Furmans Electrical Contractors v Elecref Ltd

This is an appeal from a judgment of Mr Recorder Burrell QC dated 18^th July 2008 sitting in the Grimsby County Court. He gave judgment in favour of the respondents (Furmans) against the appellants (Elecref) in the sum of £7,751.31 and ordered Elecref to pay the costs.

Furmans were subcontractors to Elecref who were themselves subcontractors supplying electrical items on many contracts. Furmans installed the cabling. They were originally remunerated on a meterage installed basis, and during that period Furmans’ men worked simply as long as it took them to install the cabling but (it seems) no more than a nine hour day. From about July 2004 Elecref began to employ Furmans on the basis of a daily rate for some jobs. The recorder found that it was originally agreed that Elecref would pay a daily rate calculated on the basis of £650 for four men for the day, and £700 if the site was far away, to include accommodation. But he also found that nothing was mentioned as to the number of hours on which a daily rate was based. There is no appeal against that finding.

It seems that Furmans charged the daily rate basing their figure on a nine hour day for 4 men although Elecref’s own men were working an 11 hour day. They also charged half the daily rate if they only worked half a day, although the evidence did not show precisely how many hours that entailed. They furthermore charged the daily rate with accommodation on certain Fridays, even though accommodation was not used.

Invoices were sent charging the daily rates or the half day rate and charging for the Friday with accommodation over a considerable period of time. The invoices before the judge covered the period February to October 2007. Almost all the invoices have markings on them confirming they were checked by the site supervisors at Elecref. Up until September invoices were paid, albeit late, without any question being raised by Elecref. The judge found in relation to the site supervisors that they “did not know the precise basis of the hours that should have been worked per day, as contended for by Mr Bride, and should have been the subject of previous agreement. None of the invoices set out the actual hours worked, or the hours being charged for.”[paragraph19] and then at paragraph 27 “As to the site supervisors signing off the invoices . . . they did not know . . . what [Furmans’] hourly daily rate actually was and they did not know what was being contended for. They were not on notice of any contractual hourly day rate, either as being contended for by [Furmans] or as contended for by [Elecref].” Then in paragraph 28 “I accept Mr Bride’s evidence that all they knew was that [Furmans] were on site working for a specified period of time per day and claiming the sum of £650 per day.”

In September 2007 there was a sum outstanding on the basis of Furmans’ invoices. At about this time Mr Furman notified Mr Bride that he was intending to increase his daily rate. Mr Bride for Elecref protested by fax dated 5^th September 2007 in the following terms:-

“Re: Working hours

Andy, it has been flagged to me that when you are working on day work for us you are not working the same hours as your lads as per the agreement. When we discussed this you agreed that if we w(h)ere working 11hrs or 12hrs per day you would be doing the same with your men and starting and leaving at the same time. I understand that your lads arrive at 8ish and leave at 6. They take 1 hr for lunch that gives us a 9hr working day.

They also leave site at lunch or 10 o’clock on a Friday and we are charged the same amount for this day, given that you have no accommodation to pay for the Friday this should be £120.00 cheaper for this fact alone.

Taken the amount of days you have been working on day work with the 2No crews you can see that it adds up to a vast loss of working hours and over charge for the Friday rate and accommodation charges.

Since April you have worked approx 158 days, giving 31No Fridays. Your rates roughly work out to £62.00 per hour for the 4 man team.

If we w(h)ere to say 1.5hrs per day Monday to Thursday this equates to 186 hrs @ £62.00 = £11,532.00.

Digs monies for the Friday add up to another £3720.00, not counting the lost hours.

You send through a letter stating you’re increasing your rates when you should be in fact reducing these due to increasing the number of employees against your overheads, and I was going to be talking to you about a £50.00 per day reduction in your rates. We have been approached directly by some of your employees regarding employment (which I have told the contract guys that I’m not prepared to discuss due to our working relationship) and we know what you pay.

I would respectfully suggest that you revue your hours/rates, or we revert to price works, and need your answers by 9 o’clock tomorrow.”

That fax would indicate that Elecref had the means of checking the number of hours being worked by Furmans and had made the checks and discovered what hours were being worked.

