendant.
Eileen O’Grady, barrister
