Edmonds v Lawson & Anor (t/a Lawson Developments)

These are two cross claims by former friends. The first by the Claimant Noel Edmonds against Ulrik and Judy Lawson trading as Lawson Developments a partnership, claiming £338,600 damages representing his claimed entitlement from the Defendants to a contribution under a joint venture agreement upon the sale of his house and estate, Wood House at South Tawton in the county of Devon. The second is a claim by the Defendants against Noel Edmonds for the balance of monies due in respect of construction works carried out at his family home St Serf, Lyndhurst Road, St Leonards, Exeter, over a 15 month period between November 2006 and February 2008.

Noel Edmonds is a well known television performer, broadcaster and experienced businessman, who until recently ran the Unique group of companies. Until 2006 he lived at Broomford his estate in Devon. The principal house which has historic and architectural interest was renovated and maintained by him to a high standard.

Ulrik Lawson, together with his wife, operated a building construction and development business known as Lawson Developments, he has construction and design skills including the sensitive renovation of properties and the realisation of planning potential in building projects.

It is common ground that in 2005 Mr Edmonds and Mr Lawson became close friends. Mr Edmond’s marriage had broken down and he had to sell Broomford to fund a divorce settlement. Over a period of approximately 12 to 15 months, from time to time he used the Lawson’s home in Jacobstow as his base in England, during this time and later confidences and aspirations were shared and Mr Edmonds received a great deal of emotional support from the Defendants. The close relationship between the parties later became an impediment when they tried to objectively analyse their business arrangements in relation to the two projects that are subject to this litigation.

In evidence, Mr Edmonds described Mr Lawson as the brother he never had, and told the court of their shared recreational interests, common values and similar public school experiences which included an element of bullying.

Mr Lawson was more reticent but accepted they had been close friends and then had sadly fallen out because of their differences in relation to the two projects in which they became involved.

Those projects related to the purchase and projected development of Wood house South Tawton a Grade II listed mansion house, its ancillary buildings, listed garden and estate, and the renovation of Mr Edmond’s family house St Serf, Lyndhurst Road, Exeter.

During 2005 Mr Lawson became aware that Wood House might have come onto the market informally at a reasonable price under what was tantamount to a forced sale. From the outset he entertained the belief that the Wood estate had considerable development potential that could be realised given the appropriate planning consents. This ranged from the division of the principal house into separate dwellings, the conversion of agricultural and other buildings to residential use and the building of new dwellings on the estate.

Despite the passing of time and the adverse expressions of view as to development by English Heritage and the relevant planning authorities it is clear that until the sale of the estate by Mr Edmonds in 2008 Mr Lawson continued to believe that planning consents for change of user and greenfield development would be granted to enable the fabric of the house to be repaired and updated and a profit to be made from subsidiary development. His genuine and continued optimism, at least in the short or medium term, was not warranted.

His early enthusiasm for the project of purchasing and developing the Woodhouse estate was communicated to Mr Edmonds and shared by him and when the estate came onto the market the two were minded to purchase and develop it in some way to be explored.

Wood House South Tawton and its estate came onto the market in early 2006. The vendors agreed a sale price of £2.1 million. The conveyance was originally to be taken in the names of both the Claimant and the First Defendant but later it was decided that the conveyance was to be to the Claimant alone.

There is a dispute as to the precise reason for this. The Claimant contends it was to benefit the Defendants who had an existing liability to Capital Gains Tax on a development property that was to be sold. The Defendant says that it was for the benefit of the Claimant who had no place of residence in England and Wales and who intended to keep open the option of electing to nominate Woodhouse as his principal English residence. To that end he instructed his assistant Ms Maria Robertson to put the utilities into his name and also represented to the press that he intended to live there. There is clear evidence that Mr Edmonds and Ms Robertson took advice from Mr Edmond’s accountant as to the steps that should be taken to establish with the Revenue that Wood House was Mr Edmond’s principal residence and would not attract Capital Gains Tax in the event of a sale at a profit.