The response of Furmans was as follows:-

“Richard, In reply to your fax dated 5^th September. My terms and conditions clearly state our working hours are 8 till 6, I have never entered into any agreement to work otherwise, we actually take 45 mins for our lunch. The issue of a Friday leaving time is wrong, I have reviewed the invoices from April on wards with 22 of them being for local work (within 1.5 hrs travelling radius) thus a normal leaving time, with the remainder being a mix of two week trips where there would only be one Friday as a leaving for home day when this occurred we would leave the same time as your lads.

More recently on the one-week visits we have left same time as your lads have, for instance with Danny Kennedy at Hemmel We left at one o’clock on the Friday.

In my terms/rates Notices it states a higher rate for away work or “extended travel” more than 1.5 hrs this covers the extra travel or accommodation.

I understand you have been approached by two members of my staff, with regard to this I expect you to honour my confidentiality with any disclosures you may find, as naturally I do that of yours and your company.

In reply to your final paragraph I have reviewed my hours and rates, as we know not to your approval. Future works would be on a price basis as this would save any further misunderstands.”

Mr Furman at the trial sought to support his assertion that his terms and conditions stated that his rates were on the basis of four men or three men working a maximum of 8 am till 6 pm on the basis of a fax which he said he had sent to Mr Bride of Elecref on 10^th September 2006. The recorder had some doubts about the authenticity of that fax but in any event found it had not been received by Mr Bride. He thus rejected Furmans case that a “maximum 8 am to 6 pm” had been agreed as the hours on which the daily rate would be based.

On the other hand he also rejected Mr Bride’s evidence that an 11 hour day had been agreed as the basis for the daily rate, although the recorder did accept the evidence of Mr Bride supported by a former employee of Elecref Mr Green that “a reasonable claim at £650 per day should have been based on the 11 hours per day and not 9 because 9 was not commercially viable”.

Despite Mr Bride’s protest on 5^th September and following Mr Furman’s response quoted above, Elecref paid a further £26,129.99 on 2^nd October 2007. They then refused to pay further invoices for August to October 2007.

On receipt of a further letter claiming the outstanding sums Elecref faxed Furmans on 17^th October 2007 asserting that there was an agreement that Furmans would work the same number of hours as Elecref’s employees and requesting time sheets so that an invoice could be issued for the overcharge.

Furmans issued proceedings on 30^th November 2007 claiming £23,203.31 which related to six invoices between 26^th August 2007 and 23^rd October 2007.

The claim form simply said:-

“The claim is for £22718.74 being the price of services rendered and materials supplied by the Claimant to the Defendant and detailed on invoices raised between 26 August 2007 and 23 October 2007, full particulars of which have been delivered to the Defendant.”

Elecref put in a defence and counterclaim and supplied Further Information of that Defence and Counterclaim. The Counterclaim asserted that “[Elecref] claims that [Furmans] is in breach of the verbal agreement that the daily rate would be based on its men working an 11 or 12 hour day and accordingly [Elecref] counterclaims the sum of £40,529.37 . . .” By further information supplied Elecref asserted that an oral agreement had been reached on or around 28^th July 2004 that Furmans would work at a daily rate. That rate was asserted to be £700 for four men local rate and £800 away rate for four men, to include accommodation for the period between 1^st July 2007 and 31^st October 2007 and that the daily rate would be based on an 11 or 12 hour day. With the further information Elecref also supplied a schedule of seven pages setting out their calculation of what they alleged were overcharges under the invoices already paid, and on the invoices outstanding stating that they based the calculations on the basis that the rate was based on an 11 hour day.

By their reply Furmans admitted certain aspects of the defence. Importantly they pleaded that it was their case that Furmans “worked for [Elecref] on agreed and established daily rates.” The reply did not assert what hours Furmans alleged were the appropriate number of hours on which the daily rates were based. Furthermore Mr Furman’s statement would suggest that Furmans’ case was that they could charge a daily rate “no matter how much work was involved” and “whether we came back on the next day for 1 minute or for ten hours . . . was irrelevant . . . because we could charge them for that full day’s rate.” [See paragraphs 8 and 10].

At trial however it is common ground that the contest became whether, as Mr Bride said, it was agreed that 11 or 12 hours were the hours on which a daily rate would be based or whether as Mr Furman was suggesting, in reliance on his fax, that a maximum of 8 am to 6 pm was the number of hours on which the rate was based.

The fact that on some occasions Furmans had charged for only half a day made the position taken up in Mr Furman’s statement difficult to maintain and was no doubt the reason why the case was run as it was.

