Sykes & Anor v Packham (t/a Bathroom Specialist)

By his order dated 21^st January, 2010 (“the judgment” or “the order”, as appropriate), HH Roger Connor gave judgment for the then Claimant (now “the Respondent”) in the amount of £25,910.72 plus £8,282.80 by way of interest, a total of £34,183.52, to be paid within 28 days. The Judge further ordered that the then Defendants (now “the Appellants”) pay the Respondent 85% of his costs of the claim and counterclaim on the bases set out in the order. The Judge refused the Appellants’ applications for permission to appeal and for a stay of execution.

As explained in the Judgment, the Respondent is a plumber and heating engineer, trading, at the material time, as a bathroom specialist. He claimed in respect of work done by him at a substantial house called Midsummer Moon at Wavendon, Milton Keynes (“the house”). The dispute relates to the period immediately before and after purchase of the house by the Appellants, in the latter part of 2005. By the claim, the Respondent sought payment for what he alleged was the balance due to him in respect of works done by him, his employees and sub-contractors at the house (“the works”) and for materials supplied. The Appellants denied that they were liable to pay any further money to the Respondent and counterclaimed, alleging overpayment and that some of the work done by the Respondent (or his employees or sub-contractors) was defective. As already recorded, the Judge found in favour of the Respondent in the amounts set out in the order.

The Appellants sought permission to appeal from the judgment, on the following three grounds:

The single Lord Justice granted permission to appeal on all these grounds, together with a stay of execution (by reason of the Respondent’s financial difficulties). There had been a further ground of appeal as to matters arising from the draft judgment; the single Lord Justice refused permission to appeal in this regard and the Appellants did not pursue it before us. Nothing more need be said of it.

There is also before this Court a Respondent’s Notice (“the cross-appeal”), advanced on two grounds::

There are, accordingly, four principal issues for decision by this Court:

Pausing here, this litigation prompts a number of reflections. It concerns a domestic building contract which, on any view, went badly awry. The resolution of the disputes which have arisen matters greatly to both parties. On the facts found by the Judge, the Respondent is (or was) a small builder, honest but unsophisticated; as we understand it, he is now bankrupt with liabilities to Her Majesty’s Revenue and Customs. So far as concerns the Appellants, there can be no minimising the severity of various findings made by the Judge as to their credibility (in particular, that of the first Appellant), findings which have not been appealed – leading to the Judge’s conclusion (at [52] of the judgment) that where there were conflicts in the evidence between the parties “in most matters I prefer the evidence of the Claimant”. That said, it only fair to record that the Appellants were always on what might be termed a hiding to nothing – given the Respondent’s impecuniosity, there has never been a realistic prospect (whatever the merits of the Appellants’ case) of recovery from him.

Against this background, I confess to some sympathy with both parties, not to mention the Judge holding the ring. A case of this nature, where the costs of protracted litigation may so readily exceed the sums in issue, necessarily gives rise to acute concerns. In such circumstances, giving effect to the “overriding objective” (CPR, Part 1.1) presents a formidable challenge. There is a need to strike the right balance between saving expense, proportionality, expedition and fairness – all components of dealing with a case justly (CPR, ibid). As will be seen, this is indeed what the Judge, to his credit, has sought to do. The underlying question on the appeal is whether he was right in what he did.

Before proceeding further, it will be convenient to outline the Judge’s principal findings.

As is not in dispute, the key document was an “estimate” dated 25^th May, 2005 (“the estimate”), of which more below. The Judge’s central conclusions with regard to the estimate and, in consequence, the approach he thought it right to adopt, were as follows:

“ 54. ….having regard to the round figures given and the terminology used in the estimate, no reasonable person reading the estimate could…have thought that the Claimant was offering to supply the goods in question for a fixed price, notwithstanding the passage referring to changes in manufacturers’ list prices……

55.

As to whether the decision of the Defendants to instruct the Claimant to do the work gave rise to an agreement to provide the necessary labour for a fixed price, or a contract upon some other basis I, again, conclude that no reasonable person, reading the oft repeated phrase, ‘Approximate labour and expenses costs’ would have concluded that the Claimant was offering to provide the labour required for a fixed price. I am reinforced in that view by the evidence of the Claimant that the Defendants had asked him to provide a quotation and he told them that he was unable to do so…..If, as I accept, the Defendants asked the Claimant for a quotation and were told that he could only provide an estimate, it is simply not credible that they believed that, by his estimate, he was offering to carry out the works for a fixed price.