I am satisfied that although Mr Edmonds had some accrued capital gains tax losses the house was taken in his name to preserve his position in the event of a sale yielding a profit. It is of significance that Mr Edmonds saw fit to take accountancy advice on this issue at this time. Furthermore it is striking that Ms Robertson, Mr Edmond’s close aid and agent on the 24 April 2006 requested Arbuthnot Latham, Mr Edmond’s bankers to remove all reference to potential commercial development of the Wood estate in their documentation as it might impact on Mr Edmond’s liability to pay capital gains tax at some point in the future. The bankers reissued the documentation which included the loan facility letter to accommodate this request.

The purchase price of £2.1 million was provided as to £1.6 million lent by the private bankers Arbuthnot Latham to Mr Edmonds and secured by a first charge on the house and estate, and the balance from £600,000 provided by Mr Edmonds and Mr Lawson equally which also covered the cost of purchase.

Mr and Mrs Lawson borrowed their £300,000 contribution from Arbuthnot Latham who were also their bankers. Mr Keech of Arbuthnot Latham advised the Lawsons to take a charge in relation to their £300,000 contribution to the Wood venture. This advice was repeated by Mr Guy Crwys of Messrs Ashfords the solicitors who acted on behalf of Mr Edmonds in the purchase. That advice was put in writing. Mr Edmonds was expressly informed of it and its effect. He can have been under no illusion that the £300,000 contribution of Mr Lawson to the Woodhouse venture was secured by legal charge ranking second to that securing the £1.6 million loan to Mr Edmonds.

A deed of priority was also executed reciting the respective priorities of the two charges and this too was explained in writing to Mr Edmonds.

Since the property was put into the legal ownership of Mr Edmonds he effectively had control as to when and how the property should be sold.

Whilst there was much discussion about joint venture, no where was the precise ambit of such a venture agreed and reduced to writing.

Neither party heeded the advice of Mr Crwys that some written agreement was desirable.

Mr Lawrence on behalf of the Defendants submits that it may well be at the stage when the property was purchased by Mr Edmonds neither party had any real inkling as to what the terms of the joint business venture might be.

Nonetheless it is common ground that there was some oral agreement.

Mr Edmonds and Mr Lawson agreed to jointly fund the running costs of the house and estate and to fund the interest charges on the loan of £1.6 million advanced by Arbuthnot Latham to Mr Edmunds.

Mr Lawson agreed to use his best endeavours to ascertain the planning potential and pursue any relevant planning permissions. It is clear that he spent considerable time and money investigating this through Mr John Milverton a planning consultant, with the planning authorities and English Heritage who was a decisive planning consultee because the house was Grade II star listed and the garden Grade I listed.

By the 9 March 2007 in a discussion document prepared by Mr Milverton it is noted that the overall cost of restoring the house and the gardens was substantial, at a current estimate of £4.5 million. The state of the gardens was described as parlous and rapidly deteriorating and the advice was that they were close to slipping beyond the point of economic restoration unless the programme of restoration was started in the near future. A commercial solution, that is one without grant funding was observed to be just about possible if the “25 house solution” or a variant was accepted.

This involves clearly planning permission to put 25 houses in the relatively small estate of 30 acres the majority of which comprised formal gardens.

Such development was considered greenfield development by local planning authority and was against their policy.

By September 2007 Mr John Milverton was considering the time scales of obtaining some permission for development and the various proposals in play.

English Heritage clearly hoped that the house and estate could be sold to a buyer who would repair the house and renovate the garden structure keeping the two together as a whole. A “White Knight” with deep pockets.

The various possibilities of enabling development would clearly only be considered if no “white knight” came along to renovate and repair without any injurious development of a Grade I listed gardens and building on greenfield sites. Such a last resort solution remained in the realms of possibility but the timescales for development permission which could involve appeals, could be up to a further two years or more.

Mr Edmonds contends that it was agreed that the first Defendant would use his best endeavours and take all reasonable steps to obtain planning permission for the proposed development within 2 years of the date of purchase. On the expiry of the 2 year period the parties would carry out the proposed development if planning permission had been obtained or if Mr Edmonds did not wish to be involved in the development of the property Mr Lawson could buy out Mr Edmond’s interest at its then value or Mr Edmonds could sell his interest to a third party or the property would be sold.