It will be noted that neither side had pleaded “quantum meruit” either as a basis for being entitled to be paid on the outstanding invoices or as a basis for being entitled to the return of money already paid.

The recorder found that, between 2004 and December 2006, if daily rates were the basis on which Furmans were employed the daily rate agreed was “£650 (distance to job one and half hours) – with digs £750 weekend Saturday £850 and Sunday £950” all as set out in a fax from Furmans dated 28^th July 2004, which Mr Bride accepted he got. The recorder also found that during this period it was more common for the parties to work on a meterage basis.

The recorder, having found that the 10^th September 2006 fax referring to the same daily rates but also referring to the hours as 8 am to 6 pm maximum was not received, found that in December 2006 things changed and the parties from this time worked on a daily rate basis. He found that Furmans continued to base their daily rate on the basis of a 9 hour working day.

He found that in January 2007 Mr Furman informed Mr Bride of an increase of £50 to each of the rates previously set out in the fax of 28^th July 2004. I understand the judge to have found that Mr Bride agreed those increases and that it was Mr Bride’s manuscript notes on page 119 of the trial bundle recording those increases. The invoices certainly seem to indicate a daily rate of £800, which I would understand to be the daily plus accommodation rate as originally agreed at £750 plus £50; [see for example invoice of 18/3/2007 charging £800 and £400 for a half day.]

The judge found that on 5^th September 2007 Mr Bride sent the fax quoted above, asserting that there had been overcharging. That fax did not in fact make any claim for reimbursement. He further records there was an issue as to whether, just before this fax or just after, Mr Furman was saying he would have to raise his rates but that he need not decide that issue, and he simply recorded that the parties then fell out.

He found that nothing was agreed about the number of hours on which a daily rate should be based. He rejected Ms Toman’s argument for Furmans that there was a course of dealing which established 9 hours as the rate because the judge found that Mr Bride was unaware of the basis on which Furmans were charging and that such knowledge as the site supervisors had was insufficient to bring about any agreement by conduct.

He then found that since no agreement had been reached on the number of hours on which a daily rate should be based that Furmans’ claim under all the invoices, whether what had been paid or what was being claimed, was on a quantum meruit. He assessed the quantum meruit by reference to Mr Green and Mr Bride’s evidence that “£650 per day was reasonable for an 11 hour day but not a 9 hour day”.

As the judge mentioned quantum meruit when giving his judgment, Ms Toman protested that quantum meruit “had never been pleaded against us”. Mr Pennock in turn suggested it did not have to be pleaded because it was a point of law. Ms Toman refuted that suggestion but neither counsel was allowed to make any substantial submissions and the Recorder continued with his judgment.

He found that a quantum meruit was the appropriate basis on which to assess Furmans’ claim. He did not distinguish between invoices already paid and those unpaid and simply assessed the sum that would have been due on a quantum meruit in relation to works already paid for and what was due for the work unpaid for. He did that by reference to Elecref’s counterclaim. As to that, he found that there was no evidential support for Elecref’s counterclaim at over £40,000. He relied on Mr Bride’s and Mr Green’s evidence as to what was a reasonable rate. He found that the 5^th September fax was a good guestimate by Mr Bride of the amounts by which they had been overcharged and were being overcharged. In the result he took £15,252 away from the amount being claimed, £23,203.31, and gave judgment for £7,751.31. The effect of his judgment was to order repayment of sums already paid.

The recorder refused both sides’ permission to appeal. It was Elecref who sought permission to appeal from the Court of Appeal. The basis on which they sought permission was the fact that they had discovered that owing to an error only four pages of the schedule supporting their counterclaim had been included in the trial bundle. They wished to argue that the recorder would not have dismissed the schedule as being unsupported by evidence if all seven sheets had been in the bundle, showing how their counterclaim for £40,529.37 was calculated. They sought permission to argue that on that basis and, in reliance on the recorder’s findings, the reasonable number of hours for the daily rate was 11 and not 9, that by a process of applying the recorder’s reasoning to their 7-page schedule their counterclaim succeeded to a significantly greater degree than that awarded by the recorder.

Furmans put in a respondents’ notice. They wished to argue first that by a course of conduct the 9 hours had been agreed as the number of hours on which the daily rate would be based. They also wished to assert that the judge’s decision was unjust because the judge’s finding was based on “a reasonable rate”, that the “reasonable rate” had not been raised on the pleadings and they had not had any opportunity to deal with that aspect. We gave the respondents permission to appeal at the commencement of the hearing before us. Although no squarely raised in the respondents’ notice, as argument in the Court of Appeal demonstrated, part of the aspect that needed consideration was whether if no express argument or representation as hours was established (that being the only pleaded case in the counterclaim) there was still a basis on which the paid invoices could be re-opened.