56.

On the other hand, I cannot read into the words used in the estimate or, indeed, any other part of the evidence, any basis for concluding….that the Defendants agreed to pay for the works upon …..a form of costs plus contract. There is simply no evidence that that is what was agreed and there is no basis upon which I could conclude that such an agreement is to be inferred. Conspicuously, there is no evidence as to what the ‘plus’ would be. In the absence of an express agreement as to how the price of the works was to be ascertained, I conclude that there was an implied agreement that the price to be paid would be a reasonable price for the work to be done and the materials to be supplied, as would also be the case in respect of the additional works, no other means of ascertaining the price having been agreed…

………

58.

Evidence to assist me in determining the amount of a reasonable price in this case is by no means abundant. I do, of course, have the experts’ report giving me figures in respect of their valuation of the additional works. However……that evidence is of limited value because the experts had no means of assessing the amount of time wasted due to the presence of other trades or the amount of additional work resulting from changes in instructions given by the Defendants. I perceive that my duty, in those circumstances, is to seek to assess what would have been a reasonable price, doing the best I can. There must, inevitably, be an element of rough justice in this process. (I could, of course, decline to make this finding and adjourn the case for further enquiry. However, this would, in my view, be incompatible with the requirements of the overriding objective set out in part 1.1 of the Civil Procedure Rules, particularly having regard to the lack of proportionality between the costs involved and the sums remaining in issue and the further delay that would result.) ”

Thereafter the Judge proceeded to consider the reasonable price payable under the contract, with reference to amounts paid by the Respondent (1) by way of wages, (2) to sub-contractors and (3) for materials, tools, equipment and items supplied; further, the Judge concluded that the Respondent must be entitled (whether by way of addition to the above items or separately) to (4) appropriate sums in respect of his own labour and an element of profit.

In very broad terms, the Judge’s conclusions with regard to these items were as follows:

As recorded in the judgment, the Judge’s decisions produced the following overall figures (“the schedule”):

“Wages £21,500.00

80% of wages £17,200.00

Claimant’s ‘wages’ £14,867.00

Sub-contractors £13,603.86

Purchases £28,255.45

Sub-total £73,926.31

Profit

25% on wages £ 4,300.00

15% on purchases £ 4,238.32

20% on sub-contractors £ 2,720.77

Total £85,185.40

Add VAT @ 17.5% £14,907.44

Total £100,092.84

Less paid by Defendants £ 68,280.88

Amount allowed on

the claim £31,811.96

Sum allowed on

counterclaim £ 6,207.25

Balance £25,604.71 ”

As will be apparent, there is a small discrepancy between the balance found by the Judge (£25,604.71) and the amount contained in the order (£25,910.72). It was suggested during the hearing that this discrepancy could be resolved if the amount recorded in the schedule for purchases was corrected to read £28,481.91 (thus also producing a slightly different VAT figure). I am not minded to take up more time over this tiny difference. I propose to follow the figure contained in the order and to make the necessary correction to the figure for purchases in the schedule in order to do so.

(1) The estimate: The key document is the estimate, to which reference has already been made, submitted by the Respondent to the Appellants. The opening lines described it as a:

“…revised estimate of cost to partially refurnish the interior of your future home as your specification and choice of equipment.”

The estimate went on to describe, at least in general terms, the substantial works to be done; bathroom equipment was to be supplied and fitted “as individual room design and final specification”. When dealing with bathrooms, the estimate gave a “general specification”. When giving a room by room breakdown, the estimate spoke throughout of “approximate materials and equipment costs” and “approximate labour and expenses costs”. For each room, an “estimated total” was given.

On the final page, the estimate set out various proposed terms as follows:

“ Request payment of VAT (£13,230.00) as deposit at Approval.

Payment of materials (£34,420.00) at commencement.

Balance (£41,180.00) on completion

……..

Any extra works requested, may be subject to extra costs.

Proposed start date during week commencing: 4^th July 2005

This Estimate is calculated on current retail prices for all materials and equipment, all fixing materials and sundry items.

Materials cost will be subject to any manufacturers price increases at time of installation.

Labour and expenses costs are for approximately 8 weeks working time…….

