AXA Insurance UK Plc v Cunningham Lindsey United Kingdom (An unlimited Company)

AXA Insurance UK PLC (“AXA”) bring this claim for professional negligence against loss adjusters, Cunningham Lindsey United Kingdom (“Cunningham”), in relation to the reinstatement of an old farmhouse in Leicestershire, Orchard Farm, Burbage, near Hinckley. There had been subsidence, for which AXA had accepted liability under a householder's policy. The householders were a Mr and Mrs Bennett and the latter’s mother, Mrs Graham (“the Insured”). Cunningham was retained by AXA to provide services in connection with that reinstatement in 1999 and 2000. The reinstatement did not proceed well and AXA and Cunningham parted company in early April 2000.

AXA then retained Cameron Durley Consulting Engineers (“CDC”) to investigate, draw up work schedules and supervise the completion works which took place between August 2000 and August 2001. Whilst the original sum insured was just over £200,000, and the expectation when Cunningham was involved was of a reinstatement cost of much less than £100,000, the eventual cost to AXA is said to have been over £1.5 million. AXA claim that the bulk of this cost is attributable to the negligence of Cunningham; this is denied. The completion (which included remedial) works were tendered for and started on a lump sum priced basis; for various reasons, thereafter, AXA agreed to pay on a cost plus basis.

Some aspects of liability are admitted by Cunningham, relating to the inappropriate use of concrete lintels to repair cracked bricks, the use of unsuitable plaster to reinstate old plasterwork and of unsuitable mortar to re-point external brickwork. The other disputed allegations of negligence relate to other defects and organisational, administrative and other professional failings on the part of Cunningham.

The major area of dispute between the parties is quantum and causation. AXA have adopted what their Counsel has called a “top-down” approach to these quantum issues; AXA takes the total costs and losses which it alleges that it incurred and then deducts any elements which it accepts are not sufficiently causatively linked to the pleaded negligence. Cunningham adopts a “bottom up” approach which is to price for those defects for which it accepts liability.

The hearing has lasted for 14 working days. There have been 10 witnesses of which four are experts. Originally, AXA intended to call Mr and Mrs Bennett and served short statements from them. Some ten days before the trial, AXA informed Cunningham that they would no longer be calling them. Cunningham served witness summonses on them but, shortly after the trial commenced, announced that they would not call them either. I intend to be as relatively circumspect as the evidence permits me to be about the behaviour of the Insured which was criticised by both parties at the time and by various witnesses whose evidence I did hear. Since some of those criticisms are serious but because I have not heard their evidence, I will only address those criticisms as far as is necessary. Of course, I am not making findings of fact against them as such.

Orchard Farm is in a rural location in Leicestershire. It is a few hundred yards to the south and east of the M69. Its drive leads off the B578, which is a minor road which crosses over the M69 from the large village of Burbage, which is some two miles away.

The house as it was in 1999 comprised three parts, with the front and rear sections comprising the living accommodation and behind the rear section a boilerhouse and office. The oldest part, built in around 1680, was the rear section. It comprised ground, first and second floors, albeit that the second floors were in what had been the roof space. The brickwork to this section was rendered. There were two pitched roofs to this section with a valley between. The front section, probably built in about 1730, comprised ground, first and second floors at levels slightly higher than those for the rear section. There was a cellar beneath the ground floor sitting room. The brickwork of this section was fair-faced, that is without render. There was a monopitch slate-covered roof. The boilerhouse and office were probably built in the 20^th century and comprised a single storey extension. It did not run along the whole of the back of the rear section.

In this case, the parties have adopted an orientation described by looking at the building from the front. Thus, the front is described by reference to rooms as being on the right hand or left hand side (“RHS” or “LHS”), as is the rear section.

Pre-1999 photographs show a number of features. The windows, which were clearly not original, were probably from the 1950s or 1960s. There was a substantial amount of ivy creeper over much of the front section and part of the rear section. To the left hand side of the front section there were a large and a smaller willow tree.

The foundations of the front and rear sections were (as was not uncommon for the time at which they were built) not deep. They were some 0.97 to 0.98 metres in depth without any spread footing. They bore on to silty clay subsoils.

In about 1972 Mrs Graham and her husband purchased Orchard Farm. At some stage their daughter, Mrs Bennett and her husband moved in. At some later stage following Mrs Graham’s divorce, it appears likely that Mr and Mrs Bennett together with Mrs Graham became joint owners of the property.

By 1994, a new or renewed insurance policy for the building was secured by the Insured. At that time the insurance company was UAP Provincial Insurance PLC, later taken over by the AXA Group. The policy was renewed on an annual basis. The insurance policy covered damage caused by subsidence.

In the summer of 1995, cracking first became apparent to the internal elevations of the building and further more substantial movement occurred in the summer of 1996. The Insured called in (through their solicitors) consulting structural engineers, MD Prosser & Associates, who produced a “structural appraisal” on 4 July 1996.

Relevant observations from this report are as follows:

The two main chimney stacks in the front section were in a poor state of repair.

The mortar pointing was not in good condition having weathered over the years and the lead flashings were in poor condition. There was some cracking in the brickwork externally, some of which was historic (having been repaired in the past by way of repointing). There was some historic distortion to brick arch lintels above window and door openings. There was some vertical cracking to the rendered external finishes of the kitchen area on the rear section at the right hand side. This had been repointed historically. There was some slight reopening.

There was some historic and more recent differential foundation settlement between the rear and front sections.

There was historic and more recent crack damage to the plasterwork, both in ceilings and walls. There was some hollow plasterwork.

There was evidence of damp penetration through the solid walls into the plaster finishes.

Internal door openings had dropped. A timber beam above the inglenook fireplace in the front ground floor dining room (RHS) had split.

The second floor rooms in the rear section had been recently refurbished. The same applied to the first floor bathroom in the rear section (RHS).

The floor finishes to the first and second floors to the front section dished and undulated and tended to “bounce”. This was attributed to the slender nature of the supporting structure. On the first floor gaps had appeared between the floor finishes and the adjacent plaster surfaces. There was some slight rising dampness at ground floor level but on the front left hand elevation there was more significant dampness. There was also dampness in the ground floor room (LHS) in the rear section. There was evidence of damp penetration in the cellar.

Mr Prosser concluded that, whilst the property was in substantially good structural order, it had suffered due to a lack of maintenance over the years. Cracking existed which was both historical and more recently attributable to the recent prolonged dry spells. Although some damage was attributable to foundation settlement, major underpinning works were not required. He recommended that a number of further works were required, including repointing of cracked mortar joints and localised repairs to cracked rendering externally. He recommended the localised reconstruction of the rear corner of the single storey annexe at the rear of the building, together with measures to deal with dampness. The beam over the inglenook fireplace in the dining room was to be replaced and cracked plasterwork and internal decorations was to be repaired.

By early 1997, the Insured had notified AXA of subsidence damage and a claim under the insurance policy. On 11 March 1997, AXA instructed Christopher Wells & Co. (“C. Wells”), a firm of engineers, to inspect the property to ascertain the cause of damage, the period over which it had developed together with recommendations for dealing with the damage. C. Wells comprised chartered surveyors and engineers amongst their partners. C. Wells found that there had been downward movement in the foundations which had probably occurred both historically and more recently; this was in the front left hand corner and to the rear right hand corner of the rear section. They concluded that the more recent damage had been caused by prolonged hot and dry periods in the summer of 1995 and to a lesser extent in 1996, causing the clay subsoil to the relatively shallow foundations to shrink with the resultant downward movement. Tree roots had exacerbated the situation. They recommended that the willow trees and other vegetation be removed. They set up crack monitoring for a 12-month period. They advised that some of the roof plasterboard was in a very precarious state and it needed to be repaired promptly. A plan produced by C. Wells, showing the position of two trial pits which they had dug, shows cracking in the front elevation (3mm wide), cracking on the right side between the front and rear sections (3mm wide), cracking on the right hand wall of the rear elevation (1.5mm wide), cracking on the back wall of the rear section (2mm wide) and some cracking in three places into the rear of the rear section (between 1.55mm and 2mm wide).

In June 1997, a CCTV drain survey was done showing some damage. On 10 June 1997, C. Wells wrote to the Insured telling them that this was recent damage caused primarily by clay shrinkage aggravated by the action of tree roots and leakage from the underground drains. They confirmed that there was a valid claim under the terms of the insurance policy. Their recommended remedial works comprised the removal of various trees, including the willow trees adjacent to the left hand side of the property and the ivy creeper from the right hand side of the front elevation, together with repairs to underground drains. Once this was done, the condition of the property would be determined by further monitoring over some 12 months.

It appears that the willow trees were not removed but were substantially cut down in size, whilst the ivy was mostly removed. This was mostly done in or by about August 1998. Drainage repairs were carried out in about July 1998. The drainage work, paid for by AXA, cost over £6,000.

By September 1998, C. Wells’ monitoring exercise had shown no deterioration in the cracking. By this stage, relations between C. Wells (in particular Mr F R Russell, who was dealing with the claim) and the Insured began to deteriorate. By this time, it had emerged that the Insured were interested in carrying out substantial works to the property themselves. The Insured had started to upgrade the ground floor bathroom and wished to secure a contribution for what would have been the cost of redecorating that bathroom attributable to possible subsidence damage, although by its work the bathroom had been rendered unusable by the Insured.

By 7 September 1998, the Insured indicated that they had lost confidence in C. Wells. The result was that Mr Russell was removed from the project.

Following a further complaint from the Bennetts that the yard area had not been effectively or fully reinstated following the drainage work, C. Wells agreed that an additional 60 to 70 tonnes of suitable stone at a cost of about £700 should be laid.

C. Wells replaced Mr Russell with Mr Rhodes. They wrote a conciliatory letter to the Bennetts on 11 September 1998 indicating that they would prepare a draft schedule of work to be forwarded to the Bennetts for their consideration. By mid-October 1998, C. Wells had prepared a schedule of proposed remedial works which they then sent to AXA and the Insured. On 16 October 1998, C. Wells indicated that it was in order for the Bennetts to proceed with their proposed refurbishment of their ground floor bathroom. They also confirmed that soil against the external face of the property would “in an ideal world be reduced to 150mm below damp course/door level wherever possible”. Similarly, Mr Rhodes did not see any problem in the Bennetts’ proposal to create a new doorway from the ground floor hall through to the kitchen (that is from the front to the rear sections of the house); he suggested that there would be a need for an adequate lintel to support the structure. This is confirmation that the Insured were considering significant alterations. It also shows that they were seeking advice from the loss adjuster about non-insurance related work. This was something which was to continue over the following three years.

Through their insurance brokers, T F Bell & Co., Mr Highton, the Insured sent back certain comments to Mr Rhodes on 27 October 1998. The Insured referred to various cracks which had not been mentioned in the schedule of Remedial work. With regard to wallpaper which was to be replaced, Mr Highton suggested that the cost would be £85 per roll because it was a special “American Hand Painted-S Colour” type.

There was some delay in responding to this letter but on 2 December 1998 Mr Rhodes wrote back. He indicated that two of the three cracks would be dealt with as part of the subsidence repair works but another would not be. He suggested, relatively politely, that:

Mr Rhodes clearly doubted whether a request made by the Bennetts for temporary alternative accommodation was legitimate. He was clearly of the view that the house did not have to be vacated as a result of the proposed subsidence repair works albeit that some works to some ceilings on the upper floors would render an area uninhabitable; Mr Rhodes thought that the work to these ceilings was a maintenance issue which the insurance company was only prepared to deal with by way of concession.

The Insured’s reaction to this letter was apparently one of anger at Mr Rhodes. There was a telephone conversation between either or both of the Bennetts and Mr Smith of AXA, who had taken over responsibility for this insurance claim. On 18 December 1998, Mr Wells of C. Wells wrote to Mr Smith addressing the dissatisfaction expressed by the Insured. He confirmed that by this stage (as was the case) the Schedule of Works had been essentially agreed and that the plan which was then in place to have tenders for the works by Easter 1999 indicated that the works were still on programme. A meeting was fixed for 22 January 1999.

That meeting was attended by the Insured, Mr Wells, Mr Rhodes, Mr Highton and Mr Smith. It is described in Mr Smith’s file note of 5 February 1999. The meeting, which lasted one hour and a quarter, was described by Mr Smith as “ill tempered, [and] fraught with a great deal of personal abuse directed towards Christopher Wells personally, his engineers and his company in general”. It is clear that AXA did not escape criticism from the Insured. The Insured were simply not prepared to have C. Wells involved further. However, various minor amendments to the specification for the insurance works were agreed at the meeting. The Insured indicated that they wished to have two contractors known to them invited to tender for the works. Notwithstanding the previous advice of C. Wells, Mr Smith agreed that the Insured would be allowed alternative accommodation at the expense of AXA whilst the remedial works were carried out. At this stage, that was to be in two mobile caravans and a portakabin to be provided at the site, with the latter to act as an office. Mr Smith agreed that an additional payment of £827.07 should be made in respect of the rectification work which had been carried out to the roof of the side extension which had moved slightly away from the main building.

After the meeting, Mr Highton and Mr Smith agreed that a suitable alternative loss adjuster would be Cunningham.

By the end of January 1999, before Cunningham’s retainer, the position can be summarised as follows:

AXA had accepted in principle that there was a good subsidence claim by the Insured under their insurance policy in respect of damage caused to Orchard Farm by subsidence.

A schedule of works had been agreed notwithstanding a deteriorating relationship between the Insured and C. Wells. Mr. Smith “saw nothing of any great difficulty in the claim” at this stage (T2/10).

It was clear to all concerned that the Insured had every intention themselves of carrying out extensive works, which were unrelated to subsidence-related repair work. AXA knew this and did not object.

There was a significant amount of historic defects and damage and also dilapidations in the building which had nothing to do with the subsidence damage which was covered by the insurance.

The Insured were perceived to be difficult and oversensitive.

There was an expectation that the remedial works would start following a competitive tender at around Easter-time in 1999. It was clear to all concerned that the Insured were not and would not be tolerant of any delays to this programme.

On 3 February 1999, Mr Smith of AXA met Mr Green and Mr Hall of Cunningham at Cunningham’s Leicester office. At this meeting Cunningham was retained to act as loss adjusters and project administrators in respect of the subsidence related work at Orchard Farm. I will return to this retainer when dealing with the issues in this case as there is a major dispute as to the nature and basis of this retainer. It is accepted that at least the C. Wells’ (finally revised) Schedule of Works was handed over to Cunningham at this meeting.

On 11 February 1999, following a meeting with Mr Highton, Mr Hall and Mr Green (together with Mr Highton) met the Insured. The meeting was reasonably amicable. However, the Insured expressed some disagreement with the revised specification which had been produced by C. Wells and apparently agreed to by them previously; they considered that it was too specific. They wanted the Schedule of Works to be less specific because, they said, they wanted to have the method and extent of repair of the cracking finally resolved following the removal of plasterwork. They wanted to have the option of arranging the redecoration themselves because, as had been expressed beforehand, they wished to carry out extensive and substantial additional works themselves which had nothing to do with the insurance related works. They wanted to help identify a number of builders who would be acceptable to them. There was discussion about the use of three contractors: Bowmans, Browns and Glenborough Estates (“GE”). The Insured knew of GE and were content for them to be invited to tender.

At or immediately after this meeting, Mr Hall inspected the property. He formed the view (justifiably) that the property was old and had suffered from neglect, disrepair and lack of maintenance. He noted the location of the more recent subsidence damage. At the meeting or on this inspection, Mr Hall wrote on a copy of the C. Wells’ specification of work a number of notes.

Mr Hall reported to Mr Smith by telephone on 12 February 1999. Mr Smith was made aware what was to happen. He approved the use of the three proposed contractors to tender for the works. An explanation was given that there was to be a revised Schedule of Works which reflected the fact that decoration might be done at a later stage by the Insured and that it would be less specific than it had previously been. It was agreed that the Insured should have alternative accommodation away from the site. Mr Smith specifically agreed that the Insured could and indeed would be carrying out substantial non-insurance related works to the property at or at about the same time as the insurance related works.

By 24 February 1999, Mr Hall had amended the specification, which was then called the “Contract Specific Schedule”. He amended the C. Wells’ Schedule as well as he could to reflect the Insured’s requirements. He sent them a copy on 24 February 1999 and indicated that, of the three potential tenderers, Browns were unwilling to tender. In his letter to Mr and Mrs Bennett of 24 February 1999, Mr Hall referred to using Countrywide Property Management for alternative accommodation and Pickfords Removals for storage of furniture and effects.

On 26 February 1999, Mr Hall invited Bowmans and GE to tender for the works on the basis of the Contract Specific Schedule. On 4 March 1999, Mr Hall visited the site to examine water ingress through and into the cellar below the ground floor sitting room on the left hand side of the front section. He found that the ingress of water was extensive but it was draining away. The adjacent ground was waterlogged. He and Mrs Bennett discussed alternative measures to solve or address the problem which he indicated could be undertaken within the remedial works via a variation order.

Following receipt of tenders, Mr Hall recommended acceptance of the GE tender in the sum of £31,501.65, which was some £5,000 cheaper than Bowmans’ tender. Unlike Bowmans, GE had not filled in the part of the formal tender which indicated a commitment to complete the work within a period of time.

By 26 March 1999, Mr Hall had contacted GE to tell them that they had got the job. On that day, Mr Hall met Mr Bolland of GE, Mr Highton and the Insured at site to discuss the project. Portakabin accommodation was discussed; it had been ordered. It was agreed that work would start on 12 April 1999. No time for completion of the works was agreed, largely because it was apparently not discussed. Bowmans, the unsuccessful tenderer, had offered a period of ten weeks to complete the work.

In the early part of April, Mr and Mr Bennett and Mrs Graham respectively moved into separate alternative accommodation which had been arranged through Countrywide Properties. The alternative office accommodation at the site in the form of a portakabin was provided. Pickfords had been engaged to organise furniture removals, with some contents going into storage and other contents being decanted into the two rented houses.