When the matter came to be argued before us both sides appreciated that something had gone seriously wrong when a claim such as this, over relatively insubstantial sums of money, had been fought in the County Court at considerable cost and was now being refought in the Court of Appeal at further substantial expense. Furthermore both realised that some of the arguments they were raising might lead in other circumstances to an order for the matter to be retried. But in their clients’ interests both counsel anxiously wished to avoid that solution if at all possible.

There was a moment during the hearing when it seemed possible that for one or other side’s arguments to be put it would be necessary to consider whether amendments to the pleading ought to be made. Mr Pennock, for example was seeking to argue that the effect of the judge’s finding was that there never was a contract between the parties and that in the result his clients were entitled to have their money back on the invoices overpaid but give credit for a “quantum meruit” in relation to the value of the work performed. There was no sign of such a point on the pleadings. Equally Ms Toman’s argument, that 9 hours had been agreed by a course of dealing, also found no paragraph in a pleading although since the point had been argued at the trial Mr Pennock was not taking that point.

Ultimately we ruled it would be quite disproportionate to encourage any thought that pleadings could be amended at this stage, or to encourage any process which might lead to an order for a retrial. We ruled that the right course was not to allow any amendments and to approach the case on the basis of the pleadings as they stood without, of course, since this was a County Court case, being too strict about that position where points had in fact been dealt with at the trial and evidence addressed to the same.

On the pleadings it seemed to us that the claim was a standard claim in this type of case. The claim form simply alleged that services had been provided and the claim was for sums set out in the unpaid invoices. It did not plead any express terms as to price and prima facie the claim was based on a contract or possibly more accurately on a series of contracts to supply services and materials as identified in invoices. Without more what the claimant would be entitled to is a reasonable sum for those services and materials. That, I should emphasise, is not strictly a quantum meruit claim. A quantum meruit claim is a restitutionary claim which can be made when there is no contract. [See the judgment of Goff J as he then was in BSC v Cleveland Bridge Co [1984] 1 All E R 504]. That case itself shows that a court will be reluctant to find no contract, albeit that was the conclusion in the particular circumstances of that case. Simply because no price has been agreed expressly does not lead to the conclusion that there is no contract. The contract may simply be one for a reasonable price.

Ultimately in this case it became clear, at least at the trial, that a daily rate had been agreed for both the day when the work was reasonably local and the rate when accommodation should be supplied. The first issue for the recorder was whether there had been an express agreement as to the number of hours on which those daily rates had been based and he found no such express agreement. The second issue he considered was whether the number of hours had been agreed by a course of conduct. Once the court rejected that contention, this was a case where there would be no difficulty finding that there was a contract, or more accurately a series of individual contracts under which Furmans agreed to supply services and materials for Elecref at a daily rate, assessed on the basis of a reasonable number of hours.

Although the recorder called it a “quantum meruit claim” this was in fact the exercise he performed, but (and this is the real point on this appeal) he made no distinction between the paid and the unpaid invoices. If he had dealt with the unpaid invoices alone he would have found that Furmans were entitled to a daily rate, as agreed, based on a reasonable number of hours which he would have assessed at 11. He would further have had to decide whether Furmans were entitled to charge the rate including accommodation when the day was a Friday and the accommodation was not needed.

As I have indicated, the judge found no express agreement as to the number of hours on which the daily rate should be based and there is no appeal from that finding. He also rejected the submission of an agreement made by virtue of a course of dealing. That is a point appealed by Furmans with which I should deal at this stage.

If the invoices had spelt out that the daily rate was calculated on the basis of a 9 hour day, that might have provided a basis for an agreement by virtue of a continuous acceptance of such invoices. But Furmans’ case, as set out in Mr Furman’s statement, was that a daily rate was payable for any number of hours worked during the day however few, but his case when he gave evidence was that the rate was worked out on a basis of “8 am to 6 pm maximum”. The invoices cannot be said to have spelt out clearly the basis on which Furmans were calculating the daily rate, and since Mr Furman did not apparently himself know quite what the basis for the daily rate was it is difficult to spell out with any certainty a course of conduct which could lead to a contract. I would reject, as did the judge, a contract formed by course of conduct.