…..

If this estimate is acceptable, please sign and return one copy so that we may finalise equipment to use and arrange a suitable start date. ”

The total price of the works described in the estimate came to £88,830, including VAT.

(2) The Judgment – further findings: The Judge’s central findings as to the estimate have already been set out. Matters do not quite end there. The Judge noted that the Appellants had supplied the Respondent with various plans; however and importantly, he went on to hold (at [53] of the judgment) that he was satisfied that, prior to preparing the estimate, the Respondent had not been supplied with the version of the specifications containing details of the bathroom equipment eventually ordered. The Judge commented in various places (see, for example, at [11] and [54] of the judgment) as to the “conspicuously round figures” given for the bathroom equipment. As recorded by the Judge (at [13] of the judgment), it was common ground that the parties had not followed the payment terms set out in the estimate.

The Respondent began work in the week commencing 4^th July, 2005. It was further common ground (judgment, [16] and following) that the Appellants asked the Respondent to carry out works additional to those described in the estimate and that other works (re-roofing and electrical) were carried out on the instructions of the Appellants by other workmen, separate from but concurrent with the Respondent’s works. In the event, the works carried out by the Respondent took a great deal longer than 8 weeks to complete (judgment, at [19]):

“ Clearly, that additional time must have been, at least in part, the result of the fact that the works to be done had become more extensive, the changes of instructions from the Defendants and the problems of access being restricted by the work of other trades.”

In the event, the Respondent’s work at the house came to an abrupt and acrimonious end on the 17^th /18^th November, 2005, for reasons rehearsed in detail in the judgment but which need not be recounted here.

(3) The rival cases: Turning to the rival cases, the Appellants focussed on the pleadings. The Respondent had simply claimed for payment pursuant to an invoice. At no stage had it been pleaded – or, for that matter, averred in evidence – that the parties agreed that a reasonable price would be payable for the works. There was no call for the Appellants to address at trial issues otherwise than those covered by the pleaded case, a fortiori, given the Respondent’s parlous financial position. The Judge had been right to reject the Respondent’s case that the parties had agreed on a “cost plus” contract; that case was unsupported by the evidence. The Judge had, however, erred in rejecting the Appellants’ contention that this was a fixed price contract. That the contractual document was described as an “estimate” was neither here nor there. The fact that the estimate referred specifically to the cost of materials being subject to manufacturers’ price increases and made express provision for charges for extra work led to the inference that, such matters apart, the estimate was a fixed price contract. The Respondent, who had obtained the work by competitive tender, was not entitled to charge more simply because he had under-estimated. In the Appellants’ submission, the Judge’s conclusion ignored the fact that the Respondent in his own evidence said that he had a fixed price contract in mind at the time the estimate was presented. The language of the estimate did not support the conclusion to which the Judge had come.

On the appeal, the Respondent relied on the shifts in the Appellants’ case (for instance as to the extent of additional works required) and on the Appellants’ choice of not engaging with issues as to the reasonableness of wages and invoices. The Judge had been entitled and right to conclude that there was an implied term that the contract price would be a reasonable price for the work done (not simply the extras). The estimate plainly did not disclose a fixed price contract; it was labelled an “estimate” and had “other elements which suggest uncertainty”. In the alternative (pursuant to the cross-appeal), the Respondent renewed the contention that this was a costs plus contract.

(4) Discussion: For my part, I agree with the Judge that the contract between the Respondent and the Appellants provided for a reasonable price to be paid for the works done. My reasons follow.

First, I agree entirely with the Judge that, contrary to the Respondent’s case at trial, this was not a cost plus contract. Quite simply, the evidence did not support it; moreover, as the Judge tellingly remarked: “Conspicuously, there is no evidence as to what the ‘plus’ would be”. It follows that I would dismiss the cross-appeal in this regard.

Secondly, I am amply persuaded that the estimate did not give rise to a fixed price contract. In this connection, I do not think that there is any “magic” in the label “estimate”; certainly in the present case, I do not regard that label as a term of art. However, I do regard both the context and language of the estimate as pointing decisively against this being a fixed price contract. By way of elaboration:

Having concluded that the estimate neither disclosed a cost plus nor a fixed price contract, the question remained as to how the works were to be priced. Here, suffice to say that I find myself unable to improve on the Judge’s conclusion, already recorded but meriting repetition:

“ In the absence of express agreement as to how the price of the works as to be ascertained, I conclude that there was an implied agreement that the price to be paid would be a reasonable price for the work to be done and the materials to be supplied, as would also be the case in respect of the additional works, no other means of ascertaining the price having been agreed.”