GE started work on site on 12 April 1999. The works which GE was employed to carry out were described in the Schedule of Work which had been prepared by Cunninghams. So far as is material, these works broadly comprised the following:

Incidental works to the heating, electrical and plumbing installations;

General preparation works such as removing all fixtures and fittings necessary to undertake the works;

Crack repairs to the external brickwork were to be of two types. There was a provisional allowance for 74 crack repairs using a “helibar” system of repair. There were also to be crack repairs by the insertion of slate wedges and repointing to brickwork; remedial work to some five linear metres of stacked cracking was provisionally allowed for.

Provision was made to take down and rebuild the external left hand corner of the rear lean to.

The rendering to the rear elevations in the rear sections was to be hacked off and replaced with new render.

Internally, allowance was made to provide 30 helibar crack repairs and some 20 other areas of cracking using an epoxymortar repair system.

Various plasterwork repairs were called for with ten rooms identified as requiring this work with a provisional measurement of 85m². In three rooms plasterboard and skim finish was provided for.

For six door openings on the ground, first and second floor adjacent to the front elevation, cracked masonry above was to be cut out and pre-stressed concrete lintels were to be placed above. That would or at least might involve one end of the lintels resting on or within the front wall.

On the ground floor of the front section (RHS) in the dining room, provision was made to remove the cracked existing oak beam to the inglenook fireplace, with provision made for necessary temporary support. A new oak beam, some 3.4m in length, was to be provided together with reinstatement of all areas to match the existing; this included a plastered soffit within the inglenook fireplace.

In the first floor bathroom, the existing shower tray was to be removed and a new shower tray, waste outlet and trap and reinstatement to areas disturbed provided for.

Various contingency and provisional sums for unspecified work were provided for.

On 13 April 1999, Mr Hall of Cunninghams visited the site and met with Mrs Bennett, Mrs Graham and Mr Bolland of GE. Some opening up work had been done internally, including the removal of some plaster. It is clear (and I accept) that there was a detailed and thorough inspection by Mr Hall of all parts of the house and a confirmation of precisely what work was required. It was decided at this meeting by Mr Hall that the helibar system for repairing cracks specified would be abandoned; instead, concrete lintels would be inserted in the areas of cracked brickwork (both internally and externally). Thus, the cracked bricks would be taken out and concrete lintels (of differing lengths) would be inserted in their place with slate wedging as necessary and repointing. This was Mr Hall’s decision and thereafter GE used the lintel repair method.

Apart from periods between 13 May and 1 June and 16 June to 23 June 1999 (when he was away having eye operations in hospital), Mr Hall was in charge of the project until he was relieved of his duties in late August 1999. He visited the site on the following days: 13, 21 and 30 April, 7 May, 4 June, 1 and 22 July, 16 and 25 August 1999.

In their first Interim Report No. 1 of 15 April 1999, Cunningham reported to AXA on the tender, alternative accommodation and furniture removal. The following was stated:

Within a relatively short time of GE commencing work, the Insured had embarked upon their own non-insurance related work. This included the demolition of a brick wall which surrounded the chimney breast in the first floor (RHS) bedroom in the front section, that is above the chimney and inglenook in the ground floor dining room. Mr Bennett either did this work himself or had labourers in to do it. I am wholly satisfied that this work was not done by GE. It was no part of their contract to remove this brickwork surround from around the chimney breast in that bedroom.

The Bennetts also removed and replaced virtually every window in the building. This involved physically removing the old windows and inserting new Georgian style sash windows. French windows or doors were also inserted in two locations on the right hand side. It is also clear that some electrical and plumbing works were done. Much of this work was done by the Bennetts from about mid-May to the end of June, whilst Mr Hall was, largely, away in hospital.

At first, the insurance works went well. Up to 7 May 1999 (and before Mr Hall’s first hospital visit) he described in his notes of meeting with the builder and the clients that work was proceeding well. Some additional works were authorised by Mr Hall, including the replacement of a brick infill on the second floor flank wall on the right hand side of the front section. At one meeting, on 30 April 1999, there was a discussion between the Insured and Mr Hall as to whether or not AXA would pay for extensive tanking works to the cellar and works to the junction between the rear and front sections. Mr Hall explained to the Insured clearly that there had to be a distinction between the works which AXA were undertaking with regard to subsidence related works and other works which had nothing to do with the subsidence which was the subject matter of the Insured’s claim against AXA. He believed that the Insured understood the distinction. However, by 7 May, another matter was raised by the Insured, who wished to have the lean to building at the rear demolished and this and the reconstruction paid for by AXA. Mr Hall did not consider that that was appropriate because, although there had been some subsidence damage to the lean to building, the limited repair to one corner of that structure allowed for in Cunningham’s Schedule of Work was, he thought, sufficient to repair the subsidence related damage. Mr Hall brought these matters to the attention of Mr Smith of AXA. The two agreed that the wholescale demolition and reconstruction of the lean to was not justified; similar considerations applied to retanking the cellar.

Knowing that he was due to be away in hospital, Mr Hall offered the Insured the services of an alternative surveyor while he was away; the Insured indicated that it was not necessary for there to be an alternative surveyor. It was agreed between Mr Smith and Mr Hall that the non-contentious work would proceed and the more contentious work which the Insured were seeking to have done at AXA’s expense would be done (if at all) at a later stage.

A large amount of the non-insurance works referred to above was initiated by the Insured in Mr Hall’s absence. There is no doubt that the Bennetts prevailed upon GE or individual GE workmen to carry out some of this non-insurance work, such as the removal of some old and the installation of new windows. Another example is that on the rear section (LHS) at first floor level there had been a very substantial window. The Bennetts wanted this window, to what was called “the Den” on the first floor, to be smaller, at least in height. GE were prevailed upon to construct in blockwork the area below the new window which had been occupied by the older larger window.

Following his discharge from hospital, Mr Hall attended a meeting with the Bennetts, Mr Highton and Mr Bolland on 4 June 1999. By this stage, it was clear that GE had done a substantial amount of work at the behest of the Insured. There was a growing dispute as to whether certain items of work should be covered by insurers or not. So far as the works to date were concerned, they had been progressing reasonably well, with all the internal repairs completed to the front section and work proceeding externally. There was a discussion as to whether the Insured should receive a financial allowance from AXA with regard to decoration works which would otherwise have been necessary as a result of the insurance work but which the Insured wished to do themselves. The question of works to the cellar was also raised.

After that meeting and having consulted Mr Smith, Mr Hall wrote to Mr Highton to make it clear what cash allowances (in lieu of work) AXA was prepared to make. He emphasised that it was important that GE finished the insurance related works with the Insured being left to carry out the remaining work. The cash allowances offered were:

attendance on heating and electrical services less an electrical testing fee (£200) …. £800

allowance for repair to lean to/boilerhouse …. £1200

allowance for shower tray ….. £300

allowance for decoration …. £5,000

Mr Highton responded on 17 June 1999. Whilst Mr Hall’s offer was not accepted as such, various other allowances and increased allowances were sought.

In Mr Hall’s absence for his second hospital visit, Mr Mellor of Cunningham was left in charge. He had various conversations with Mr Highton and attended a site meeting on 21 June 1999. By the time of this meeting, the Insured were raising an issue which was to feature later. Several old “reed” ceilings had been replaced; it was said that they had been damaged by subsidence. They had been replaced with ordinary plasterboard as opposed to the old-fashioned way of plastering ceilings (using reeds). The Insured wished to seek an allowance to reflect the fact that they would have been entitled to have reed ceilings renewed and that, having saved AXA a substantial amount by agreeing to plasterboard, an additional financial allowance should be made to them. Before and at the meeting of 21 June 1999, the Insured also raised an issue which was that the crack repairs which had been carried out by GE in relation to subsidence damage had been finished off with localised plaster repairs. This left a patchwork arrangement. Mr Mellor agreed that the whole of the plasterwork could be skimmed over. Also by this time, the Insured or their broker had raised a number of other matters, including damage to a banister and quarry tiles, the yard surface finish and work to a patio area. A major further matter was the Insured’s contention that the external walls which had had ivy removed from them in 1998 had led to damp penetration, actually or potentially. The Insured’s argument was that they had only taken the ivy off at the suggestion of C. Wells. The ivy had necessarily damaged the mortarwork but had hitherto been providing some protection against rain penetration. The exposed brickwork had no such protection and, given the deteriorated pointing, required repointing. Their argument therefore was that AXA should carry out repointing to the front and right hand side elevations of the front section of the house from which ivy had been stripped.

From about this time, the third week in June, the relationship between the Insured and Mr Hall began seriously to deteriorate. This arose, essentially, because Mr Hall was, not unreasonably, seeking to limit what AXA should pay for whilst the Insured were anxious to have as much work as possible paid for by AXA.

By 29 June 1999, and following consultation and agreement with Mr Smith, Mr Hall was in a position to offer various additional sums. In addition to items already offered (electrical services, lean to, boilerhouse, shower tray), he was authorised to offer £4,000 for decoration, £935 for repointing, £250 for works to the ground floor bathroom, £670 for patio repairs and £2,000 towards work in the cellar (essentially providing a sump to take water away from the cellar).

Mr Highton responded directly to Mr Smith in his letter of 5 July 1999; following a meeting on site between Mr Hall, the Bennetts, Mr Bolland and Mr Highton. Mr Highton on behalf of the Insured accepted elements of Mr Hall’s offers but sought further payments.

It was in the first fortnight in July 1999 that the Insured and their broker raised the issue about wallpaper to the ground floor sitting room on the left hand side of the front section. They sought to suggest at that stage that the current replacement cost was £220 per roll.

It is clear that Mr Smith of AXA was kept fully briefed not only by Mr Hall but by his contacts with Mr Highton. He clearly considered by the third week in July that matters were becoming difficult and serious. To that end, he drafted a lengthy file note on 20 July 1999 which demonstrates that he was being kept fully up to date with what was happening. Mr Smith had put forward a global offer of £15,000 for all the additional matters for which the Insured were claiming a costs allowance. That had been rejected by Mr Highton. Mr Smith was willing to accept that the cost of repointing should be allowed even though he doubted whether the work was admissible under the terms of the insurance policy. He refers in his file note to the further issue which had risen about carpets which had had to be removed, it being said by the Insured that removed carpets had been cut in a way that they could not be fitted back. Presciently, he concluded that the claim “all the markings of one which will descend into an acrimonious and bitter dispute”. He was clearly of the view that the Insured were being unreasonable and had excessive expectations. He had received the impression from Mr Highton that the Insured were likely to require the removal either of Mr Hall or Cunningham as a whole. He expected the claim to escalate to a level where a complaint might be made to AXA’s chief executive or the Insurance Ombudsman. In his own mind at this stage Mr Smith had no reason to complain about Cunningham’s performance. He considered that Cunningham should be retained to continue the project.

At a site meeting on 22 July 1999, attended by Mr and Mrs Bennett, Mr Highton, Mr Bolland and Mr Hall, it was agreed that the front elevation would be repointed and that certain further minor works would be done. The meeting was acrimonious and during it personal remarks were made by the Bennetts about Mr Hall. He was accused of lying, of inaccuracies and of bias. Mr Hall refuted the allegations.

It was in early August 1999, apparently without warning, that Mr Bennett demolished the rear lean to boilerhouse. Over the following three weeks, substantial holes had been knocked into the rear walls at ground and first floor levels and lintels placed above the openings. A photograph dated 25 August 1999 (C/20) shows this work substantially advanced by then. It seems also to be the case judging from the GE diary entries that GE took no or little part in that work. However, the diary does indicate that GE did start to dig foundations for the new two-storey building that was to be constructed in place of the demolished buildings and thereafter to have constructed some of the brickwork for the new extension.

Mr Smith and Mr Hall continued to liaise. For instance, on 16 August 1999, they discussed the project and what should be offered. It was agreed that, so far as the external repointing was concerned, a maximum of 50% should be offered.

On 16 August 1999, there was a meeting attended by the Insured, Mr Highton, Mr Hall and Mr Smith. This was an extremely difficult and heated meeting. AXA and Cunningham were criticised because it was said that one of the decorators had interrupted the power supply to the water purification system so that the Insured had suffered violent sickness and diarrhoea. It was later discovered that the sickness had not been caused by any problem with the water purification system. The meeting lasted more than three hours and the Insured criticised Mr Hall in very blunt terms and suggested that he had become mentally unbalanced. There was a detailed discussion about different aspects of the works and various cost allowances. Mr Smith of his own initiative agreed to extend the repointing so that AXA agreed to pay for more. After the meeting Mr Hall looked at the rear wall because damage had been caused to it during the demolition process.

AXA by mid-August clearly considered that the Insured were “out to get as much as they can” and Mr Hughes of AXA, with whom Mr Smith was in contact about the difficulties arising, did say to Mr Smith in an email of 19 August 1999:

By then, Mr Smith had formed the view (as is recorded in a memo to Mr. Hughes) that AXA was effectively being asked to pay for the Insured’s refurbishment. There was a meeting on 25 August 1999 attended by Mr Mellor of Cunningham and attended by Mr and Mrs Bennett. It was clearly an extremely unpleasant meeting. Mr and Mrs Bennett accused Mr Hall of being a “liar and a crook” and that he was corruptly involved with GE, and its sub-contractor decorators. GE’s workmen were accused of being crude and guilty of bad behaviour and putting up obscene drawings. They identified a large number of alleged defects in the works. Mr Mellor reported back to Mr Smith later in the day about this conversation. They both agreed that Mr Hall had done nothing wrong. They did not want to have to take him off the job.

The following day, Mr Highton spoke to Mr Mellor saying that one of the decorators had dropped his trousers in front of Mrs Bennett and the Bennetts were refusing to have the decorators back.

The allegations which had been made against Mr Hall were taken very seriously by Cunninghams. Mr Hall, Mr Bolland and Mr Wells of the decorator firm all signed statements on 27 August 1999 denying allegations of corruption or other criminal behaviour. I am wholly satisfied that there was no corrupt, dishonest or other criminal behaviour on the part of Cunningham’s employees, GE’s employees or those of their sub-contractor.

By the end of August 1999, the Bennetts were much aggravated by what they perceived were the failings of AXA, Cunningham and the builders and prepared lists of defects (headed “Notes of the concerns made on 29.8.99”); they wrote to AXA’s Chief Executive. They complained of delay and poor quality work. They criticised Mr Hall as having health problems and treating them with contempt and complained about obscene and sometimes profane language by the builders’ staff; the behaviour was said to have been “consistently crude and offensive”and they had left pornographic drawings on plasterboard. They complained about illness being caused by the interruption of the water supply (this complaint later being dropped). By early September 1999, Cunningham decided that, in the interests of seeking to get the job finished, Mr Hall should be taken off the job. It was decided that Mr Wassell should be brought in to see the job to its conclusion. Little work was done in September 1999 by GE; such work as was carried out was primarily work of constructing the new rear extension for Mr Bennett.

Mr Wassell and Mr Mellor met Mrs Graham and Mrs Bennett on 3 September 1999. Mr Wassell went over the next two weeks to site again.

On 16 September 1999 the Insured wrote to Mr Smith with a list of complaints and concerns. They complained of “very shoddy work” and bulging in external brickwork. They complained about the builder having no “second site fixing skills”. They complained about the obscenities and profanities of the men he had hired. A list of defects on a room-by-room basis was identified, the vast bulk of which were relatively minor snagging complaints. albeit several complaints were more serious. By this time the Insured were simply not willing to have GE come back to the site. By or on 22 September 1999, GE was told not to come back.

Mr Wassell sought to adopt a conciliatory approach and indicated that he would action the Bennetts’ defects list so far as was appropriate. He attended various meetings in the last ten days of September to work out a way forward. There was some discussion about further cost allowances to be made too.

The position can be summarised as at the end of September 1999 as follows:

The insurance remedial works had initially progressed reasonably well.

It was while Mr Hall was away in May and June that the Insured began in earnest to carry out extensive works of their own which had nothing to do with the insurance work. To that end, they used their own resources and also directly instructed GE to do certain aspects of that work.

Mr Smith of AXA was kept fully apprised of the growing problems and tensions which were arising over the period from May onwards and no material steps were taken by Mr Hall in his dealings with the Insured which were not approved by AXA.

The Insured made more and more demands for cash contributions in respect of work in effect which was either not to be carried out or which was not insurance related.

Whilst complaints of defects were not wholly unjustified, complaints about the honesty and mental condition of Mr Hall were unjustified.

The Insured seemed unable or unwilling to differentiate between work which was insurance related and work which was not.

Mr Wassell set about identifying what work remained to be done. He produced a Schedule of Work on 6 October 1999. It addressed many of the complaints which the Insured had put forward in September 1999.

The Bennetts complained again in mid-October. They did not consider that the schedule was specific enough in two relatively minor respects. They still awaited information about the water testing (which had allegedly led to the illness), the wallpaper and carpets. A further issue had arisen relating to the structural inadequacy of the footings of the boiler house. In his letter of 15 October 1999, Mr Bennett confirmed to Mr Wassell that only one day of insurance work had been done on the house since 27 August 1999. That letter indicates clearly that the Bennetts understood that there was a difference between the insurance work and the work which Mr Bennett was commissioning for his own purposes. He must have been aware that the inadequacy of the footings of the boiler house could not in any way be attributed to insurance work. This was new work which he had commissioned, albeit done by Glenborough. He, however, was requiring AXA and Cunningham to resolve the problem. In complaint letters to the chief executives of Cunningham and AXA, the Insured complained about Mr Smith and Mr Wassell, the latter being said to be continuing Cunningham’s “contemptuous and dismissive attitude”.

By this time, Mr Wassell had sought to bring in a new contractor, H B Pearce (“Pearce”), who had visited the site and been asked to price the Schedule of Works produced by Mr Wassell. Mr Pearce considered that it was difficult to price, not least because, when he had visited the site and met Mr and Mrs Bennett, he had formed the view that there were likely to be substantially more works to be done over and above those set out in the schedule. He therefore proposed that the works should be done on a day work basis at an hourly rate of £17.93 with sub-contractors and materials being charged at cost plus 15%.