Mr Lawson contends there was no such agreement predicated on a 2 year limit.

It is clear that the Arbuthnot Latham funding was not long term. It could have been renewed, or replaced from another source. On the other hand the prospect of even modest planning gain in the short term was not likely. I reject the notion that there was any agreement limiting the joint venture between Mr Edmonds and Mr Lawson to 2 years.

Such a practical limit may well have been within the contemplation of Mr Edmonds. Clearly it was being considered by his aid Ms Robertson who had the estate photographed for sale brochure purposes in the summer of 2007.

It was not commercially viable of course to have an open ended arrangement whereby both parties pumped substantial monies in to maintain deteriorating buildings and gardens when even the house could not be repaired and renovated without very substantial funds from development and planning gain. The tentative nature of the renovation and development proposals emphasise that it could only have been approached as a medium or long term project.

It is evident that the genuine expectations of both parties ran parallel to each other with no genuine engagement of minds on this issue bringing about any agreement.

I am satisfied that cold reality crystallised with Mr Edmonds the experienced businessman following the receipt of the Milverton email in September 2007.

His enthusiasm had already cooled, commercial reality dictated to him a sale. Fortunately as the owner of Wood he was completely in control and within his rights to sell.

It is evident from the correspondence and in earlier pleadings in this matter that the Defendants took the view that a unilateral sale by Mr Edmonds was not within the terms of their agreement. As Mr Lawson originally understood the arrangements that may be so but once the conveyance was taken by Mr Edmonds whilst there may have been expectations there was no agreement that his consent to sale was necessary or even that he should be consulted.

Mr Edmonds was the freehold owner and had the full right and entitlement to sell when and how he pleased.

By paragraph 6 of the Particulars of Claim there is pleaded a variation of the joint agreement asserted by Mr Edmonds. Mr Edmonds contends that in February 2006 in conversations prior to the 7 February 2006 it was agreed that the property would be purchased in the sole name of the Claimant.

This is uncontroversial and is borne out by the conveyance.

At paragraph 6 (ii) it is alleged that:- Repayment of the £300,000 advanced by the Defendants would be secured by a charge on the property which would rank in priority behind that of Arbuthnot Latham. Otherwise, however, the terms of the joint venture agreement… including that set out in paragraph 5 (v) would remain in force.

Mr Edmonds in his written evidence says

“Ulrik persuaded me to come onboard by agreeing that my investment would be repaid in priority in the event of the sale of Wood”.

In cross examination he was unable to remember the precise details of a conversation save to say that “it must have been face to face”.

If he is right that he regarded it as a crucial element in the agreement it is difficult to understand how a businessman used to dealing with substantial investments failed to mention it to his trusted business manager of 18 years standing Ms Robertson at the outset.

Mr Lawson is adamant that there was no such promise made. Such a priority would be contrary to the agreed legal charge of £300,000 days later giving priority to Mr Lawson by Mr Edmonds, and confirmed by Mr Edmonds in the Deed of Priority.

It is inconceivable that if there had been such a promise that Mr Edmonds would have subsequently executed the priority legal charge in favour of Mr Lawson unless he intended to give priority to Mr Lawson’s contribution of £300,000 in the event of sale, and without making any comment or objection.

I do not accept that there was any such promise made by Mr Lawson.

Ms Robertson gave evidence that she did not learn of the alleged priority promise from Mr Edmonds until late 2007 or early 2008. When pressed in cross examination she said it was probably in early 2008 whilst at his house in France.

But I am driven to the conclusion that Ms Robertson’s evidence in this respect is not reliable because she gave a sworn account at paragraph 81 of her second witness statement of a conversation she allegedly had with Mr Edmond’s solicitor when ascertaining the position on sale of Wood.

The genesis of the first priority promise was probably in the summer of 2008 at the time that the difficulties with St Serf came to the fore.

