Housing estate — Refurbishment programme — Architects engaged by local council — Architects accepting tender by contractors — JCT Conditions 1963 forming basis of contract — Contractors failing to perform duties — Council eventually settling with contractors to leave site — Architects claiming for fees — Council counterclaiming for alleged breaches of contract and negligence — Whether architects should have given notice to contractors — Clause 25 of JCT Conditions enabling council to determine contractors’ employment provided notice by architects given — Whether contractors failed to proceed “regularly and diligently with the works” — Judgment for council on ground of architects’ failure to give notice
The plaintiff architects brought an action against the defendant, Newham London Borough Council, claiming fees alleged to be due to them under a contract of 1986 relating to refurbishment works on the Clements Avenue Housing Estate, London E16. The council counterclaimed for breaches of contract. The large estate had been built in 1948 and consisted mainly of three-storey blocks each of six flats and a small number of terraced houses. Since then its reputation had declined as a place in which to live and it was decided to rehabilitate it with the assistance of tenants, councilors, and representatives of the police, social services and the housing office. The contract between the council and plaintiff architects appointed them — in addition to their other duties — as “supervising officers”.
The architects approved the tender of a firm of contractors, M, under a JCT contract, which provided, inter alia, that if M failed “to proceed regularly and diligently with the works” then the architects could give notice which, if the default was not remedied in 14 days thereafter, would enable the contract to be determined (clause 25(1)(b)) by the council.
The programme of works involved the tenants of the flats being “decanted” in stages to other temporary accommodation while their own blocks were being refurbished. It was decided that nine weeks was an appropriate working period for each block. In the event, the overrun on each block was enormous so that the tenants were kept out of their homes for much longer than anticipated, eg in one block, work due to be completed in November 1987 was in fact completed in June 1988.
After inconclusive consultations with the architects concerning the determination of the contractors’ employment, as well as having sought legal advice, the council officers themselves negotiated a settlement with M, which terminated M’s employment in 1988. By then it seemed certain that a year or more would elapse after the contractual period had expired before completion, the tenants had become more and more angry, and problems had arisen with the council’s need to keep expenditure within central government requirements.
M were paid £1,480,000 for work done and the council waived any claim to liquidated damages. Thereafter the council also terminated the architects’ employment. On questions of liability, the judge found in the architects’ favour on six out of seven allegations concerning alleged negligence and failures of breach of contract. The last allegation was that the architects had failed to give a notice of default to M on the grounds that the contractor had failed “to proceed regularly and diligently with the works” under clause 25(1)(b). In Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] 1 Ch 233, which was the only English decision in which those words were considered in the context of a JCT contract, it was said that “regularly and diligently” were “elusive” words. They conveyed a sense of activity and of orderly progress, but provided little aid on the question of how much progress was to be expected.
Held Judgment for the council.
1. In the light of the cases, textbooks and expert evidence, the court concluded that “regularly and diligently” should be construed together.
2. In essence the words meant simply that contractors must go about their work in such a way as to achieve their contractual obligations. This required them to plan their work, to lead and to manage their work force, to provide sufficient and proper materials and to employ competent tradesmen so that the works were fully carried out to an acceptable standard and that all time, sequence and other provisions of the contract were fulfilled.
3. On the factual evidence, M did not plan their work properly, did not provide efficient leadership and at least some of their tradespeople were not reasonably competent in terms of speed and/or quality of work. Moreover, the contractors had gone on to an estate which was tenanted and it was made plain how important it was that the tenants were to be returned to their homes as speedily as possible.
4. M had failed regularly and diligently to proceed with the works and the architects should properly have served them with a notice specifying their default so as to have enabled the council to determine M’s employment. The architects had been fully aware of M’s many deficiencies and had urged them to bring about improvements. The only effective sanction was to serve M with a notice. It was also the only way in which the council could, on M’s failure to comply with the notice, terminate their employment. The council had drawn the architects attention to the possibility of determining the contract, but the architects steadfastly maintained their position that M’s performance had not come within clause 25(1)(b) although they had been without authoritative guidance as to the meaning of “regularly and diligently”.
5. In the event, as a result of the failure to issue M with a notice, the council was prevented from terminating M’s employment while keeping the contract in existence. They were deprived of the very advantageous position which they would otherwise have enjoyed under clause 25, and in those circumstances, they acted reasonably in negotiating an agreement with M. Damages for losses flowing directly from proven breach of contract were to be assessed as to amount.
Richard Fernyhough QC and Adrian Williamson (instructed by Alastair Thompson & Co) appeared for the plaintiff/appellant; Humphrey Lloyd QC and Kim Franklin (instructed by Fenwick Elliott & Burns) appeared for the defendant/respondents, Newham London Borough Council.