The heated discussion about the cost of the wallpaper in the front sitting room continued with prices of well over £300 per roll being quoted. Mr Bennett had been asked by Mr Wassell to list all the work which he had either done or had had done by builders. Work covered a five-page list faxed to Mr Wassell on 13 October 1999. It confirmed that he had employed either GE or another builder to carry out window installation, skirting board and architrave work, and plastering in some 15 rooms in the house. He confirmed that he had carried out a substantial amount of electrical and plumbing work; he had removed and repositioned radiators and had laid new cabling and fitted new sockets and light switches. He had put new floors in, replaced various ceiling joists and fitted various windows and sills himself. He had demolished various brick walls, including the wall in the first floor bedroom above the dining room in the front section. He had built a partition wall and carried out other demolition work, including removing concrete floors. He had removed various sanitary goods, such as baths, washbasins, lavatories and shower trays. He had replaced ceiling joists. He accepted that he had knocked through the rear walls into the boiler house. Whilst his list was not complete (it did not include, for instance, the demolition of the old boiler house and the reconstruction of a substantial new rear extension), it was very extensive.

Mr Wassell and Mr Rollitt of Cunningham liaised closely with Mr Smith. For instance, on 19 October 1999, he had a detailed meeting with them. The newly emerging “carpets” issue was discussed. The Insured thought that their carpets, which were relatively old, foam-backed and of poor quality, should be replaced entirely at the expense of the insurers. The wallpaper “saga” continued with Mr Smith still reluctant to pay or allow the Insured anything approaching the £220 to £305 per roll being claimed for. A proposed way forward in dealing with the Bennetts was agreed upon. It was agreed that instructions would be given to Pearce to carry out the outstanding works on a day work basis.

Mr Smith was fully aware of all the ramifications, that the Insured were difficult to deal with and that they made unjustified complaints about individuals. He knew, however, that he had made concessions to the Bennetts which fell outside their policy cover (in particular the sum of about £2,000 with regard to works in the cellar and also the repointing work). He wrote in an internal review that there were various options, including appointing a third firm of loss adjusters to oversee the works (he was not in favour), agree a specification with the Insured or use their own contractor with “top-heavy supervision from CB” (he accepted that this would not be straightforward). There was the possibility of a cash settlement: the Bennetts were putting this at about £25000 but it went against the grain to pay what they asked for.

By mid-November, Pearce had been appointed and had commenced work on site on a day work basis. Mr Wassell visited the site from time to time during these works. The relationship between Mr Wassell and the Insured was frosty. Further accommodation had been found for the Insured. They were outraged that nine months after work had started they still had an “uninhabitable ruin of a house” (as described in their letter of 9 December 1999 to Cunningham). They did not seem to appreciate that at least a major part of the reason why the house was uninhabitable was the extensive works which they had either carried out or commissioned themselves which had nothing to do with the subsidence repair works.

In a letter dated 3 January 2000, the Bennetts wrote to Cunningham in a way which was highly critical of Mr Wassell:

By early January 2000, Cunninghams were recommending to AXA that the reserve be increased to some £94,000 (there had been increases to the recommended reserve before this). In their Interim Report of 7 January 2000, Cunningham gave a detailed explanation as to what the present position was. It reported that the Insured had indicated that they wished to see physical harm inflicted on Mr Wassell. The report reviewed all the problem areas. A new problem had been raised relating to the dining room chimney flue: the Insured had complained that the fire did not draw and that this was attributable to the various areas of brickwork repair carried out to the chimney during the subsidence repairs. With AXA’s approval, Cunningham had asked a chimney consultant (Haussmann) to provide a report to determine the cause of the problem and what work needed to be done. Cunningham confirmed that the policyholders had been carrying out extensive refurbishment works, including rewiring and plumbing alterations and so on.

This reserve was increased to £118,000 on Cunningham’s recommendation. In their next Interim Report to AXA of 20 January 2000. In that report, the report from Haussmann had been received and the repairs recommended, including the provision of a liner, were to be put in hand. This was clearly agreed to by AXA, more by way of concession rather than anything else.

By early January 2000, Mr Wassell had agreed GE’s final account. Against an original tender price of £31,501, a sum of £46,748.47 was agreed as due.

In or by mid-January 2000, it was discovered that the internal walls were getting extremely damp. The crack repairs had been carried out internally and localised plasterwork done around the area of the repairs with a skim coating over the old and the new. At a meeting attended by the Insured, Mr Highton and Mr Wassell on 17 January 2000, it was agreed that a specialist report should be obtained. The following day, Mr Wassell contacted the Building Research Establishment (“BRE”) asking for a report on the damp, dealing with the cause of the damp penetration and the proposed remedy.

On 27 January 2000, Cunningham notified their insurers of a “potential claim” under their professional indemnity policy. This seems to have related to the threat of a potential claim from the Insured that Cunningham had failed adequately to supervise and manage the claim causing them loss.

On 28 January 2000, Mr Wassell wrote to Mr Smith. He indicated that there was a problem with damp penetration, apparently due to porous brickwork and rising damp in the two areas respectively where dampness had been noticed. It was appreciated that the rising damp problem might be attributable to some of the re-plastering work. Mr Wassell raised the point about a financial payment to be made to the Insured in respect of the loss of the reed ceilings. Because the old reed ceilings were replaced during the subsidence repairs using modern plasterboard rather than replacement with reed ceilings, a saving had been made to the insurers of £17,100. It was therefore arguable that there was a fund available to insurers to pay out money to the Insured for work which was not or was not necessarily covered by the insurance policy. Thus, the replacement of the carpets could be funded in this way. Mr Wassell sought instructions as to whether this approach was acceptable.

Relationships between Cunningham and the Insured were not improving in any way. For instance, Mrs Graham considered that Mr Wassell was dealing with matters “in an unprofessional and contemptuous way”, in a letter dated 30 January 2000.

BRE then visited the site on 9 February 2000. Mr Trotman of BRE told Mr Bennett of his initial view that the wrong plaster had been used in the house.

By mid-February 2000, Mr Bennett began to have doubts whether the lintel technique of crack repair was appropriate. He raised this with Mr Wassell, who wrote him a note about it on 17 February 2000. Mr Wassell advised that the lintel technique was often used and it was simply a way of rebuilding the area of crack damage. On 18 February 2000, Mr Ferguson, Head of Structural Masonry in the Construction Division of BRE, visited the site to consider the crack repairs at the instigation of Mr Bennett.

Pending the investigation and resolution of the damp problem, the Insured and Cunningham accepted that the final decoration could not take place.

Mr Wassell contacted Mr Haseltine of Jenkins & Potter, who are well-known consulting engineers, to advise on the use of the concrete lintel repair technique. Jenkins & Potter responded in a letter of 21 February to Mr Wassell indicating that the use of pre-stressed concrete lintels to repair crack repairs was “an admirable solution”, provided that they were well mortared into the brickwork slots.

On 2 March 2000, BRE reported to Mr Bennett on the use of concrete lintels. Mr Ferguson had been able to see a number of lintels visible in the external brickwork. He concluded that the building was not in an imminent state of collapse. From the lintel work which was visible he considered that the workmanship was poor. BRE would not recommend the use of reinforced concrete lintels to repair cracks because the lintels would be much stronger and stiffer than the existing clay bricks and would therefore form areas of stress concentration within the brickwork as the building slowly moved over time; this would lead to additional cracking. He was concerned about rust staining from reinforcing wires visible in some of the external lintels. He considered that the overall quality of the remedial work in respect of crack repairs was questionable.

On 8 March 2000, BRE reported to Mr Wassell about the dampness. Mr Trotman was of the view that there was excessive moisture in a number of locations. The lightweight plaster which had been used for the plasterwork repairs around the crack repair areas acted in a capillary manner. The presence of the concrete lintels within the walls could be interrupting drainage of water down through the wall. He recommended that a new lightweight plaster should be cut up and replaced by a sand/cement render, patching if feasible and re-rendering whole walls if necessary.

The Insured were unsurprisingly upset by the contents of the two reports. They continued to find it difficult to get on with the Cunningham representatives. By mid-March 2000, they were threatening to “go public” on the problems which they had encountered.

Cunningham took some time to consider what to do. They obtained a quotation from Pearce on 17 March 2000 to remove all plaster from the internal faces of the external walls of the front section of the house and apply a sand and cement render to the walls; there was associated preparation and putting back work. On 17 March 2000, Mr Rollitt of Cunningham sought further advice from BRE with regard to the dampness problems and the lintel repairs. At this stage, Cunningham began to consider whether or not some underpinning might be required.

On 24 March 2000, Cunningham wrote to the Insured indicating that they were proposing to proceed with their scheme for remedial underpinning. They were still intending to proceed with superstructure repairs using Pearce; they would adopt the BRE recommendations about replacing the plasterwork and would revert on the issue of the lintels. The Insured’s response (on 26 March 2000) was that underpinning was “drastic and irreversible”. The letter is highly critical of Cunningham. There is no doubt that by this stage the Insured had wholly lost confidence in Cunningham.

In March 2000, Mr Smith was taken off this particular claim and was replaced by Mr Rawlings. Mr Rawlings met the three representatives of Cunningham who were then directly involved with the project, Messrs Rollitt, Wassell and Whitehouse, on 25 March 2000. It was mutually understood that the Bennetts were very astute in business and had a clear strategy to engage in personal criticism of those appointed by insurers which involved securing the execution of works which were not necessarily covered by the policy.

On 31 March 2000, Mr Rawlings met the Insured. They told him that the main issues were the plasterwork and the related dampness, the use of the concrete lintels by way of crack repairs and the lack of confidence in Cunningham. The Insured raised the question of compensation for negligence and breaches of duty of care, delay, incompetence and loss of investment opportunity. Mr Rawlings rang Mr Pearce and instructed him to remove the plaster internally so that the lintels could be examined. He also rang Mr Rollitt to say that it might be necessary for Cunningham to withdraw.

On 1 April 2000, Mr Rawlings asked AXA to withdraw. Although he was not critical of Cunningham’s performance, he accepted that the Insured had a significant and ultimately “terminal lack of confidence” in Cunningham. On 3 April 2000, he informed Mr and Mrs Bennett of his decision and of his intention to retain Mr S Kirwin of Cameron Durley.

Thus, a summary of what had happened since the departure of Mr Hall until April 2000 was as follows:

There had been reasonable attempts to progress the completion of the works, after a relatively slow start.

There was little productive work done from mid January.

The relationship between the Insured and Cunningham was never better than poor. By April 2000, it had gone so far downhill that it was terminal.

The emergence of the twin problems of dampness internally caused or contributed to by the use of an inappropriate lightweight plaster and the use of concrete lintels to repair crack damage had been discovered and led to investigations in February and March which were to lead to the need for further extensive remedial works.

Other than the damp and concrete lintel problems, the very large bulk of the original “insurance” related work had been completed.

As from 3 April 2000, CDC was instructed. Mr Rawlings instructed Mr Kirwin of CDC by letter dated 4 April 2000 in the following terms:

The need to do all the work associated with the removal and replastering of most of the plastered rooms internally in the house; this would involve the hacking off of all the plaster and the replastering of the walls, together with the removal of skirtings, electrical and plumbing works which would or might be affected by the need to replaster. The house would not be habitable until the new electrical and plumbing works were completed.

The location of the lintels used to repair brickwork damage, both internally and externally, had to be identified. Internally, this would be expected to be revealed by the removal of the plasterwork. Externally, some of the lintels used for crack repairs were visible, whilst others had been re-rendered over; accordingly, external render would need to be removed to relocate any crack repair lintels. Wherever they were located, they would need to be extracted and replaced with bricks and mortar.

Mr Kirwin took steps reasonably promptly to meet the Insured and visit the site. He also liaised in mid-April with Cunningham. It is clear that at all times from then on he liaised very closely with Mr Rawlings of AXA. He liaised with Mr Pearce to continue to remove the plaster. It was agreed that he should continue to use BRE’s services, which he did.

Contrary to what Mr Kirwin has said in evidence, I do not consider that the property was in a dangerous structural condition at this stage. Mr Kirwin gave evidence that he considered that the property was in a dangerous state for a number of reasons, including the inadequacies of a number of lintels that had been used to support new openings in old brickwork. He gave no oral or written warning either to the Insured, Pearce, who were working there, or to AXA. I am sure that, if he had felt that there was any or any significant danger from the structural condition of the property, he would have recorded that in writing and advised those parties of his concerns. The fact that he did not suggests to me that there was no such danger. There is no record of any material deterioration as a result of the problems identified by Mr Kirwin in his witness statements. If there had been a dangerous condition, one would have expected some deterioration over the following four months. Mr Kirwin thought that he might have noted his concerns in writing but was unable to point to any such note. He also said at one stage in evidence that he thought that one or more dangerous lintels were propped but later was not sure if that was so (T7/72,85). His evidence was wholly unconvincing on this topic.

However, Mr Kirwin took a substantial number of photographs, many of which were included in the Trial File C. In File C there are some notes which Mr Kirwin has added for the purposes of the case. Those photographs were taken broadly to record the condition and the state of progress of the works at the house. They demonstrate that by this stage the rear (two-storey) new addition had been substantially completed, at least externally, by Mr Bennett or his directly employed labour. Photographs showed a number of lintels fitted externally, some of which were by way of brickwork repair, whilst others were by way of support above openings. Internally, the photographs showed areas where new plasterwork had been hacked off (by Pearce), whilst other photographs still show plasterwork. Some photographs show that electrical and plumbing work had either been disconnected or certainly remained to be completed. Some apparently damp plasterwork is shown. Up until mid-May 2000, scaffolding which had been present prior to April had been removed.

The photographs show that the property could not be lived in but that was to some extent attributable to factors over which Cunningham had had no control, such as the execution and completion of substantial re-plumbing and new heating and electrical works being incomplete. Another primary reason why the house could not be inhabited was the need to carry out the further plastering and brick repair replacement work. Until those were done, the plumbing, heating and electrical work could not be completed by the Insured or the redecoration sensibly started.

Mr Kirwin, with commendable efficiency, visited the site from time to time, held a number of discussions with the Insured and began in May 2000 to prepare remedial works drawings and specifications. He was assisted by Mr Blakeley.

Pearce continued their work of removing the plasterwork and some of the external render until 27 May 2000. Although they had not completely exposed all the brickwork which might have had lintel crack repair work done, Mr Kirwin believed that sufficient was known of to enable him to develop the detailed remedial scheme. Up to that stage they had located some 76 concrete lintels (over 110 were eventually found). By then another defect of some importance in this case had been apparently discovered. The repointing work which had been done to the front and right hand side elevation of the front section of the building had been done using a regular sand and cement mortar as opposed to using the old-fashioned lime mortar which had been used previously at the house. The re-pointing had also been done in a somewhat poor manner and much of the brickwork had been left in a dirty state. The difficulty with the use of a sand and cement mortar was that it was inappropriate because it was much more brittle and inflexible compared with the lime mortar.

In early June 2000, a meeting was arranged between Mr Blakeley, Mr Kirwin and Bowman & Sons (“Bowman”), who were to be the prospective contractor for the works. Bowman was acceptable to the Insured and were well known to be competent and experienced.

By the end of May, a further defect had become apparent which was in the chimney breast in the first floor right hand side bedroom in the front section. Photographs by Cameron Durley taken on 19 May show this chimney breast which is partly canted being supported by what Mr Kirwin (in evidence) properly described as a Heath Robinson arrangement whereby two concrete lintels running one above the other but on two elevations of the chimney breast are apparently supported by a wooden frame canting in parallel to the canted elevation. It is not altogether obvious why the chimney had not collapsed or suffered further severe damage. This work, however, had not been done by GE as part of the insurance work or as work which was done under the supervision or at the direction of Cunningham. This is work which was ordered or instructed by the Insured and it may or may not have been done by GE workmen working directly for the Insured.

By early June 2000, Mr Kirwin had decided to re-render the whole of the front and rear of the property internally to ensure that they did not have any damp-proof problem. The purpose at least in part of this was to provide an internal render that was impermeable to water. In this context, Mr Kirwin took the advice of BRE. A site investigation was done in May 2000, with a report (from Hymas) on 11 June 2000.

On 16 June 2000, Mr Kirwin wrote to Mr Rawlings. He wrote as follows:

By 22 June 2000, an agreement had been reached with the Insured relating to the loss of the reed ceilings; this appears to have been £13,177.17 plus VAT.

Heritage Preservation, a specialist damp-proofing company, was called in to carry out a survey and produce a report, which they did on 23 June 2000. Heritage found materially as follows:

The existing external render was found to be in poor condition i.e. cracked, hollow and porous.

Re-pointing had not been carried out to a high standard.

Internal plaster in most areas had been taken over the level of the existing chemical damp-proof course thus possibly allowing moisture direct access.

Changes in floor level between the two front reception rooms and the kitchen and utility rooms in the rear section could be allowing lateral penetration of dampness.

On 10 July 2000, Mr Kirwin invited Bowman to tender again a specification and Schedule of Works and eight drawings. This was not to be a competitive but a negotiated tender. Provisionally there was an agreement for a commencement date for the remedial works in the fourth week of August 2000. Arrangements were made to secure extended alternative accommodation for the insured.

During the tender period there were various revisions to the contract drawings. On 3 August 2000, Bowman returned their priced tender in the gross sum of £181,369.03. Mr Kirwin secured the services of another contractor, NRB, to price the Schedule of Works. He formed the view, not unreasonably, that the results of that exercise were insufficiently different from Bowman’s pricing so that it was justified going ahead with Bowman.

Key features of the Schedule of Works for which Bowman tendered included the following items of work:

Bowman, notwithstanding a request to do so, were not prepared to reduce their tender price. Bowman’s tender was accepted either expressly or by conduct by Bowman being allowed to commence work.

There was a pre-contract site meeting on 14 August 2000, attended by the Bennetts, Mr Highton, Mr Blakeley and two representatives of Bowman. It was agreed that the commencement date should be 29 August 2000 with a completion date of 23 February 2001.

Mr Blakeley supervised the works on site from 29 August to 10 November 2000. He visited the site usually on three or more days each week and liaised closely with Mr Kirwin and the Insured. Mr Blakely’s last visit was to be 10 November 2000. The Insured were highly critical of Mr Blakeley. They wanted to have Mr Kirwin there on the site on a virtually full-time basis.