I agree.

(1) Introduction: As carefully explained in his judgment (at [58], set out above), this conclusion as to the nature of the estimate now posed a case management dilemma for the Judge. He could either proceed to assess what would be a reasonable price, acknowledging that in doing so there would be an element of rough justice; or he could adjourn the case, a course which, as the Judge saw it, would give rise to disproportionate cost and delay. The Judge opted for the former course. The question on this appeal is whether he was right to do so.

(2) The rival cases: For the Appellants, Mr. Hill vigorously contended that the Judge should have either dismissed the claim or required the Respondent to amend his pleadings, on terms as to costs. At the very least, the Judge should have granted the Appellants a sufficient adjournment, giving them the opportunity of adducing evidence as to the reasonableness of the manner in which labourers were deployed, the time taken and the hourly rate charged. As already foreshadowed, it was the Appellants’ contention that they had confined the case at trial to matters covered by the pleadings, so as to keep the trial short and contain costs accordingly. The case for payment of a reasonable price had only arisen late, in the course of closing submissions.

For the Respondent, Mr. Christie submitted that the CPR requirement was to plead facts not law: see, CPR, Part 16.4.1. That, said Mr. Christie, was what the Respondent had done. The question of reasonableness had been canvassed in the Reply and Defence to Counterclaim, subject only to the slight difference between contending for a cost plus contract and the case for payment of a reasonable price. When pressed for Further Information, the Respondent’s Response had in terms claimed payment of a reasonable rate for his own work. The Appellants’ assertions as to what they would have done, given an adjournment, lacked credibility, as illustrated by the claim for “extras”. That claim had always been advanced in terms of a quantum meruit; yet the Appellants had called no evidence: see, the judgment, at [18]. In short, the Appellants had not suffered any prejudice; it was not clear what additional evidence would have been forthcoming had there been an adjournment.

(3) Discussion: At least an important function of pleading is to identify the issues and the extent of the dispute between the parties: CPR, Part 16.0.2. Viewed in this light, the Respondent’s exiguous pleadings left a good deal to be desired. Thus far, there is merit in the Appellants’ case. But, to my mind, the difficulties arising from the Respondent’s pleaded case serve to introduce the dilemma confronting the Judge; they do not, at least without more, resolve it in the Appellants’ favour.

The Judge had the very considerable benefit of trying the case and was plainly apprised of the issues. He had formed a view as to the credibility of the parties. He had the relevant considerations well in mind – referring expressly both to an element of rough justice if he persevered with a view to determining a reasonable price for the works and to the consequences in terms of cost and delay if he did not and chose to adjourn. For my part, I can readily appreciate why he chose to proceed. Moreover, as it seems to me, this was a paradigm case management decision, where this Court should, if at all possible, uphold a robust, decisive approach on the part of the trial Judge unless – for present purposes – persuaded that the course taken was unfair to the Appellants. It must not be forgotten that the aim, every bit as much in more modest cases as in larger ones, is to bring the trial to a conclusion; adjournments may be tempting but come at a considerable cost.

In my judgment, the decision taken by the Judge was substantially fair to both parties and avoided the disastrous consequences of adjournment. At all events, it was a decision that the Judge was entitled to take and I do not think that it would be right for this Court to interfere. Working through the matter:

(1) The judgment and the rival cases: I have already outlined the approach adopted by the Judge in assessing a reasonable price for the Respondent’s works.

The Appellants subjected this approach to sustained criticism. No expert evidence had been relied upon; the Respondent’s actual expenditure did not or not necessarily furnish a sound basis for assessing a reasonable price. There had been no evidence as to the appropriate rates of pay for either the Respondent or his workmen. Similarly, evidence had been lacking as to whether the time taken on the works was reasonable or not. As to the amount paid to sub-contractors, the Judge had been wrong to allow a sum for CIS tax; there was no evidence that the Respondent had paid this tax or was liable to account for it. Much the same criticisms applied to the amount allowed by the Judge for materials. There was, moreover, no evidence supporting the Judge’s conclusion as to the uplift applied to the cost of wages and materials; in that regard, the Judge had gone beyond the amounts claimed by the Respondent himself. The upshot was that the Respondent had been awarded a profit element of something over £30,000 in respect of a contract which the Judge had found to be worth £85,000 odd (excluding VAT). These conclusions of the Judge, cumulatively at least, could have had a material impact on whether there was a judgment in favour of the Respondent at all.