Thus, so far as the claim is concerned, the question which should have arisen was what was the reasonable sum due on the outstanding invoices? The recorder never actually made that calculation because of the view he took as to the position on the paid invoices.

The recorder simply took the view that the issues relating to the paid invoices were precisely the same as for the unpaid invoices. He thus thought that what he was concerned to do was to calculate what sum had been over-charged on the paid invoices and was being charged on the unpaid invoices and set that off against the claim. If he had done that with all seven pages of the schedule in mind, the result might well have been that a sum was due in Elecref’s favour. But in failing to distinguish between paid and unpaid he, in my view, fell into error.

The counterclaim claimed that there was breach of an agreement as to the number of hours on which the daily rate should be based. If that oral agreement had been established, that might have provided a basis on which it might have been permissible to reopen the paid invoices. Elecref would have been entitled to say that they paid on the basis of that agreement and on the basis of a representation that 11 or 12 was the number of hours on which a daily rate was based. Whether that case would have succeeded, I do not need to consider but I should just say that since the agreement if any was made in July 2004 I do find it a little difficult to think that with site supervisors signing off invoices all during that time and even though there may only have been few such invoices, Elecref could really say that they continued to rely during 2007 on a representation that Furmans were working 11 hours a day. Be that as it may, Elecref did not establish an oral agreement and they did not thus establish that Furmans had ever “represented” that they were basing their daily rate on an 11 to 12 hour day.

It follows that Furmans had put in invoices claiming daily rates which were not contrary to any agreement or representation. The invoices were paid after checking by the site supervisors over a substantial period of time even prior to the period covered by the unpaid invoices being considered at the trial. It is unclear precisely what the site supervisors knew but, in relation to paying a daily rate for Fridays when accommodation had not been needed, the invoices and knowledge of when the men had been on site would seem to speak for themselves. That Furmans were working nine hours when Elecref’s men were working 11 hours was information they were certainly in a position to check, and something that during a period February 2007 to April 2007 they should have checked. That alone creates a difficulty in seeking to reopen the invoices paid. But what creates an insuperable difficulty is that in September 2007 Elecref actually voiced doubts as to whether they were being overcharged, appreciating that only 9 hours were being worked and claims were being made for accommodation on a Friday when it was not being used. But still they made no claim for the return of any money and indeed followed the protest with a very substantial payment.

Elecref did not allege in their counterclaim any basis other than the oral agreement on which they should be allowed to reopen the paid invoices. They did not plead any mistake or other misrepresentation. They did not establish the oral agreement nor did they in fact establish at trial any mistake or other misrepresentation. Furthermore in making a substantial payment once they knew of the complaint they were making, even if there had been some mistake or representation they waived their rights. They thus did not establish any basis on which they were entitled to reopen the invoices already paid.

Chitty 30^th Edition paragraphs 29-186 to 188 identify the basis on which payments made might be reclaimed. Paragraph 29-187 begins as follows “Where the payer has doubts but pays nevertheless, he is unlikely to be able to recover the payments . . . ”, and even where the payer has no doubts a payer will not recover where the “payer has waived any claim to recover the money or has assumed the risk of any mistake.” [See paragraph 29-188.]

In getting the site supervisors to check, and with the knowledge that the judge found those supervisors to have and remembering that actually those checks had gone back as far as February 2007 and for a few invoices earlier than that, I think, even as at September 2007, Elecref would be likely to have been held to have assumed the risk of any mistake. Once having raised the doubts, and not reclaimed money but paid a substantial sum they waived any claim to recover the money and that put the matter beyond doubt.

Thus, the question which the recorder should have addressed was simply what is the reasonable sum that Furmans were entitled to receive on their unpaid invoices? The total deductions claimed by Elecref on those invoices appear to be £3591.02. Mr Pennock and Ms Toman did not address us on the figures themselves but it is clearly desirable that rather than send the matter back to be assessed we should do our best.

I would deduct £3,500.00 from the sum claimed but would be prepared to consider written submissions to allow Ms Toman or Mr Pennock the opportunity of showing that, even on the basis indicated, my calculations are wrong..

It follows however that the appeal of the respondents must be allowed and judgment entered for the appropriate sum. It also follows that the appeal of the appellants must be dismissed.

I agree.

I also agree.