It is the case that throughout the Bowman contract, which was to extend until August 2001, the Insured were relentless in their demands for work to be done, much of which had little to do with the subsidence related problems or the putting right of the defective work done initially to put right the subsidence related damage. For instance, on 8 November 2000, Mr Rawlings wrote a memo as follows:

The perception that the Insured were relentless had some justification. For instance, on 12 November 2000 the Bennetts wrote to Mr Rawlings (copied to AXA’s Chief Executive) which gives the flavour of the strained relationship:

Two days later Mrs Graham wrote to Bowman seeking to:

Mr Rawlings sent an internal e-mail to a Mr Hannah of AXA on 13 November asking to speak urgently on the Bennett case:

Mr Kirwin wrote a nine-page letter to Mr Rawlings dealing with the letter of complaint. He effectively challenged each and every complaint. I am satisfied that this letter dealing with the 23 apparent complaints made in the Bennetts’ letter of 12 November represented the truth. The Bennetts’ complaints were perceived to be wholly or substantially unjustified. I can only assume that the Bennetts had allowed their emotions to cloud their recollections.

Mr Rawlings clearly by November thought that he should be taken off the project. He wrote a file note for Mr Hannah shortly after 17 November 2000:

These extracts and other evidence suggest that the mistrust which AXA (initially Mr Smith and later Mr Rawlings) had about the Bennetts, their motivation and intentions had continued from early 1999 to the end of 2000.

An important concern for AXA, and indeed Mr Kirwin, was the fear (and possibly threat) of publicity about what might have gone wrong on this project. Mr Smith initially, and later Mr Rawlings, believed that the Insured had access to the press which might publish critical articles about AXA. This is reflected (amongst other documents) in a note which Mr Rawlings wrote on 11 December 2000:

The threat of publicity was one which continued to engage Mr Rawlings and AXA. He wrote in a file note on 12 February 2001:

The bulk of the structural work was carried out and completed by Christmas 2000. For instance, Bowman’s site diary contains the following: “Removal final concrete lintel (hooray!)” on 23 November 2000.

There was some delay in commencing the re-pointing work, which was intended to be done in the autumn of 2000 before the cold weather might arrive to make the job more difficult. That work was not commenced until January or February 2001.

I have formed the view, contrary to Mr Kirwin’s express belief otherwise, that there was not any significant increase in the quantity of structural repair work between August and the end of 2000. The overwhelming and major problem which occurred during this period and, even more so, in 2001 was the relentless, continuing and numerous changes of minds and additional demands of the Insured.

This state of affairs undoubtedly continued until the summer of 2001. Matters reached a head in early February 2001 when Bowmans threatened to pull off the site. Mr Gibbons of Bowman wrote to Mr Kirwin on 5 February 2001 in these terms:

Mr Kirwin wrote a conciliatory letter to Bowman on 6 February 2001. He did not challenge the assertion that there had been ridiculous requests by the Insured:

He wrote on the same day to Mr Rawlings. There was no hint or suggestion in this letter that substantial additional structural or repair works were necessary or had been required over the preceding six months. Instead, he told Mr Rawlings in some detail how well in relative terms the works were proceeding, the aim being to complete the works by mid-April 2001. He wrote as follows:

The costs escalated from an original projection of some £180,000 to over £800,000. This is illustrated by the table below of Interim Certificates issued by Cameron Durley:

The first four valuations give some indication of what extra work (over and above that which had been specified) was ordered or claimed for:

Valuation 1 which covered the first month of work only identified one item of additional works which was providing for “dummy window frames”.

Valuation 2 which related to the second month of work identified some £13,500 of allowable dayworks by way of additional work. Some at least of this was structural type work (chimney breast in kitchen, external corner of kitchen rebuilding and removing lintels in first floor front LHS bedroom).

In valuation 3 which related to the next month (up to 5 December 2000), a further £32,000 approximately was added with regard to further daywork some of which relates to structural work.

Valuation 4 which covered the period up to 11 January added an additional £28,000 approximately for additional dayworks and some £4,000 in respect of various miscellaneous additional works. Again, some of these relate to additional structural works, although by no means a very substantial proportion.

Mr Kirwin in evidence made it clear that as from about 2006 (well after the works were completed) he had formed the view that the main reason that the job became substantially delayed and went cost-wise way above the original expectation of £180,000 was that “previously unknown structural problems were being exposed virtually on a daily basis”. He identified this first period up to early January 2001 as the period in which the project in terms of scope, work content, time and cost began to change to a very substantial extent. He said in evidence on numerous occasions that it was this that led to the important decision in late January or early February 2001 to move from a lump sum fixed price contract with Bowman to a cost plus basis of payment.

There is little documentation, contemporaneously, to identify precisely when and how this change to the reimbursement method came about. Suffice it to say that by Valuation 5, 10 February 2001, Bowman and Mr Kirwin (with the approval of AXA) had agreed that payment should be on a cost plus basis. It is not, in my judgment, a pure coincidence that by this time Bowman had become completely exasperated with the the Insured.

As the job began to draw within sight of completion, Mr Kirwin made it absolutely clear not only to AXA but also to the Insured that his assessment at the time was that the substantial delays, the decision to move to cost plus and the very large increase in cost was attributable to the actions of the Insured. On 21 June 2001 he wrote to Mr Rawlings in these terms:

At about the same time Mr Kirwin consulted a Dr Chappell, who was an expert on building contracts. He prepared some notes of their meeting:

A few days later Mr Kirwin had a meeting with the Bennetts. He made some notes in a memorandum to Mr Rawlings which identified what happened at the meeting. Mr Kirwin talked with them about drawing a line in the sand and stressing that there would be no further extras without his authority. His note then records what he said:

I am satisfied on a balance of probabilities that Mr Kirwin’s analysis in June 2001, and indeed before, that the substantial part of the delays to completion of the Bowman works, the substantial part of the increase in costs and the decision to change to a cost plus basis of reimbursement was attributable to the relentless and frequent demands for changes and interference by the Insured was probably correct. Certain it is that during the period of the Bowman works, August 2000 to August 2001, Mr Kirwin did not in open correspondence or in private notes or memos identify any factors other than the relentless demands of the Insured. For instance, he did not identify any additional structural works as having caused or materially contributed to the delays and substantial increases in cost. It is also the case that over the first three months of the project when Mr Blakeley was more involved that he did not similarly identify any such factors as being disruptive or significantly attributing to substantial extra cost. Mr Kirwin was reasonably frank in evidence in accepting that during this period he did believe that these factors were attributable to the Insured. It was only some five years later in the run-up to these proceedings and thereafter that Mr Kirwin began to form any different view.

Given that the burden of proof is on AXA, I am certainly not satisfied that they have discharged their burden of proof in establishing that the delays, change to the cost plus reimbursement method or the substantial part of the additional cost was attributable to any factor for which Cunningham was responsible.

Mr Nicholson QC for AXA suggested in his final submissions that there is, primarily, documentary evidence which records that additional works were done over the first four months which did or might account for the delay to the work. Whilst there is no doubt that there were some works additional to those specified in the Bowman contract, there is no record that such additional works were delaying or disrupting the works. For instance, reference is made to the record of a visit made by Mr Blakeley on 11 October 2000 which records what is or may be some additional work. However, in his “Remarks”, he then goes on to say: “Works progressing well”. Again, there is reference to certain lintels (possibly not expressly specified in the Bowman contract documentation) having to be replaced by way of additional work but there is no record that this materially delayed or disrupted the work. Given that, prior to the Bowman contract, Mr Kirwin knew that it was highly likely that further lintels would be discovered under what remained of plasterwork which had not been removed by Pearce, it is likely that some allowance was made in the initial programming for such work if and to the extent that it was discovered to be necessary.

By mid-April 2001, Mr Kirwin’s belief and perception was that the works would be completed by about early or mid-June 2001. Mr Rawlings recorded in an internal memorandum on 12 April 2001 that “completion of the contract is seven weeks away”. Mr Kirwin wrote to the Insured on 23 April 2001 confirming an agreed definite date for furniture to be moved back into Orchard Farm on 27 June 2001.

However, it is clear that whatever the reasons for delay beyond the anticipated June completion they were not in any way attributable to the need to carry out structural works. Bowman were seriously considering walking off the job again. This is recorded in Mr Rawlings’ telephone conversation record on 19 April 2001, where he records “the atmosphere of distrust, double checking, changing minds and unwarranted criticism of anyone and everyone”.

A problem arose in April which related to the windows which the Insured had installed in mid-2000. Mr Kirwin formed the view that the workmanship in installing the windows had not been good. As he records in a memorandum to Mr Rawlings in April 2001:

An additional problem emerged by early May 2001, which was that the new external rendering had begun to crack following the placing of the 10mm top coat. Random hairline cracks developed. Mr Kirwin sought the advice of BRE about this. Bowman was instructed on 1 May 2001 by Mr Kirwin to remove the finishing coat, apply a new scratch coat and then apply a finishing coat before the new scratch coat had finally set. That did not apparently work because further cracking in the top coat appeared again, as is recorded in Mr Kirwin’s email to BRE on 10 May 2001.

Bowman appears to have attributed the delay beyond the anticipated June completion date to Windsor Kitchens, who were a supplier/sub-contractor for a variety of kitchen and other units. Mr Kirwin inspected a substantial “L” shaped unit on 19 May 2001 and was very disappointed at the quality of the workmanship.

By 4 June 2001, the June date for the Insured moving back in had been postponed. In a fax to Pickfords of 4 June 2001, Mr Kirwin talks about furniture coming back to Orchard Farm between 18 July and 3 August 2001.

Following complaints by the Insured about a security company, Ritchbell, who had been providing guards for the house, it was removed by CDC as from 8 June 2001. Another company, Guardian Security, was retained. This included checking not only on Orchard Farm but also between 15 and 24 June 2001 the temporary accommodation of the Insured whilst they were away over that period.

On 25 June 2001, Mr Kirwin wrote to Bowman indicating in effect that practical completion of the work was expected to be by 1 September 2001. He listed a number of items of work which remained to be done, including the installation of an important kitchen unit.

Windsor Kitchens fitted the “L” shaped unit. It was removed by 11 July 2001. The Insured said that they did not want any such unit to be fitted and asked for a cash settlement. By the end of July 2001, works were proceeding. So far as I can ascertain from Bowman’s letter of 30 July 2001 to Mr Kirwin, the only significant works outstanding were external works, such as the completion of York paving and landscaping with kitchen units awaiting completion or to be supplied to site.

It seems that by this stage at least the Bennetts had moved back into the house, although they described themselves as having been there since 19 July in their letter to Mr Rawlings of 29 July 2001 and “camping” in the house. Mrs Graham moved back into the house on or about 2 August 2001.

On or about 3 August 2001, Mr Bennett asked Mr Kirwin to remove Bowman’s foreman, Mr Chambers, because “his wife had allegedly overheard him, whilst in his cabin, swearing and name calling her husband”.

In his letter dated 7 August 2001, Mr Kirwin wrote to summarise where they stood with the claim. The letter is instructive in a number of respects:

To summarise the position as at practical completion of the Bowman contract:

The original Bowman contract period was about six months.

The causes of the delay of some five months were, essentially, the numerous changes called for by the Insured and their constant interference with the work and its progress.

There remained outstanding at practical completion a number of items of work which were primarily snagging and kitchen unit related work.

None of the delay beyond a six-month contract period was attributable to the discovery of the need for and the execution of additional structural-type works. To the extent that there were additional structural works, I do not consider that AXA has anywhere near established on a balance of probabilities that they delayed or materially disrupted the work by Bowman.

Shortly after practical completion, the Insured instructed solicitors, Bradshaw Hollingsworth (“BH Law”). BH Law wrote to AXA on 20 August 2001. They raised issues relating to the outstanding work and also indicated that their clients would wish to be compensated “for inconvenience, distress and loss of amenity”.

On 3 September 2001, Mr Kirwin asked Bowmans to provide costings for the outstanding works and snagging items contained in the snagging list which Mr Kirwin had prepared with the Insured. Many of the items on the snagging list were simply snagging being relatively small items such as minor deficiencies in finishes. Mr Gibbons of Bowman wrote back to Mr Kirwin on 5 September 2001 with a list of costings for the outstanding works. The total was £58,295, albeit that £45,000 was allowed in respect of the fitted units (primarily from Windsor Kitchens).

On 28 September 2001, Merricks, solicitors instructed by AXA, wrote back to BH Law indicating that the cost of completing the outstanding works and undertaking remedial works was £94,000. It is not clear from where that figure emerged. In addition to that sum, AXA was prepared to make a payment of £50,000 in respect of distress, discomfort and inconvenience suffered by the Insured. AXA offered to pay the Insured £144,000 plus any further sums to be certified as payable to Bowman.

BH Law wrote back on 1 October 2001 asking for a breakdown of the £94,000 and raising various further questions.

Merricks wrote back on 4 October 2001 with a breakdown of the sum said to relate to outstanding works. The new sum was £101,984.13. Apart from VAT, £5,995 was allowed in respect of the snagging items on the agreed schedule. An additional £52,300 was allowed for completing York Stone Paving, remedial works and re-surfacing of main yard and driveway, installation of interceptor channel to front gate, filling in re-surfacing of potholes to access road, landscaping works to front lawn areas and manufacture and fitting of all outstanding fitted units except the “U” shaped unit the cost of manufacture of which was not included. £500 was allowed for the independent certification of the electrical works and a contingency of £20,000 was allowed for “unknown additional works that the Bennetts may have identified since the contractor stood down, minor modifications to electrics, providing a new finishing render coat to rear section etc.” A sum of £8,000 was allowed for professional fees for supervising the completion of these works. The total was £86,795 which together with VAT of £15,189.13 produced the total of £101,984.13.

BH Law wrote back in two letters dated 12 October 2001. Various additional claims were raised including a claim for expenses amounting to £7,612.54 together with a claim for reimbursement for various items said to have been damaged by the builders during the course of the works: this included damage of various plants and trees and various other expenses. There was also an optimistic claim for £5,040 for storage by Mr Bennett’s mother of books.

In their second letter, BH Law asked for £240,000 plus their legal costs.

Following a without prejudice meeting on 7 November 2001, Merricks on behalf of AXA offered the sum of £190,000 to the Insured “in full and final settlement of any and all claims that they may have in respect of the cost of completing any and all outstanding works and remedial work including but not exclusively the snagging list, work to the rendering, plaster and electrical work and any claims that your clients may have in respect of distress, discomfort and inconvenience …”. Various other offers were made. BH Law came back to Merricks by letter of 20 December 2001 indicating that they would accept an offer of £215,000.

By letter dated 10 January 2002, Merricks offered to settle at £200,000.

Although this final offer was accepted in principle, there followed a period of some months whilst negotiations continued on the terms of the settlement agreement. The Bennetts were anxious to ensure that structurally the building was structurally sound. To that end, AXA instructed consultant engineers, Hancock Wheeldon & Ascough to provide a structural appraisal, which they did in a report in May 2002.

The Compromise Agreement was finally signed on 22 November 2002. It was between the Insured, AXA, CDC and Bowmans. The sum of £200,000 was payable “in full and final settlement of all and any claims that [the Insured] may have against AXA, Cameron Durley, Bowmans, Cunningham Lindsey or any other Loss Adjuster, builder, agent or adviser instructed by AXA …”. In addition, AXA undertook to pay a contribution of £10,000 to the Insured in respect of the involvement of BH Law.

There was no, and certainly no reliable, evidence that this agreement was reached as a result of any advice from Merricks, Counsel or any other expert advisers. There was no breakdown attached to the Compromise Agreement as to how the sum of £200,000 was made up or calculated. It remains unclear and unproven upon what basis this settlement at this level was in fact justified.

I found all of the witnesses to be honest. From the way that they gave their evidence, I did not consider that any of them were deliberately or consciously trying to do anything other than give their honest recollection about what happened. That said, I was generally favourably impressed more by Cunningham’s witnesses than AXA. I found Mr Green, particularly, had a good and reliable recollection of what happened. I formed the strong view that Mr Wassell was a good and conscientious man who sought to do his job as well as circumstances would permit; his recollection was generally reliable. Mr Mellor I found to be straightforward and reliable in a way which I found eminently believable. Mr Hall gave his evidence in a firm and honest way, albeit that it is clear and he accepted that he fell below the requisite standard of care in a number of respects.

I found the Defendant’s expert, Mr Smithurst, particularly impressive. He has been an extremely experienced loss adjuster for over 30 years. He has many years’ experience of surveying and, as a qualified Fellow of the Association of Building Engineers, has a very good working knowledge of how buildings work. He had done an enormous amount of research into the case which had been done in a logical, comprehensive and comprehensible manner which more than adequately compensated for the fact that he had not visited (and probably had not been able to visit) the premises. He made concessions where it was appropriate to do so and I found him eminently believable from the way in which he dealt with questions both from Counsel and from me.

Unfortunately, I did not find AXA’s witnesses so impressive. Although, as I have said, I do not doubt their honesty, their usefulness as witnesses was undermined in effect by the way they dealt with or were able to deal with questioning. I found that Mr Smith was very defensive. From the way in which he answered questions, particularly under cross-examination, I formed the view that his recollection was very limited. Save in so far as he wrote contemporaneous (or relatively contemporaneous) file notes or sent or received letters or notes himself, he could remember very little of what had happened. I say that not by way of criticism of him as a person because, doubtless, he had dealt with hundreds and possibly thousands of claims and it would be difficult to recall much of relevance without the assistance of file notes and other contemporaneous documents.

Mr Munnings of AXA was called. He took over the conduct of the Insured’s insurance claim in September 2001 from Mr Rawlings. Much of his evidence related to the time before he became involved and so, in the old-fashioned sense, was substantially “hearsay”. His views about what the documentation before he became involved meant adds very little to any understanding of the case. He was in practice unable to answer why various sums were paid out to contractors or the Insured before he became involved; he was simply able to say based on his reading of the documents that everything had been paid out on the recommendation of Mr Kirwin. Broadly I found his evidence of little help or use.