The Respondent supported the approach adopted by the Judge. As explained by the Judge, it was too late for an expert to have made a useful contribution and an expert would not have been in a position to unravel the difficulties caused by the work of unrelated tradesmen and changes in the Appellants’ instructions: see, judgment, at [34] and [58]. In the circumstances the Judge was right to use a measure of rough justice. Insofar as the Appellants complained of the profit margins, Mr. Christie pointed out that Mr. Hill had himself suggested (in the course of cross-examining the Respondent at the trial):

“ What one would normally expect in a contract of this sort is that any extra work would be charged at materials plus 20% plus labour…..”

With this observation in mind, the uplift percentages which the Judge had awarded were hardly unreasonable.

(2) Discussion: To a considerable extent the debate on this issue represented a continuation of the hostilities in which the parties were engaged under Issue (II). Plainly, if the Judge lacked the material to assess a reasonable price, then it would be necessary to revisit his refusal to adjourn. But, consistently with my view on Issue (II), I do not think that the Judge was precluded from fairly determining a reasonable price for the works.

Faced, as already discussed, with a choice between an expensive adjournment, coupled with uncertain prospects of any further evidence of substance on the one hand and proceeding with the material he had on the other, the Judge, in adopting the latter course, essentially used the Respondent’s actual expenses as his starting point. Broadly speaking, I find little with which to quibble - not least as the Judge took a generally conservative view of the Respondent’s claim (see the judgment, at [68]) – and would only part company with the Judge on a very few matters, with decidedly limited financial consequences.

In a little more detail and following the order of the schedule:

Accordingly and to the limited extent of reducing the sums awarded for the Respondent’s own “wages”, together with the profit percentages on wages (paid to labourers) and sub-contractors, I would be minded to differ from the Judge and, to such extent only, to allow the appeal. That apart, I would dismiss the appeal on this Issue. Accordingly, the schedule, taken from the judgment and set out above, should continue to serve as a guide to the outcome of the case, subject only to the following amendments: (1) the typographical error in respect of purchases should be corrected; (2) the schedule should reflect the individual matters where, as indicated, I would allow the appeal; (3) the cross-appeal (if allowed under Issue (IV)) will need to be reflected; (4) necessarily the VAT amount and arithmetic will need adjustment.

It is to be noted that no specific argument was addressed to this Court to the effect that even if the Judge was otherwise right, then his order that the Appellants pay 85% of the Respondent’s costs was nonetheless wrong. Given the view to which I have come with regard to the appeal, I can see no basis for interfering with the order, made by the Judge, as to the costs below.

This issue concerns the remaining ground of the cross-appeal. I can take it almost summarily. The point relates solely to an arithmetical (or, possibly, clerical) error which the Respondent sought to have corrected under the slip rule – but which the Judge declined to do (understandably, perhaps, in the context of this litigation). In fairness to Mr. Hill, while not conceding the cross-appeal in this regard, he (rightly) did not advance positive submissions by way of opposition. I can see no good reason for not acceding to this ground of the cross-appeal.

In a nutshell, as is plain from the judgment, the Judge intended to award the Respondent the sum claimed in respect of sub-contractors, including CIS tax but not VAT. However, in giving effect to the relevant schedule, the Judge erred by overlooking an amount of £3,259.57 – an error easily made, having regard to the unhappy layout of the document in question. The figure for sub-contractors in the schedule should therefore be amended to read £16,863.43 (rather than £13,603.86).

Reverting to the unfinished business under Issue (III) above, I should now record the correct figure for the 15% profit margin in respect of sub-contractors. That figure comes to £16,863.43 x 0.15 = £2,529.51 (rather than £2,720.77).

I would be grateful for the assistance of counsel in drawing up a revised schedule, reflecting the conclusions contained in this judgment and making all necessary consequential re-calculations. The revised schedule should be annexed to the order of this Court.

I agree.

I also agree.