So far as Mr Kirwin was concerned, it was clear to me that he was a conscientious and decent man who was an engineer experienced in dealing with difficult subsidence and structural damage cases. Although his cross-examination was polite and only occasionally aggressive, he became very defensive, flustered and on occasions difficult to follow. After a sustained period of cross-examination, I became somewhat concerned about his well-being. I asked him this question on Day 8 (T8/73):

I got the impression from the way he gave his answers both as a witness of fact and as an expert that not only was he scarred at the time but at least some scarring remains. He referred to “the heat of the battle” and a “daily battle” to describe his dealings with the Bennetts (T7/147-8) and his letters and notes, some of which are referred to in the history above, describe the sort of pressure which he felt that he was under. As he said on a number of occasions, this job was the worst job he had ever been on; the problems had undoubtedly been caused, he felt, by what he regarded as the relentless behaviour of the Insured. I formed the view that he was in consequence not able to give the sufficiently independent evidence called for by an expert witness. Thus, his retrospective analysis some five years or so after the event that the real reasons for the delay and substantial increase in cost were attributable to factors other than those to which he attributed them in 2000 and 2001 was not reliable. I do not, by any means, say that all his evidence was unreliable. His recollection, often supported by contemporaneous documents of what happened in 2000 and 2001 was not a dishonest recollection and was often accurate. I also do not consider that his ex post facto reconstruction of events in 2006 and in 2007 was a dishonest one. I believe that he has simply tried to convince himself that the problems of delay and additional cost on the project of which he was in charge could not have been attributable or simply attributable to those factors to which he did attribute them to at the time.

As to Mr Sharpe, the loss adjuster expert called by AXA, he did not give evidence for very long. I formed no unfavourable view of him or the way in which he gave evidence. However, as indicated above, I generally much prefer the evidence of Mr Smithurst.

Finally, Mr Miller was called as an expert quantity surveyor. To some extent his brief was limited in that he did not consider the efficacy or the need for remedial works and did not consider the validity of the various discounts which appear in AXA’s amended claim. I did not find him unimpressive although he was less experienced than Mr Smithurst. However, I found Mr Smithurst’s evidence on quantity surveying matters to be substantially better and more impressive than that of Mr Miller.

Although I will form no negative inferences one way or the other, I consider that it is surprising that at least two further witnesses were not called. Mr Blakeley from CDC, who was closely involved with the remedial work project up until November 2000 was not called. His evidence could have provided greater clarification as to the extent to which, if at all, any additional work, found to be necessary, materially delayed or disrupted the works. I was also surprised that Mr Rawlings was not called. As the senior AXA manager in charge of this claim over a period where the costs escalated by a factor of four to five over that budgeted, for his evidence might have been helpful to explain the circumstances in which AXA was prepared to allow such increases. Whilst no inferences can be drawn as to what evidence they would have given, I do not have the benefit of their evidence in support or otherwise of AXA’s case, particularly on causation.

As I have said earlier, I do not have the benefit of the evidence of the Insured. I have therefore had to make findings of fact based on other witnesses’ evidence and the correspondence to from and about them. It is clear that from 1998 to 2001 the Insured took against, to a greater or lesser degree from time to time, three separate firms of loss adjusters (C. Wells, C. Cunningham and CDC) and various individuals within those firms, at least two sets of contractors (GE and Bowmans) and a number of their individual employees and against AXA, in particular Mr Smith and Mr R Rawlings. This might be coincidence and might reflect that all the individuals objected to were odious or incompetent (although I doubt that). It is no coincidence however, in my view, that objections to individuals were often made after the individuals took a stand against extra work being done or sums paid to the Insured. In one sense, the approach of the Insured was one which was extremely profitable to them. Although they suffered the serious inconvenience of their house being a building site to a greater or lesser extent for over two years, they ended up with a vast amount of refurbishment and reconstruction which was not in any way related to the works which Cunningham and GE originally embarked upon. AXA itself accepts now that substantial elements of betterment were allowed to the Insured for which they now make no claim.

Mr Nicholson QC for AXA with his final submissions produced a “List of Issues on behalf of AXA”. It runs to 11 pages. I consider that the issues can be more generically defined as follows:

There is no doubt that there was a contractual retainer. I consider from the facts and the evidence that a contract was made on 3 February 1999 at the meeting held between Mr Smith for AXA and Messrs Green and Hall for Cunningham. There was some suggestion that it was only a provisional agreement which was to be confirmed later. I do not consider that it was so expressed or so agreed at the meeting of 3 February 1999. However it simply does not matter because in any event it was confirmed by conduct later with Cunningham going ahead to provide the services which it was agreed that they should provide.

The relevant factual background to the contract meeting held on 3 February 1999 was that by early 1997 AXA had accepted that there was in principle a good claim for subsidence. Matters had proceeded relatively slowly in that by February 1999 no work had been carried out other than some drainage related work and monitoring of the building. The Insured were anxious to have the works started as soon as reasonably practicable. They had been led to believe that those works would start at about Easter time 1999. Mr. Smith did not foresee any great difficulty in relation to the agreed works. The Insured, for good or bad reason, were upset with the behaviour of the first loss adjusters, C. Wells. It was clear that the Insured wanted to take the opportunity to carry out extensive works of the property themselves. The Insured were believed to be “difficult” to deal with.

I accept that Cunningham was retained to take over the claim from C. Wells in effect to put the existing proposed repair scheme into effect. I found Mr Green’s and Mr Hall’s evidence on this aspect of the matter to be particularly credible. They were asked to proceed upon the basis that the property was stable in the sense that it had stabilised after and during the monitoring which had been instituted by C. Wells. Given what had happened with the Insured before February 1999, it is unlikely that Mr Smith would have wished Cunningham in effect to start all over again and repeat any or any material part of the investigative and monitoring work which C. Wells had carried out. It is unlikely that Mr Smith would have wanted Cunningham to draw up a materially different list of work to be done than was contained in the schedule which C. Wells had produced and apparently, in substance, agreed with the Insured. It is unlikely because he knew or believed that the Insured were difficult and would cause trouble if the works were materially changed and put back much beyond Easter 1999.

I consider that it is most likely that the meeting on 3 February 1999 was initially between Mr Green and Mr Smith. It was only when it was clear that the retainer was to be a relatively limited one that Mr Green called for Mr Hall to attend as the person most likely (in Mr Green’s view) to be the appropriate person to deal with the job as it had been described. Mr Hall was a surveyor and not an engineer. If Mr Green had had any inkling from Mr Smith that a substantial structural investigation, reappraisal and monitoring exercise was required, he would not have allocated the work to Mr Hall. This would explain why the only document handed over by Mr Smith and, indeed, asked for by the Cunningham representative was C. Wells’ Schedule of Works. Although it is likely, and I find, that Mr Smith brought to the meeting with him the files, it was because it was to be a limited retainer that he did not offer to hand over and did not hand over the files there and then to Cunningham. The very fact that Mr Smith never complained or hinted at a criticism of Cunningham that it had not done what it was employed to do supports the view which I have taken that the retainer was limited.

There is further corroboration in Mr Hall’s contemporaneous note which refers to this meeting as being one to discuss Cunningham’s “taking over this claim at Stage 3”. The reference to Stage 3 was to Cunningham (or a predecessor’s) working document which split the work which the loss adjusters habitually did into a number of phases of which Stage 3 was the actual execution of the remedial works.

I do not consider that there was anything which might be described as a contractual prohibition on Cunningham being denied access to AXA’s files or the files of C. Wells. That was simply not discussed between Mr Smith, Mr Green and Mr Hall.

I am satisfied that it was likely that Mr Smith instructed Cunningham to proceed on the basis that the property was stable for at least two reasons. First, given that it is likely that he had read and understood his files, he would have known and seen that C. Wells believed that the subsidence had effectively stabilised. Secondly, he would have seen and known that there was no suggestion by C. Wells that the property should be underpinned or have equivalent support measures undertaken; the works were only to be to the superstructure. If there was likely to be a continuing problem, it is likely that Mr Smith would have known that stabilisation measures would have been required. The fact that they were not required would have suggested to him that the property had stabilised. If there was any real question mark over that, I feel sure that Mr Smith would have made a clear point to Cunningham that either further investigative works and monitoring were required or that consideration should be given to stabilisation measures. I found Mr. Smith less than impressive in the giving of his evidence on this issue: although he had dealt with numerous claims before, he tried unconvincingly, to suggest that he could not recall if he had read his files and that he could not have been qualified to form even a general view about whether the property was stable.

Paragraphs 23 and 25 of the Amended Particulars of Claim are admitted in the Defence. It is accepted, rightly, that it was an implied term of the contract that Cunningham should carry out the services provided under their contractual retainer with reasonable care, skill and diligence. The standard is that ordinarily to be expected of reasonably competent loss adjustors holding themselves out as competent to provide a project management service in respect of subsidence claims and/or to deal with such claims. There is a concomitant duty in tort which does not, however, extend the duty arising in contract.

There are 21 different types of breach of contract which are pleaded. Since none of them have been abandoned, it is necessary for me to deal with each one. I will deal with them in the order in which they appear in the Amended Particulars of Claim and using the same nomenclature given to each type of complaint.

Paragraph 26.1 of the Amended Particulars of Claim complains that Cunningham were negligent in failing to obtain advice and input from structural or civil engineers and should have used either a structural or civil engineer or very experienced building surveyor to supervise and direct the remedial works as a whole. I am satisfied that there was no breach of contract in this regard. Since Cunningham was only asked in effect to proceed from the repair stage and in effect to take over in time from where C. Wells had reached, it was not necessary or would not have been considered normal practice to retain a structural or civil engineer to assess the property or prepare the detailed design of the structural parts of the remedial works. C. Wells had engineering staff, had investigated the problems, had prepared a Schedule of Works and had essentially concluded that superstructural repairs only were required. The repair regime which they had promulgated and which Cunningham was asked to take forward was for a relatively modest amount of relatively ordinary building works. The crack repairs involved taking out cracked bricks and replacing them with an appropriate form of repair. Nowhere was it necessary to take down and reconstruct any structural or large areas of brickwork. Hacking off old plaster and replastering is a relatively uncomplicated type of work. Even the replacement of the inglenook beam in the ground floor front section (RHS) dining room was a relatively simple operation which did not in itself require engineering input. It was not an unreasonable or negligent decision on the part of Cunningham to decide that Mr Hall who was a reasonably experienced surveyor for this type of work should be used as the relevant person to manage these works.

In Paragraph 26.2 of the Amended Particulars of Claim, AXA plead that Cunningham should have read or called for the papers in AXA’s file. I have accepted that there was no contractual prohibition or instruction from AXA to prevent Cunningham calling for the files. However, I accept Mr Smithurst’s evidence (for instance adumbrated in Paragraph 2.1 of the Statement of Agreement or Disagreement by Expert Loss Adjustor witnesses) that it was not unreasonable given the limited retainer for Cunningham not to call for the file. If, as he says, the retainer was simply to see through the scheme which had already been prepared and promulgated by C. Wells, there would have been little point in calling for the files. Cunningham was given at the meeting of 3 February 1999 the key document which was C. Wells’ revised Schedule of Works. As AXA itself accept in Paragraph 26.2.1 of their pleading, that Schedule of Works identified clearly the locations of the repairs needed for the recent subsidence damage and also highlighted a debonding of some of the existing plaster. It was obvious to anyone such as Mr Hall, who would visit the property shortly after the retainer meeting, that the property was of considerable age and that it suffered from various items of disrepair not caused by subsidence or otherwise within the scope of the insurance. Indeed, Mr Hall was able on his visits to the site before and after GE commenced their work to see this. Although Cunningham did not call for the files, I am not satisfied that they would necessarily have found anything in the files which would have materially assisted them in performing the limited retainer. It might have proved to be the case that, if things began to go seriously wrong with the building or the project, a competent loss adjustor in the position of Cunningham would have called for the AXA or C. Wells’ files. Indeed this is exactly what Mr Wassell of Cunningham did do in September 1999 following the cessation of Mr Hall’s involvement.

A separate complaint (Paragraph 26.3) is made with regard to an alleged failure to obtain the C. Wells file. Again, I am not satisfied that there was any failure to exercise reasonable care and skill to the requisite standard in this case. Given the limited retainer, it was not incumbent upon Cunningham to call for these files since their involvement was in practice contractually to be a relatively limited one, namely finalising a contractual specification for the execution of pre-defined works, procuring tenders, monitoring the remedial works, administering the building contract and appropriately adjusting the losses relating to the remedial works and the associated costs.

The next complaint relates to failing to carry out any proper inspection at least before commencement of remedial works.

I am satisfied that Mr Hall did carry out a reasonable inspection on 11 February 1999. He did it on a room by room, floor by floor basis by reference to the C. Wells’ Schedule. Although his notes are of a relatively limited type, being recorded in note form and on the C. Wells’ Schedule of Works, I do not consider that that level of recording as such was negligent.

What was negligent, however, and this is accepted by both sides’ experts at the very least, is that he should have recorded the condition of the property not only in relation to those specific parts of the building which were to be repaired as part of the insurance related works project but also any other reasonably discoverable defect or area of damage which was not insurance related. It was and must have been obvious to Mr Hall that this was an old and dilapidated building with a number of actual or potential deficiencies within it which had nothing to do with the insurance related works. Mr Hall knew probably in February 1999 and by the end of March at the latest that the Insured were intending to carry out works themselves which might well overlap in time. It was important to have a survey or inspection of the condition of the property so that there was no or at the very least definable argument about what the problems were and what the problems were not to be considered the responsibility of AXA.

Whilst there was some record of the damage (in the areas to which it related) in relation to the insurance related works determined by C. Wells, there was no other record. Although some photographs were apparently taken, probably by Mr Hall in the February/March/April period, they seemed to have been taken not by way of establishing a record but simply to identify, if not at random only, occasional and limited views of specific possible problem areas. That a condition survey record was required assumed a greater importance because Cunningham had not called for the files of AXA or C. Wells; although that was not negligent, Mr Hall did not know whether C. Wells had prepared a survey of the condition of the premises. Without that information, he or Cunningham should have taken steps to carry out such an inspection and recorded it properly.

In Paragraph 26.5 of the Amended Particulars of Claim, AXA complains that Cunningham produced design documentation for the remedial works which was wholly inadequate and unsatisfactory. Both experts agree that Cunningham fell below the requisite standard in taking C. Wells’ Schedule of Works and adapting it to satisfy the Insured. The adaptation however was to make the definition of the Works much less precise than C. Wells had specified. It was not necessarily negligent for Cunningham to agree to a flexible and less precise Schedule of Work if the remedial works were to closely monitored, managed and certified.

It is the case, as I find, that, on the 13 April 1999, Mr Hall did clearly identify to GE precisely what work was to be carried out and where. He physically went through the building and identified what work was required. It is also the case that in the first four weeks of the project it was closely managed and supervised.

So therefore, although it would have been good practice for Cunningham to prepare a Schedule of Work that contained as much detail as possible with the Insured’s concerns being met by the introduction of a contingency sum (see Statement of Agreement or Disagreement by Expert Witnesses (loss adjusters) Paragraph 1.6), it was not negligent or bad practice to do so in circumstances where as here Cunningham agreed a flexible Schedule of Work in circumstances where Cunningham was or should have been expecting to provide a high level of management and supervision. The Schedule of Works actually drafted and adopted for use for the insurance works was vague in locating defects to be remedied but it did specify sufficient for GE to quote. The precise locations where work was to be carried out were identified on the first or second day of the GE commencement and Mr Hall, reasonably successfully, provided a sufficiently high level of management and supervision over the first three to four weeks of the project. That was an important period because the extent of the remedial works would be largely determined during that period. In the result, changes were made to the types of repair to be carried out which were negligent. Other matters also intervened.

It is said that Cunningham negligently omitted to include in the GE Schedule of Works the replacement of defective flashing at the junction between the rear wall of the front part of the house and the roof of the rear part. I disagree. I accept Mr Hall’s evidence (Day 4 page 32) that the Insured, Mr Bennett told him that he would do the flashing as part of maintenance. I also accept Mr Smithurst’s evidence that this item was otherwise correctly omitted (Paragraph 5.2.7 of his report of 16 April 2007). This work did not appear (correctly) to have had anything to do with subsidence and movement.

As part of this complaint (at Paragraph 26.6), AXA allege that the contract documentation was otherwise wholly inadequate and unsatisfactory. Provision, it is argued, should have been made for contract terms which specified the specific period for conclusion of the works and for liquidated and ascertained damages for delay. It is said also that a standard form of contract should have been executed.

Although both relevant experts have agreed that “good practice would have been to insert the contract period and the level of liquidated and ascertained damages” (Paragraph 1.10 of the Statement of Agreement or Disagreement), which I accept, the experts were not agreed as such that it was bad or negligent practice not to insert or provide for a contract period and liquidated damages. The advantage of having a specified contract period and provision for liquidated damages is that they provide a tool or weapon to bring pressure on a contractor who is falling behind. In theory and indeed in practice, a contractor who has not expressly agreed a period for completion or any liquidated damages will be obliged, by implication, to complete the works within a reasonable time and to pay damages at common law for failing to complete within a reasonable time. Thus there will remain a contractual obligation and potential contractual liability with regard to completion and palpably late completion. Generally, however, if a contractor is delayed by acts of prevention and wrongful interference by the employer or persons acting on its behalf either extensions of time will be due or time will be put at large and liquidated damages provisions will be unenforceable (see for instance Peak v McKinney [1970] 1 BLR 111).

Thus, given what was to happen, which included acts of interference by the nominal employer (namely, the Insured), the obligation on the part of GE would have become one of completing within a reasonable time in any event and/or they would have been entitled to an extension of time and the liquidated damages would either not have been payable by reason of an extension or the liquidated damages position would have become unenforceable by operation of cases such as Peak v. McKinney.

Although I veer into causation, I am not satisfied that there was any breach in relation to the failure to specify a completion period and make provision for liquidated damages or that any breach did cause or would have caused any additional cost or loss in consequence.

Complaint is made (Paragraph 26.8 of Amended Particulars of Claim) that Cunningham should have obtained tenders from at least two competent contractors. Originally, tenders were to be obtained from three contractors, Browns, Bowmans and GE. Browns dropped out and so Cunningham were left with the decision as to whether to find a third potential tenderer and delay the tendering process or simply proceed to invite tenders from the remaining two. I do not consider that this can conceivably have been a negligent decision on the part of Cunningham.

It may well be that the gravamen of this complaint is that GE should simply not have been invited to tender because, it is alleged, they were or should have been known to be incompetent. It is said that it was essentially a one-man company. The circumstances by which GE came to be invited are set out in Paragraph 18 of Mr Hall’s witness statement which was not seriously challenged and which I accept. Mr Hall says:

I must judge the decision to invite GE to tender on the basis of the information available at the time of the invitation or at least no later than the recommended acceptance of GE’s tender. The belief, which was based on fact, was that GE, albeit nominally a one-man company, had on its staff or available to it reliable tradesmen and Mr Bolland, who had previously worked for a respectable local builder which had ceased trading through retirement. Mr Hall said, and I accept, that he had worked on four occasions previously with GE satisfactorily and that Mr. Bolland had worked successfully on Mr. Bennett’s mother’s house. There were reasonable grounds to believe that they were competent and sufficiently so to carry out what was a relatively simple and limited work brief. I do not consider that it can possibly be said with any conviction that it was negligent as such to permit GE to tender for the work and when their tender came in as the lowest to recommend the acceptance of that tender.

Paragraphs 26.10 to 26.19 contain a number of criticisms of Cunningham with regard to supervision and direction of the Works by GE. Paragraph 26.10 is a generic complaint of failing to supervise and direct the remedial works properly or at all. It is unnecessary for me to deal with that as the following subparagraphs of AXA’s pleading deal with the specifics. I will address the specifics.

This complaint relates to the use of concrete lintels throughout the walls as a purported method of repair. It is important to appreciate that this specific complaint relates not to the use of concrete lintels to support window or other openings but it does relate, in context, only to the use of lintels to replace cracked bricks and brickwork both externally and internally.

It is accepted (and properly so) by Cunningham that it was in breach of duty for causing or permitting the use of concrete lintels as opposed to a more conventional method of repair. As I have found earlier in this judgment, the substitution of concrete lintels for the originally specified method of repair was initiated by Mr Hall. Although Mr Hall honestly believed that it was a reasonable solution, it is now accepted that it was a careless selection. In addition, the workmanship in inserting the lintels was poor, which should have been picked up by Cunningham. Accordingly, liability for negligence is established.

The primary complaint relates to the use of unsuitable plaster internally following the crack repairs of the brickwork. A lightweight plaster was used which, following its application and covering with a skim coat, had a propensity to act as a sponge. This is and was an old house with solid external brickwork. The brickwork was old and porous. The use of the lightweight plaster internally for patching repairs led to a capillary action which in effect sucked in the damp which was already present in the walls.

It is acknowledged and accepted (properly) by Cunningham that this was a negligent selection of materials. Accordingly, Cunningham is liable for its failure to exercise reasonable care and skill to that extent.

There is also a complaint that Cunningham carelessly allowed removal of the reed-based plaster work to ceilings and the replacement with it of plasterboard and skim coating. This is not a complaint which, as a complaint, has featured very much in the trial. There was undoubtedly historical discussion between the Insured and AXA in 1999, 2000 and again in 2001 about an allowance to be made to the Insured for having the reed ceilings replaced with plasterboard as opposed to being reinstated as reed-ceiling. There is little if any (let alone reliable) evidence that there was any negligence on the part of Cunningham in causing or permitting the replacement of the reed ceilings with plasterboard. So far as I can ascertain, this work of removal and replacement had been predetermined by C. Wells together with the Insured. It is certainly the case that the work was done with the conscious approval and endorsement of the Insured. The sole issue was whether a financial allowance should in addition be made for the Insured. The Insured never complained to any significant degree that reed ceilings should be reinstated. Accordingly, I am satisfied that there was no professional negligence on the part of Cunningham in this regard.

Paragraph 26.13 of the Amended Particulars of Claim relies on a number of other defects set out in the Defence Schedule served with the pleading. It is said that Cunningham should have included proper provision in their design, recognised and identified during site visits the unsuitable materials and poor workmanship, required GE to rectify the defects to date and to improve the materials and workmanship in the future and to withhold payment for the works affected until rectified; it is said that Cunningham failed to do any of those things with regard to the defects in the Schedule. The scheduled defects alleged run to 23 of which a number are generic rather than individual. I will deal with each of these defects in fairly short order. I have indicated to Counsel that if further reasoning is required I will provide it. References are to the “M” numbers in the Defects Schedule.

It is clear from the Prosser report and the work done by C. Wells that there was to some extent a rising damp problem in the building prior to the involvement of Cunningham. It was in principle no part of AXA’s responsibility under their insurance policy to address the rising damp problem which was present irrespective of any subsidence related problems. However it is clear that prior to GE commencing work there was some damp proof course arrangement in the front section of the house on the outside wall.

There is evidence, which I accept, that GE when carrying out repair plasterwork and then skim coating the whole of the internal plastered surface on the internal walls on the ground floor rooms in the front section took the plaster and the skim over and below the damp proof course. That would necessarily exacerbate the rising damp problem and would enable the damp to bypass, vertically, the damp proof course.

It seems to me therefore that Cunningham was negligent in failing to give clear direction to GE to ensure that the damp proof course was not so bridged or failing to notice that the damp proof course was being bridged in these locations. I am not satisfied however that there was any other negligence in relation to this problem. The Heritage report recommended a new damp proof course on the external walls in the ground floor of the first section but also recommended some work on the wall (internal) between the front and rear sections. I do not consider that there was any material plastering defect on that internal wall for which Cunningham can be blamed. There was no damp proof course there which was bridged.

It is also the case that other plastering work was done on the ground floor in the rear section. However I consider that, upon the available evidence, this was not done by GE at the direction or under the supervision of Cunningham. It is indeed unclear as to whether or not it was done by GE at all. At least some of the plastering work was done by or at the instigation of Mr Bennett, for instance, in the ground floor utility room (below the “Den” on the first floor). The list of work and materials provided by Mr Bennett (accepted by the Bennetts as having been provided by them) includes two days for plastering and materials for plastering which strongly confirms that some plastering was done by them without reference to the works which Cunningham was there to supervise. Accordingly, I do not consider that there was any negligence on the part of Cunningham with regard to any deficiencies in the plasterwork carried out by or at the direct instigation of the Insured.

This apparently relates to the fact that a flashing to the chimney breast above the second floor bedroom front section (RHS) was not provided. I am satisfied that there was no negligence here. Although it was the case that C. Wells in their Schedule allowed a provisional sum for “remedial works to roof of the/chimney stack flashing affecting second floor front right-hand bedroom wall/ceiling (£100)”, this item was not included by Cunningham in their Schedule of Works which was drawn up in conjunction with and with the agreement of the Insured by Mr Hall. It is not obviously work which was in any way necessary as a result of any subsidence and prima facie would not be covered by the insurance-related works necessary to put right the subsidence damage. I also accept Mr. Hall’s evidence that Mr. Bennett agreed to do this work himself. There is no liability.

This has been addressed above. There is liability in respect of the use of lightweight renovating plaster but not in respect of the removal of the reed-backed plaster ceilings.

I have addressed the issue relating to concrete lintels above. In my judgment, Cunningham was professionally negligent with regard to specifying or permitting the use of concrete lintels, externally or internally, for crack repairs of brickwork. So far as I can understand the Scott Schedule, this comment relates to the lintels referred to in M2.1.1, M2.1.2, M2.3 and M2.6. I accept the analysis by Mr Smithurst (E5/156) in his report of 16 April 2007, as amended in evidence on Day 10 (p.m.), as to which lintels were put in by the Bennetts and not under the direction of Cunningham.

Different considerations apply with regard to lintels used elsewhere. Complaints were made about the use of lintels in the chimney breast at first floor (RHS) in the front section. The evidence suggests to me that the work in that area was not done by GE; in any event, AXA has not proved the case in this regard. It was most likely done by Mr Bennett or workmen working under his instruction. The bricked-in area which historically enclosed the chimney breast was demolished by Mr Bennett towards the end of April 1999. It is more than likely that, when he saw the deteriorated state of the cantilevered chimney breast behind the enclosing walls, he would have wanted to repair it so as to make it or leave it as a feature in the bedroom in question. It was in a deteriorated state but not as a result of any subsidence damage. It had probably been enclosed in the first place historically because it was not in a presentable condition and possibly because the occupants of the bedroom did not want smoke to escape into the room. Whilst the use of concrete lintels in the reconstruction was a precarious and unstable form of repair, it was not done under the supervision of or at the direction of Cunningham. It is possible that this work was done by GE, or a GE workman, instructed directly by the Insured but, as the Insured were or at least should have been aware, this was not work which fell to be paid for under the insurance claim. Accordingly, I do not consider that Cunningham had any responsibility with regard to this work, contractually or physically.

Some 11 or 12 concrete lintels were used to form the soffit within the inglenook behind the new oak beam. This was clearly part of the work of restoring that area which was part of Cunningham’s brief. In effect the concrete lintels provided a shutter against which, on the underside, plasterwork could be applied. This was not a usual or suitable use of lintels and Cunningham should not have permitted it. Furthermore, as Mr Kirwin noted (T7/111), they were inadequately supported at their ends. To that extent Cunningham fell below the requisite standard and was professionally negligent.

Yet further considerations apply with regard to lintels used above openings. Above several of the windows, newly installed by the Insured, lintels were placed in effect to support the brickwork above the window. So far as the new openings at the rear section to accommodate the new extension are concerned, they were created by the Insured to provide access at ground and first floor level from the existing rear section into the new extension. That work was clearly not subsidence or insurance related. It would have been simply impossible, safely, to have made those substantial openings without putting some effective form of lintel or other support above the openings; otherwise the brickwork above would simply have collapsed into or around the openings. I therefore consider that it is more likely than not that the insertion of relatively long concrete lintels above the new openings on the rear elevation was done at the instigation of the Insured and not to the design or direction or under the supervision of Cunningham. It was not Cunningham’s job to design or supervise the very substantial refurbishment works which the Insured were committed to proceeding with. It is more likely than not that the substantial opening up and the use of unsuitable and inadequate lintels to support these new openings caused substantial instability in and around the rear wall of the rear section of this house.

Six lintels were put in at the instigation of Cunningham to support new brickwork, replacing cracked brickwork, over the doorways in the front section above the doorways from the hallways into the respective sets of rooms on each floor. Prosser and C. Wells had identified substantial cracking in that brickwork. They had assumed, probably wrongly, that this was attributable to subsidence; it was probably attributable to the structural inadequacy of the front wall of the front section which, as Mr Kirwin accepted, had a tendency to lean out or bow. Be that as it may, Cunningham felt obliged to put into effect that which had been contained in C. Wells’ Schedule of Works and it was included in the work that GE was to do. The brickwork above the door openings was removed and lintels placed immediately above the doorposts spanning the gap and resting on one side on the brickwork in the hallway and on the other side in the front wall. Thus the lintels in these locations were not being used as crack repairs for brickwork but simply to support new brickwork above openings. I do not consider upon the evidence which I have seen and heard that this was a negligent design choice. The lintels selected, although not massive, have not been demonstrated to be insufficient to carry the relatively limited loads of a few courses of brickwork above them. The lintels were not intended to provide some lateral restraint on the front wall; put another way, they were not intended to hold the front wall in. It was not part of Cunningham’s brief to put right the inherent instability in the front wall. I use the word “instability” only in a limited sense because it is not suggested that the front wall was in any way in danger of collapse. I do not consider therefore that it is a valid criticism of Cunningham to suggest that they should have provided for some form of lateral restraint of the front wall. It was put to Mr Smithurst, and he accepted, that Cunningham should have noticed the instability of the front wall and pointed it out to the Insured (T9/64); however that is not a pleaded complaint, it was not put to Mr Hall or Mr Wassell and it is difficult to see how the apparent omission to warn caused any loss. It is not established that the lintels used in these locations had reinforcements exposed at the ends; if this had been the case, there was a risk in time that rust might have formed from the dampness in the front wall. I am not satisfied that there was any negligence in design or supervision on the part of Cunningham.

Some concrete lintels were used in the roof space at the direction of Cunningham as spreader beams. This was neither a normal nor appropriate use for them. I consider that Cunningham were professionally negligent in allowing the use of such lintels. Two lintels were inserted to support the kitchen bay opening at the time that the bay was demolished by Pearce. I am satisfied that these lintels were adequate and have not been demonstrated to have been negligently designed or specified by Cunningham; there was no breach of duty by Cunningham in the supervision of this work.

The complaint here is not simply that some render was removed, because some render would have had to have been removed to repair the externally cracked brickwork, but that it was removed indiscriminately, it is said. I am not satisfied that there was an indiscriminate removal of render. Some of the render which was removed, particularly on the rear elevation, was done by or at the instigation of the Insured in any event and not at the direction or under the supervision of Cunningham. I am not satisfied that AXA has established its case on a balance of probabilities on the evidence. It is noteworthy that even prior to Cunningham’s involvement loose and hollow areas of render were in any event identified which suggests that a substantial amount of debonding and failure of the render had already occurred.

This defect is one for which liability is admitted by Cunningham. After much debate, including whether or not re-pointing was work for which AXA was responsible, Mr Smith accepted that re-pointing could and should be done to the front right hand elevation of the front section. The wrong specification was used. Cunningham caused or permitted the use of an inappropriate type of materials for re-pointing: lime mortar should have been used whilst a cement and sand (a much more brittle) mortar was used. It is also the case and clearly established that the workmanship on the re-pointing was poor. The brickwork was left very dirty and stained with mortar marks. So far as can be ascertained this work was either done in August or afterwards. It is not wholly clear whether it was done by GE or by Pearce. Whoever the work was done by, it clearly was not adequately supervised by Cunningham who, if they had noticed (as they should have done) that the work was being done in an incompetent way, should have taken step to ensure that it was done in a competent way and deficiencies put right. Cunningham did not do this. Accordingly, they are liable for the defective re-pointing on the front and right-hand side.

There are four areas of localised rebuilding work which are said to have been done defectively and which Cunningham should have prevented. I will deal with the localised rebuilding defects (four in number) first:

A new window was put in at this position by the Insured. It is clear from photographs that a smaller window frame was inserted by the Insured than was there before. It was therefore necessary for the Insured to fill in the gaps created. This can be seen in various photographs (C143-5). So far as I can ascertain the new window was some few bricks’ width narrower (some 18 inches) than the original opening and possibly some three to four inches shorter. It was simply not part of the Cunningham or insurance-related works for any of this work to be done. The photographs give me the strong impression that the work was not done well. Indeed AXA in the Scott Schedule say that there was a “complete lack of bonding” between the brickwork immediately to either side of the opening. Indeed AXA go on to say that the works carried out around the window opening “demonstrate a complete lack of understanding of the serious structural condition of the brickwork and how to stabilise it”. The responsibility for that was not that of Cunningham. It may be that the Insured in doing the work to in and around this window opening had no idea of the ramifications of what they were doing or how they were doing it. However it was no part of Cunningham’s responsibility under the contract or in practice to direct or supervise this work, and it did not do so.

It is clear that there is some instability in the brickwork around and above this window. There is some evidence that an existing timber support beam above the window opening was the original beam and was left in place. It is clear simply by looking at photographs (e.g. C/188) that it has deflected. This suggests that it was historically no longer fit for purpose. This is noted in AXA’s comments in the Scott Schedule. It is also the case that a concrete lintel was inserted just above the right-hand corner of the way by way of crack repair.

I am satisfied on the balance of probabilities that the cracking and distortion of the brickwork in and around this window has nothing effectively to do with the insertion of the lintel. It is more likely than not that the work of putting in the new window, done by the Insured on their own initiative, was done badly and without reference to the inherent structural instability in this area engendered by the internal timber beam over the window having reached the end of its useful life.

I am therefore not satisfied that Cunningham was in any way to blame for the deficiencies in and around this window. Whilst it is the case that a lintel should not have been used to repair cracking, it was not that which effectively or materially caused or contributed to the instability in that area.

The Scott Schedule seems to suggest that it was Cunningham’s responsibility to address all structural instability in this house even if (or possibly particularly if) it had nothing to do with the subsidence-related damage for which AXA had accepted responsibility to indemnify the Insured. I do not consider that it was any part of their job to design and supervise the execution of works to put right defects, deficiencies, structural problems or damage which had nothing to do with the subsidence or work for which AXA had accepted responsibility. A different state of affairs might apply if and to the extent Cunningham took it upon itself to design, and specify or actively supervise works which were then done or designed badly. That happened on only a few occasions.

A comparable complaint is made in respect of the windows to the “Den” on the first floor. Slightly different considerations apply to each window. For the window on the left-hand side elevation of the rear section, this was replaced by or at the instigation of the Insured. For reasons best known to the Insured, they decided that the Den window would be some two foot shorter in height than hitherto. Accordingly, the opening below the new window sill was filled in with block work. It is the case that crack damage in the brickwork above this window was repaired, wrongly and negligently, by the use of two concrete lintels. Other than that, I am not satisfied that there were any material defects for which Cunningham are or became responsible. If and to the extent there was damage to or defects in the brickwork (as opposed to the lintel work), they were caused by the Insured and the work which caused the defects or damage was not done at the direction or under the supervision of Cunningham.

The other Den window opening on the rear elevation, again was inserted by the Insured. On the underside, two lintels were used to repair crack damage. There is some indication below the window sill of some disturbance to the brickwork. It is unclear to me (and I am not satisfied) that that was in any way caused by bad workmanship on the part of the installer of the lintels or that it is in any way attributable to any carelessness on the part of Cunningham.

Above this window opening, a full width lintel was used. This lintel was used not to repair crack damage but to support the brickwork above the window opening. I am not satisfied that that was put in at the direction or under the supervision of Cunningham. It was most likely inserted by or under the direction of the Insured when they put in the new window. Previous photographs (prior to 1999 (C/11)) indicate that the original window opening was narrower than that created and inserted by the Insured. There is some corroboration for that in later photographs which show the lintel above the window opening: there is a decorative brick arch in the facing brickwork above the window opening which is clearly much narrower than the new window opening. If there was any instability in the brickwork in and around that area, I am not satisfied that it was in any way caused or contributed to by anything done by or at the direction or under the supervision of Cunningham.

I am not satisfied that this gives rise to any liability on the part of Cunningham at all. The front and rear sections of the property had been built at different times. Historically they were intended to create one house and doors and openings existed between the two. The roofs on the rear section and the roof on the front section spanned in different directions and flashing existed between the rear section gable wall and the rear wall of the front section. The complaint made is that stainless steel ties were used to tie the front and rear sections. I am not satisfied that anything occurred in that regard. Whilst there may well have been lintels used to repair cracks, they were not intended in any way to tie the rear to the front sections. I am not satisfied that any stainless steel tying work was done by GE or Pearce or at the direction or under the supervision of Cunningham. Accordingly, I do not consider that Cunningham can be to blame if someone at some stage used some inappropriate means (if that is what they were) to seek to tie elements of the front to the rear.

This relates to structural instability which is said to have been induced by works carried out at the direction of or under the supervision of Cunningham. I will deal with each in turn.

There is no doubt that substantial instability was caused to the rear wall of the rear section by the very substantial openings created by the Insured in the rear walls and the associated works. It is clear that this work was carried out hurriedly. The demolition of the rear lean-to boiler house was achieved, by the Insured, on a weekend. There are numerous photographs taken thereafter which show that the substantial openings in the rear wall were made and lintels inserted without any great care or consideration for the consequences. The lintels inserted by or under the direction of the Insured appear to have been inadequate. Although Mr Kirwin believed when he gave evidence that they were dangerous, I am not satisfied that they were necessarily dangerous in the sense that the brickwork above them was about to collapse following an immediate failure of the lintels. However, there is little doubt that the lintels were overstressed. Holes were created by the Insured all along the existing rear wall for the new joists for the first floor; this work seems to have been unsupported and done in a haphazard fashion.

There was undoubtedly some repair work carried out and intended to be carried out as part of the insurance-related works. Cunningham accept that there were crack repairs required along the rear wall. Several lintels were supported in or close to the right-hand corner of the rear wall and right-hand elevation of the rear section. Substantial alterations were carried out to the kitchen bay.

A large number of complaints of defects are made in relation to the right-hand half of the rear section. However, without exception these relate to the structural works carried out by the Insured for their own benefit. The Insured could not reasonably have expected Cunningham, and Cunningham was not employed, to design, supervise or necessarily become involved in any work other than the insurance or subsidence-related works and any works which as a matter of fact they did positively become involved with. I am not satisfied that Cunningham played any actually material part in designing, specifying, and supervising or advising upon the structural works to this area. It is said that Cunningham should have seen at various times in 1999 that serious instability existed. Whilst it must have been clear to Cunningham on their visits that there was a substantial mess in the rear section occasioned by the substantial and extensive work which the Insured was embarking upon, I am not satisfied that Cunningham should either have noticed that there was a substantial danger or instability or have interested itself in ascertaining whether there was. There was inconclusive and unsatisfactory evidence that Cunningham might have suggested putting in some brickwork on one of the new rear lintels. There was a very rough sketch in Cunningham’s file which does not satisfy me that Cunningham was actually and materially involved in the work in this area; Mr Wassell may have authorised some replacement brick or block work in the area but I am not satisfied that this, if it was done at all, materially contributed to any instability. Cunningham was not employed to design or supervise the works which the Insured had personally embarked upon for their own benefit and the benefit of the house.

Miscellaneous

This identifies a number of areas of bad workmanship which have already been addressed above. I have accepted that the re-pointing to the front elevation and the right-hand elevation of the front section was done using inappropriate materials and done in a careless way. The use of lintels was inappropriate and it is clear that irrespective of the inappropriate use of lintels the lintels were installed poorly without proper slate wedging or re-mortaring. Apart from that I am not satisfied that there was poor workmanship or poor workmanship which it was Cunningham’s responsibility to identify and procure the putting right of.

In Paragraph 26.14 of the Amended Particulars of Claim, it is said that Cunningham was negligent in allowing the Insured to carry out other works to the house at the same time as Glenborough. I do not consider that there was any breach of duty on the part of Cunningham in this regard. Cunningham was employed in effect to see through a remedial scheme which had substantially been resolved upon by the time that Cunningham came on the scene. By that time, it was clear both to AXA, the Insured and to Cunningham that the Insured were keen to carry out extensive works themselves. The Insured were believed to be difficult customers. For the new loss adjusters to have come on to the scene and in effect told the Insured that they were not to carry out any works themselves pending the completion of the insurance-related works would foreseeably have caused a substantial public relations problem right at the start of their retainer. It is clear that the Insured were (as proved to be the case) adamant about carrying out their substantial works. It is extremely unlikely (and I consider that Mr Hall would soon have realised this) that the Insured were to be diverted from their chosen path with regard to their work. There is therefore very little that could have been done. Legally, under the contract of insurance or otherwise, it would not be possible for the insurance company to prevent the Insured from carrying out works which were not insurance related at the same time as insurance-related works were being carried out.

I am satisfied that it was a reasonable exercise of careful judgment on the part of Cunningham to allow the Insured to carry out other works at the house at the same time as GE.

True it is however that Cunningham ended up allowing some of the Insured’s own works being paid for which should not have been paid for. In that respect and to that extent only, Cunningham in this context fell below the standard to be expected of a competent loss adjuster. This is accepted now by Cunningham. It was strenuously argued by AXA that the fact that Cunningham agreed GE’s final account in about January 2001 was good evidence of what works Cunningham considered it was responsible for. It obviously represents some evidence. However, I did not find it at all compelling for two reasons: first, because the Insured was nominally the Employer, albeit to be indemnified by AXA at least for works covered by the insurance policy, GE might still be, and properly be perceived to be, entitled to payment for works instructed by the Employer (the Insured), even if the work was not instructed or directed by Cunningham at the time. Secondly, as I find elsewhere, Cunningham’s records particularly of what was done in the period up to GE’s departure were at best poor and it would have been difficult to be confident that simply by Cunningham agreeing GE’s final account they were effectively admitting that all of it was done under their direction or supervision.

This complaint (in Paragraph 26.15 of the Amended Particulars of Claim) relates to allowing GE to carry out other extra works which were not related to the subsequent damage as a result of which AXA ended up paying for them and/or defects in them for which the Insured should have been liable.

So far as extra works which were not insurance related or which were not consciously specified, approved or supervised by Cunningham, Cunningham are liable in professional negligence to the extent that they allowed AXA to pay for such works. It does not follow however that, if there were such extra works and there were defects in them, Cunningham would be liable for such defects. The breach of duty relates to permitting the client to pay for works which the client should not have paid for. Since there was no responsibility on the part of Cunningham for such extra works, even if they were done by GE at the instigation of the Insured (but not of Cunningham), neither AXA nor Cunningham were or would be liable to the Insured for such defects. The Insured were essentially responsible for such defects.

Paragraph 26.16 of the Amended Particulars of Claim complains that Cunningham was in breach of duty for allowing Glenborough to proceed with the remedial works without any programme or any proper expedition. I do consider that Cunningham were in breach of duty for failing to procure a proper programme from GE. There was only the most informal arrangement made between Mr Hall and Mr Bolland of GE as to which work was or might be done and when. Given that there was no liquidated damages provision and no express contractual time for completion, it was important for Mr Hall in managing this project to have some tool at his disposal whereby he could not only monitor progress but also encourage GE to proceed with expedition.

However the complaint goes on to say that as a result of Cunningham’s failure to provide for a contract period and for liquidated damages and to procure a programme works which should have been finished within a period of 10 to 12 weeks the remedial works proceeded slowly, and were never finished by GE.

Although this part of the judgment also veers into questions of causation, I am not satisfied that the failure to specify or agree a contract period, provide for liquidated damages or secure an adequate working programme caused GE to proceed slowly. The evidence and factual findings referred to earlier in this judgment show that the works were proceeding reasonably well until the Insured began carrying out extensive works of its own. Not only did the Insured commence work (for instance in the first floor front bedroom (RHS)) in late April, it began to take out the old and insert new windows throughout the building in late May. Very substantial further works were done over the two or three months which followed. In a number of significant instances, the Insured required GE to carry out a substantial amount of extra work. This obviously diverted GE from carrying out the insurance-related work for which it was originally engaged. I am certainly not satisfied that GE proceeded in such a dilatory manner that the works which they were originally employed to carry out were delayed as a result of their fault or as a result of there being no programme contract period and no provision for liquidated damages. Whilst, in the ordinary course of events, the works, which GE were originally engaged to do, should have been completed by about mid-July, it is clear (and I find) that delays beyond that period were not attributable to the default of GE or indeed of Cunningham. They were primarily and effectively attributable to the extensive interference by the Insured with GE. There is no doubt that significant amounts of work in different parts of the building were done by GE at the instigation of the Insured which had nothing to do with the works which GE was originally employed to carry out.

By August 1999, the Insured were saying that they did not want the decorators, subcontracted by GE, back on site. That must have delayed the work. I do not see how Cunningham could effectively have guarded against the Insured taking against the decorators. As soon as the work period extended into August, it is perhaps not surprising that a number of workmen and tradesmen employed by GE went on holiday and thus the project became further delayed. The final blank refusal by the Insured to have GE back on site was, again, something which Cunningham could not readily guard against. Even if the reason for the barring of the decorators and GE was rudeness or offensive behaviour, it is difficult for a supervisor, such as Cunningham, however competent, to prevent such behaviour by workmen at a particular site. Unless it has become endemic, it is difficult to institute a regime whereby no swearing or other insulting or offensive behaviour happens on a building site.

Further criticism is made of Cunningham relating to the delay in engaging replacement contractors and allowing them to proceed without any programme or proper expedition. I am not satisfied that there was delay in engaging replacement contractors. Sensibly, in the light of the barring of GE from the site and the increasing difficulties arising with the Insured, it was reasonable for Cunningham, whose own Mr Hall had been required to be removed from the job, to take some time to ascertain what work remained to be done and to take steps to list and schedule the works which needed to be done. That was always going to take some time. Within six weeks of Mr Hall’s departure, Mr Wassell had produced a Schedule of Works which it was reasonable to discuss with the Insured. Then, having ascertained what the Insured’s expectations were, it was reasonable to locate another contractor, Pearce.

I do not consider that Cunningham was to blame for the delay between August and November when Pearce started to work.

Once Pearce began work in November, I have formed the view that they proceeded initially with reasonable diligence. Certainly over the next few weeks, it cannot be said on the facts that anything which Cunningham did or failed to do caused any material delay. Indeed, as indicated in the history earlier in this judgment, it is more likely than not that the Insured’s involvement and the deteriorating relationship between them and Mr Wassell contributed to any delay or disruption which occurred.

However, different considerations apply as from about mid-January 2000. By that time the Insured’s complaints about the dampness and, later in February and March, about lintels effectively became the operative cause of delay. Pearce did little productive work during this period. Matters in effect went into limbo whilst the dampness and lintel investigation went further. That investigation determined that unsuitable plaster had been used for repairs and that the lintel crack repair technique was inappropriate. For both of these matters, as I have already held, Cunningham were to blame. Thus, the operative causes of delay from mid-January 2000 were these two breaches of contract on the part of Cunningham.

Essentially, this complaint, in Paragraph 26.18 of the Amended Particulars relates to whether site visits were sufficiently frequent and thorough. The complaint focuses on the period of time during which Mr Hall was in charge. The criticism is made that he only made 11 site visits.

I am satisfied that until 7 May 1999, Cunningham made a sufficient number of visits which were thorough enough. Over the next six to seven weeks, Cunningham only made two visits, one by Mr Hall on 4 June and one by Mr Mellor on 21 June 1999. Whilst Mr Hall personally cannot be criticised because he had time off in hospital and whilst he perfectly properly asked the Insured whether they wanted a replacement and were told not, I consider that Cunningham should have insisted upon superintendence and visits by another person during this period. On a job such as this, given the relatively loose definition of work in the contractual Schedule of Works and given the knowledge that Insured were likely to carry out their own works, it was necessary for there to be regular and thorough visits. Cunningham were in breach of duty for failing to arrange such superintendence during Mr Hall’s absence. During that period there should have been some four further visits.

I am not satisfied, however, that this failure in itself caused any loss. In respect of defects, there is no reason why those which were the responsibility of GE or Cunningham could not or would not have been picked up at a later stage. Alternatively, since Cunningham was responsible for certain defects in any event, there is no greater loss recoverable from this failure.

I am not satisfied that it has been demonstrated on the evidence that , following the return of Mr Hall from his second hospital trip, there were an insufficient number of inspections during Mr Hall’s remaining period of involvement or during Mr Wassell’s.

This complaint (in Paragraph 26.19 of the Amended Particulars) relates to a failure to give or record instructions given to Glenborough. I am satisfied that in general terms Cunningham failed to record instructions given to Glenborough. Although there are some handwritten notes, mostly by Mr Hall, which do identify some instructions, there was no instruction to GE which was recorded formally or clearly. The importance of recording such instructions is that the contractor knows what it has to do; there is also a record for quality and payment purposes as to what it was supposed to have done. To this extent, Cunningham was in breach. Similarly, Cunningham defaulted in failing to produce any written notes or minutes of meetings between it and GE.

AXA plead that Cunningham was negligent in approving payment applications and making payment to Glenborough despite the defects. There is an acceptance by Cunningham that Cunningham is liable for an overpayment to GE in the sum of £8,769 (identified in Mr Smithurst’s report at bundle E5/74 Para 7.7 and E5/174-184 and partly covering possible overpayments to HB Pearce in respect of whom no allegations of overpayment are made) and accepted in the Defendant’s Closing Submissions at Paragraph 258.

It is, I find, the case that Cunningham, in breach of its duty to its client, approved overpayments to GE. There were essentially two respects in which this occurred. Defective work (such as poor crack repair lintel work) should not have been certified for in full and there should have been no allowance for the execution of works which Cunningham had not authorised. It is the case also that at least some of the lintel work in GE’s final account, finally approved for payment by Cunningham in January 2000, was work which had only been ordered by the Insured and not by Cunningham. It should have been the case that sufficient records and control existed for Cunningham to determine what work was the Insured’s work and what was not. Whilst I do not doubt that Mr Hall generally understood what works had been done by the Insured, there was certainly no detailed understanding.

AXA complain that Cunningham was in breach of duty in putting forward in March 2000 their recommendation that there should be underpinning of the property. I am not satisfied that this complaint has been made out. Whilst it is the case that underpinning was put forward, one must look at the circumstances in which this recommendation came to be made. The Insured were complaining very bitterly about matters which had gone wrong from their standpoint. The dampness and lintel problems had emerged as serious problems which needed to be addressed. There was a very real concern that, no matter what was done to assuage the Insured, they would continue to complain. One way of ensuring that there was no further damage to this house was to underpin. It was an old house with relatively minimal foundations and was prone to movement when the clay ground shrank over dry periods. It would have been unfortunate if the works were finally completed and seasonal movements then caused further subsidence. There would always be a risk of complaint by the Insured that AXA had not adequately addressed the problem which had been the subject matter of the claim in 1997.

Although underpinning was not absolutely required, the recommendation that there should be underpinning was a not unreasonable suggestion given these difficulties. It should certainly have eliminated future cracking and avoided future subsidence claims. The recommendation was made following discussions between Cunningham and Mr Rawlings and it seems to have been part of an agreed strategy with regard to the Insured. I find it difficult in these circumstances to see that it was a negligent recommendation. In the event, underpinning was never done. Accordingly, I do not see that this failure, if such it can be described, did lead or can have led to any or any additional loss.

During the course of the hearing and in argument, AXA by its Counsel frequently referred to Cunningham’s culpable failure to keep proper records. In fact in its Amended Particulars of Claim it only complained as such (at Paragraph 26.11.2) that there was a failure to keep accurate drawings or records of the locations of the concrete lintels. I am satisfied that in this regard Cunningham failed to exercise reasonable skill, care and diligence in managing the works. It was important that the precise locations of the lintels inserted under the direction of Cunningham were recorded so that, if there was at any time a complaint or further damage in those areas, AXA, Cunningham and the Insured would know whether there was or was not a lintel in the immediate area. It was not enough, as it did, for Cunningham to rely upon either the memory of Mr Hall or Mr Wassell or GE. It is the case that, some months after GE left the site it produced a document of several pages which purported in the roughest terms to identify the location of the lintels. Whilst this was not wholly inaccurate, it identified lintels in places where there were no lintels and did not identify some lintels which were present. I am not satisfied that there was any breach of duty by Cunningham in not recording the work done by or at the instigation of the Insured.

The other matters of complaint in this regard, which I have upheld, are the failures to prepare a condition survey, to record instructions to Glenborough and minutes or notes of meetings.

In the light of my findings on breach, it may be helpful if I summarise those respects in which I have found Cunningham in breach of contract or negligent:

Absence of condition survey (para. 192)

Use of lintels for crack repairs (paras. 206, 218)

Poor plasterwork (paras. 208,209, 217)

Plaster over damp proof (para. 214)

Lintels on ground floor chimney, front section RHS (para. 220)

Roof space lintels (para. 224)

Re-pointing (para. 225)

Brickwork on front section RHS elevation 1^st / 2^nd floor (para. 224)

Overpayment (paras. 232, 234, 238)

Lack of programme (para 235)

Lack of inspections in Mr. Hall’s absence (para 244)

Lack of proper records for instructions and meetings (para 247)

Lack of records of lintel locations (para 252).

There are, broadly, five areas of law which need to be addressed in the context of this case:

The essential object of an award of damages is to put the innocent claimant “in the same position as he would have been in if he had not sustained the wrong for which he is now getting compensation or reparation” (see Livingstone v Rawyards Coal Company (18800 5 App.Cas 25,39).

Damages for breach of contract “should be such as may fairly and reasonably be considered either (1) arising naturally, i.e. according to the usual course of things from such breach of contract itself, or (2) such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of a breach of it” (Hadley v Baxendale (1854) 9 Ex 341, 354). I am only concerned in this case with first limb of Hadley v Baxendale damages. None of the heads of loss in this case are challenged, properly or at all, on the grounds that they fall outside the first limb of Hadley v Baxendale. Whether the quantum and the requisite causation are proved, however, another matter.

The question of reasonableness of the loss or damage claimed legitimately arises in a number of different ways. As confirmed in Hadley v Baxendale (in the words quoted above) it is necessary that the damages must “fairly and reasonably be considered” as arising from the breach. That reasonableness is itself an essential element in establishing damages was confirmed in the House of Lords case of Ruxley Electronics Ltd v Forsyth [1996] 1 AC 344. The judgments of their Lordships contain many references to the importance of reasonableness in selecting the appropriate measure of damages and determining the extent and measure of damages. For instance Lord Lloyd of Berwick says at page 368A and 370A:

Reasonableness as a separate element is to be distinguished from the “duty” to mitigate. That is described in the well-known speech of Viscount Haldane LC in British Westinghouse Co v Underground Railway [1912] AC 673, 689:

The duty to mitigate is, generally, not a contractual or statutory duty. For instance Pearson LJ in Darbishire v Warran [1963] 1 WLR 1067 properly said:

The costs of and occasioned by reinstatement in a construction context are often, albeit not invariably, the proper measure of damages where there has been defective or negligence performance, particularly where the defaults have caused defects or deficiencies in building (East Ham Corpn v Bernard Sunley & Sons [1966] AC 406). However “where reinstatement is the appropriate basis for the assessment of damages, it must be both reasonable to reinstate and the amount awarded must be objectively fair as between the claimants and the defendants” (per Clarke LJ in the Maersk Colombo [2001] 2 Lloyd’s Rep 275, 281).

In considering reasonableness, both in the context of mitigation and reasonableness as a basis for establishing damages, the court will not be unsympathetic to the predicament in which an innocent claimant is put by the breaches of contract of the defendant. As Lord MacMillan said in Banco De Portugal v Waterlow & Sons Ltd [1932] AC 452 at page 506:

Subject to remoteness and reasonableness requirements, the innocent claimant must establish that any loss is not only proved as having occurred but also that it has effectively been caused by the breach or breaches of duty established against the defendant. It is not practicable or useful to lay down any precise formulaic rules as to how causation is established in every case. This is simply because there are so many permutations of fact that it is impossible to lay down any precise formula which will cover every given circumstance. However as Glidewell LJ said in Galoo Ltd v Bright Grahame Murray [1994] 1WLR 1360 at 1374G, the breach must first be proved to have been an “effective” cause of the loss:

As the editor of McGregor on Damages (17^th edition 2003) says at 6-126, this “common sense” approach does not necessarily assist with an analysis of the authorities. This is essentially because there are so many difficult and different factual permutations which the authorities deal with. Ultimately all judges should apply common sense in the application of the law to the facts but one must be cautious about applying subjective common sense. In applying common sense one must apply basic objective logic as a part of the exercise.

Particularly in construction cases, there can be more than one effective cause of a loss. There is good authority for the proposition that, where there are two effective causes of loss and one of the effective causes is a breach of contract by a defendant, the claimant can recover that loss from the defendant. It will be no defence for the defendant to say that, even if it had not been in breach, loss would have been caused by the other effective cause in any event. Authority for this proposition is Heskell v Continental Express Ltd (1950) 1 AER 1033 at 1047-8. Thus, where there are two coeffective and concurrent causes of delay to a construction project, one of which is the defendant’s breach of contract and one of which is not, the claimant can recover its loss to that extent in full from the defendant. Although this is a topic much discussed and a point much raised, it happens less in practice upon analysis than practitioners sometimes think.

Where reinstatement is the appropriate measure of damage, it is the reinstatement reasonably necessary as a result of the physical damage caused by the defect of which complaint is made or to overcome the defect which is recoverable. As Waller LJ said in Skandia Property (UK) Ltd v Thames Water [1999] BLR 338 at 344:

The question of whether advice of an expert, even if professionally reasonable, can convert expenditure into reasonable expenditure involves a consideration of the facts in any given case. There must be some effective causal link between the incurrence of the expenditure upon the advice of the expert and the breach of contract. Thus, where a garden wall has been constructed defectively by a builder, the reconstruction of that wall may well be the basic measure of damages; if, during the construction process, the client’s surveyor or engineer recommends, perfectly reasonably, that a wall of the house should be repointed, that does not mean that the cost of the repointing will be recoverable as damages. If the advice of the expert is merely tangential or coincidental to the work the cost of which is recoverable as damages, the costs of the work carried out to that extent upon the expert’s advice will, generally, not be recoverable.

The advice of an expert may well be a material factor in the determination of what was a reasonable course of action for an innocent claimant to take. Thus in the Great Ormond Street case, Board of Governors of the Hospitals for Sick Children v McLaughlin and Harvey and Others [1987] 19 Con LR 25, the Court found that the plaintiff was entitled to damages for the remedial solution adopted by it on the advice of its expert in relation to putting right certain defects for which the defendants were culpable. There was a choice and the plaintiff adopted the more extensive and expensive solution which “was the product of caution and a resolve not to leave anything to chance which could be reasonably avoided” (page 105). The expert upon whose advice they relied had not been negligent in giving the advice.

In McGlinn v Waltham Contractors Co Ltd [2007] 111 Com LR 1, HHJ Peter Coulson QC in this Court said at paragraph 827 as follows:

As indicated above, whilst the advice of an expert may well (if not invariably) assist in establishing the reasonableness of a decision to adopt one remedial solution rather than another it will rarely, if ever, justify the recovery of the cost of remedial works relating to putting right a default or defect for which the defendant is not culpable.

The case of Biggin and Co Ltd v Permanite Ltd [1951] 2 KB 314 established or confirmed that the amount payable under a settlement made between a claimant and a third party may be recoverable as damages from a defendant where the settlement was reasonable. As Singleton LJ said at page 325:

There has recently been a helpful analysis of issues relating to reasonable settlements in the judgment in June 2007 of HHJ Peter Coulson QC in John F Hunt Demolition Ltd v ASME Engineering Ltd [2007] EWHC 1507 (TCC). In that case a subcontractor had settled with a main contractor for £152,500 in circumstances where their liability to the main contractor was £43,512.88. Issues arose as to whether or not that fact was sufficient on its own to render the settlement unreasonable and, if the settlement was unreasonable, could the claimant claim a hypothetical amount representing what a reasonable settlement would have been or did the settlement become irrelevant. I am satisfied that this judgment properly analyses the authority and correctly states the law. The following quotations are apposite:

I draw from that case and the cases quoted with approval in it that:

A long line of authority has established that a claimant is entitled to general damages for distress, inconvenience and discomfort caused by breaches of contract. Authority for this proposition includes Watts v Morrow [1991] 1 WLR 1421, Ezekiel v McDade [1994] 43 Con LR 45 and Hoadley v Edwards [2001] PNLR 41. In Watts v Morrow, the Court said that general damages should be a modest sum for the amount of physical discomfort endured; £750 for each plaintiff was considered to be an appropriate sum for some two years of aggravation. In Ezekiel, the Court of Appeal allowed £4,000 for two plaintiffs who suffered physical inconvenience and discomfort together with mental suffering for some three years of aggravation. In Hoadley v Edwards, £5,000 was allowed for two claimants for general damages for some 18 months of aggravation caused by remedial works. It was the case however that the judge allowed this figure, reduced from the £10,000 claim to reflect the fact that whilst the repair works were proceeding the claimants took the opportunity of carrying out certain improvement works.

From the various authorities I draw the following conclusions so far as are material to this case:

Essentially, although articulated in different ways, AXA put their case on causation generally as follows:

Thus, AXA says that it would not have incurred very substantial expenditure but for Cunningham’s breaches. It is to be noted that AXA incurred expenditure of £1.54m against the £72,000 which it says would have been incurred if there had been no breaches. This is to be contrasted with the £200,000 plus for which cover was provided under the insurance policy. However, AXA accepts by its Amended and then Re-Amended Summary of Loss and Damage that some £400,000 of its expenditure can not, or at least is not to, be claimed. Mr Nicholson QC explained in closing that the basis was for such credits being given was for betterment given to the Insured. This was a proper concession to make with this gloss: the explanation for the concessions is equally explicable by reference to there being no causal link between the provision of extra work or materials which had no real connection with any established breaches by Cunningham.

I have formed the view that substantial elements of cost and loss were incurred by AXA’s brief to CDC to do what was necessary to make the house habitable and the generous interpretation put upon that by CDC with AXA’a approval as the work progressed as opposed to putting right those things for which AXA and Cunningham were responsible. I am satisfied that it was this instruction and its interpretation that led ultimately to major expenditure which was not related effectively to the breaches which I have found. It is unclear and, without Mr Rawlings to give evidence, there is no reliable evidence why this instruction was given by AXA as opposed to one which called for the effective rectification of the defects for which Cunningham and AXA were collectively liable. The normal measure of loss which would have been prima facie payable by AXA and Cunningham collectively would have been the costs and losses of and occasioned by:

In context, what the Insured had a right to expect as at April 2000 when CDC was first instructed was the removal of defective work for which Cunningham and AXA were responsible and the replacement with suitable work and materials. They had the right to be put in to the position in which they would have been if the works specified by or done under the direction of Cunningham had been done properly and to a proper (non-negligent) design. Because the house contained a number of inherent deficiencies which had nothing to do with the subject matter of their insurance claim, AXA had no responsibility as such to put right those inherent deficiencies. Similarly, AXA had no responsibility as such to put right damage and instability to the house which had been caused effectively by the Insured during its own non-insurance related work. Obviously, the remedial work for which AXA was to be responsible needed to be done so as not to exacerbate any such deficiencies, damage and instability. It would be incumbent upon AXA and its advisors, such as CDC, to inform the Insured of any such deficiencies, damage and instability, of which they actually became aware, and liaise with them about how these might be addressed. Mr Kirwin’s approach was that, if CDC or Bowman came across any structural deficiency or indeed other problem in the house, even if unrelated to the works done under the direction of Cunningham or to subsidence, it was to be repaired at AXA’s expense. However, AXA had no obligation or liability to do that. Even if they had and Cunningham should have addressed all these deficiencies, AXA would have had to pay for them in any event.

AXA asserts that a “top down” approach to damages is appropriate. This involves AXA claiming all its costs associated with the project after February 1999 but giving credit for what it would have cost if everything had proceeded properly and various sums for betterment. This is asserted to be justified because, it is said, Cunningham’s breaches were so all pervasive that it represents the proper way of assessing damages. I remind myself of the caveats referred to by Lord Hoffmann in the Banque Bruxelles case [1997] AC 191 about rules making the wrongdoer liable for all of the consequences of his wrongful conduct being exceptional (e.g. page 213). Cases of fraud and breach of certain warranties of a guaranteeing type will often produce such a liability. It may also be that if damages are difficult to assess in a given case a total loss less appropriate allowances may be the best way of assessing damages.

This is a case in which the so-called “top down” approach is not appropriate:

Although the so-called “bottom-up” approach is closer to what is appropriate, it is not wholly appropriate in this case either:

It is difficult to see how AXA can establish an effective causation link as between the costs which it incurred in putting right the defects for which Cunningham is not liable and the established breaches. It can only be reasonable in rare (if ever) circumstances for a claimant to recover damages by way of remedial work for defects and other improvement work for which the defendant is not directly liable; those circumstances are inapplicable here. Much of the expenditure to which AXA committed itself related to putting right involved remedying structural and other problems in the house which were either caused by the activities of the Insured themselves (for which I have found Cunningham not liable) or inherent deficiencies in the house which were unrelated to the subsidence to which the insurance claim related; also, most of the expenditure related to giving to the Insured money, work or services which were not necessary to put right any problems or discrepancies at all. It is not reasonable for Cunningham to have to pay damages for this work or expenditure.

What was effectively needed in the April to July 2000 period was an analysis by AXA and on its instructions CDC what the problems were and the extent to which:

It is said by AXA that the state of the records and information from Cunningham was so culpably poor that AXA and CDC could not establish these matters and that this somehow justifies a substantially open-ended commitment to the Insured to bring the house and property up to a reasonably habitable standard (or better). I consider that this is an unconvincing argument:

I have already found that the large increase in cost over the accepted Bowman contract price was substantially attributable to the involvement (to an unwarranted extent) of the Insured during the remedial work period. It is worth noting (and I find) that:

I have formed the view, doing the best that I can, on a balance of probability, that:

the time spent between early April 2000 up to the commencement of the work was a reasonable period of time for CDC to investigate and research the problems, consult with the Insured, AXA, BRE and generally, prepare specifications, drawings and tender documentation, invite and consider tenders and secure a work start date of 29 August 2000. I consider that this period of 5 months would not have been any less if the only defects were those for which Cunningham was responsible. It was always going to take CDC six to eight weeks to be in a position to start design and specification work in earnest, partly affected by the absence of records from Cunningham and the need for the new engineers to acquaint themselves with the property and obtain instructions. To produce design and tender documentation would always have taken up to early July and the tender process another month. Getting a decent contractor to start before the end of August, the holiday period, was always unlikely.

The contract period for Bowman involved completion within 26 weeks by 23 February 2001. Having considered the work done which relates to the matters for which Cunningham, are liable, I assess that 20 weeks including the Christmas break represented the period attributable to those matters. Put another way, I am satisfied that, if the only works done were those for which Cunningham are liable, the works would have taken 20 weeks to execute.

A large number of different heads of quantum are claimed. I will deal with each in turn in the order in which they appear in the Re-Amended Summary of Loss and Damage which was provided by Mr Nicholson QC with his Skeleton Closing. In the interests of proportionality, I will give brief reasons for my decision on each one. I have invited the parties to ask me for more reasoning if required.

I proceed in relation to the recurring heads of loss such as security and accommodation costs on the basis that twelve months are properly attributable to the breaches of contract and negligence of Cunningham. The breaches of duty caused the necessity only for a twelve month part of the period of work and investigation after mid-January 2000 until August 2001, by when the Insured had moved in.

I deal first with the Bowman work. There are some generic works for which Cunningham are directly liable:

In reviewing the quantum, the parties and their quantum experts produced a Scott Schedule. That is largely reflective of a particularly helpful final Statement of Agreement or Disagreement produced by the Quantum experts. I have decided however not to provide comments in the Scott Schedule as many of the items of work will not attract any award of damages at all.

What I will do is identify those items in respect of which I accept that AXA is entitled to damages and those items which call for a more detailed comment. Other items have nothing to do with any matter for which I have found Cunningham liable.

By reference to those item numbers as they appear in the “Summary of items with discounts applied” in the experts’ final Statement, my findings and comments are:

Lintels as crack repairs

With regard to the improper use of lintels in the ground floor dining room (see Paragraph 220 above), it seems that an allowance for this is included in Item 49. The total of that is £2,297.82; this however includes (based on Mr Kirwin’s evidence other work in the chimney area which I am not satisfied was done under the supervision or at the direction of Cunningham. Doing the best that I can and based on Mr Kirwin’s description of the work in his witness statement, I allow £1200. I disallow all other lintel related repair work as not relating to work done by or under the direction of the Insured and not of Cunningham. Cunningham has admitted in the pleadings ( A/93) liability for the cost of replacement of 110 lintels but has pleaded that there were 21 lintels used for which they were not responsible. I am satisfied that the allowances which I have made above and below are sufficient to address this admission:

Removal and replacement of plaster

However, the following items are not recoverable relating as they do to the enabling works to permit the re-plastering to be done in the floor voids and the works done consequentially upon that opening up:

There are then a miscellaneous number of items of work which are accepted at least in part for one reason or another by Mr Smithurst, rightly in my view, in relation to the plastering or lintel operation for which Cunningham is liable:

There are some other items which I would allow as flowing from Cunningham’s breaches:

7-Plumbing: Whilst there can

8/9-Electrical: whilst there was very substantial

11-Rising damp: work was in part necessary

166-Cleaning up external areas was necessary

167-reinstatement of the yard and access areas

168-landscaping was necessary as a result of

172-security to windows: this was a reasonable

190-this is another lintel problem - it is

Reconstruction of the rear corner such as

I have found that Cunningham is liable for permitting the defective construction of brickwork at second floor level on the front section (RHS). I can not ascertain from the Quantity Surveyor’s Summary what the relevant cost is. Mr Kirwin identifies the item as C29.2 but says that the offending brickwork was removed and replaced with a window. The removal of the offending brickwork and supporting the arch over the brickwork with a catnic lintel cost £720.30 as set out on daywork Sheet 40 and confirmed by Mr Miller in Schedule 3 to his report. Although the cost of a new window would be more expensive than the replacement bricks and mortar, the labour costs of installing a window would be less than the brickwork. The pro rata cost of supplying and installing the window would be £714.29 (£5000 divided by 7 against Item E27 in Mr Miller’s Schedule 3). I therefore allow £1435 as a reasonable assessment for this head of claim.

For the re-pointing, I allow the full sum of £21,872.77, less £5000 relating to the repointing which was done elsewhere than the front elevation and front RHS elevation, leaving £16,872.77 which it actually cost. It was reasonable to do what BRE recommended and it was not unreasonable for the work to be done at the time it was. It is likely that the actual cost reflects what was properly payable for this difficult and piecemeal work in difficult conditions.

Essentially, I reject all the other heads of remedial work. They all fall into one or more of the following categories:

The total of the costs of the items in the Quantity Surveyors’ Summary is:

This is split into 12 different sub-heads, again which I will deal with in turn:

Building Works

Security

Cash Offers to Insured

Fees

Investigations (Hymas)

Compensation

A total of £282,902.67 is awarded as damages made up as follows:

I have not addressed discretionary interest as Cunningham’s Counsel has not addressed it and it is addressed by AXA’s Counsel only to identify what is and is not in issue on this topic. I invite written submissions and oral argument when I hand down this judgment formally.

Upon providing drafts of this judgment to the parties, I invited them to identify if any more reasoning was required on any aspect of breach, quantum or causation. In the interests of some proportionality, and bearing in mind the length of this judgment, and to some extent with the agreement of Counsel, I have dealt with some aspects of the issues in relatively summary form. I have provided additional reasoning where asked to.