In October 2006 Mr Edmonds purchased the house St Serf, Lyndhurst Road, Exeter. It was intended as a family home for him and his daughters. It cost £1.36 million and was sold on the 28 August 2008 at above the market price for £ 2,031,000

Mr Edmonds evidence is that he would not have bought St Serf “had it not been for Ulrik’s assertion in the autumn of 2006 that he could turn it into “the first £2 million house in Exeter and that it would showcase his talents and generate other property investment opportunities for our joint venture…”

I am satisfied that Mr Edmonds was keen to have a house in Devon that would provide a secure comfortable house for himself and his two daughters. St Serf was a house that was “tired” and needed updating.

It was agreed that Mr Lawson should undertake the renovation works and that professionals such as an architect, quantity surveyor and interior designer need not be engaged since Mr Lawson would oversee the project. It is Mr Edmonds’ case that it was expressly agreed that Mr Lawson would manage the refurbishment for no fee and “all other costs, labour and materials etc. were also to carry no mark up. He stated he was happy to do this “…as it was in the spirit of our joint venture”.

Mr Lawson denies that work was carried out on that basis contending that he was a construction professional and it was his living and he could not afford to work in such a way and did not agree to undertake the works on that basis.

At that time their only common business interest was in relation to Mr Edmonds’ Wood House estate. Whilst Mr Lawson was expending time and effort investigating planning in relation to Wood House and contributing substantial sums to interest payments and the running and maintenance of the house and estate it is unlikely that he had the luxury of being able to subsidise Mr Edmond’s home improvements at St Serf “in the spirit of our joint venture” over a 15 month period.

Whilst I do not accept that he agreed to undertake the construction, design work and project management for no cost as alleged by Mr Edmonds the likelihood is that the precise method of charging was never thoroughly discussed or explained. It is readily apparent from the monthly invoices that he submitted to Mr Edmonds and which until September 2008 were paid, that details of the back up expenditure and mark up were not set out.

The starting point of the works was a budget of generally itemised works originally estimated at £200,000 rising to £225,000 prepared by Mr Lawson.

There was no overall plan or specification at the outset that could be professionally priced in advance.

The works were discussed and undertaken on a rolling ad hoc basis.

At bedroom level walls were removed and steelwork used to strengthen loadings for a Jacuzzi and an Aga. The cellar was deepened to accommodate multiple boilers to enable continuous hot water for concurrent users on a hotel scale. An office with separate access was created for Ms Robertson. Overall it seemed that the quality of the work was good and that of the woodwork excellent. The electronics and home management systems were state of the art.

Work was undertaken on this listed building that was clearly new work and had prior permission been given might have been exempt from VAT.

A conscientious project manager purporting to exercise the role of Mr Lawson would have advised his client as to the VAT position and certainly would not have embarked upon the nature and extent of the works commissioned at St Serf without seeking listed building and other consents.

It bespeaks a cavalier attitude to authority and proper building regulation. Mr Edmonds says that he was unaware of this. However Mr Lawson says that the imperative was for him to get on and complete what was a rolling programme of works as quickly as possible.

I have no doubt that Mr Edmonds was enthusiastic about the updating of the house and put pressure on Mr Lawson but he had the right to expect that the works done conformed with listed and building regulation consents and that the VAT charging was above board and transparent. It was not. VAT should have been chargeable on all but new works approved and exempted in advance by the Revenue.

Mr Lawson was investigated by HMRC and fined for his breaches. There is a substantial element of the works that became subject to VAT that might have been exempted. There is no basis for holding Mr Edmonds liable where exemption might reasonably have been applied for and granted.

Good quality work was carried out at St Serf by Mr Lawson. The value of the house was clearly enhanced.

The relationship between Lawson the contractor and Edmonds the client during 2007 and 2008 was deteriorating. Mr Edmonds’ enthusiasm for the Wood project had evaporated and he was becoming impatient as to the progress and cost of St Serf. Whilst the social niceties were being observed trust was being eroded on both sides.

By September of 2007 the monthly payment of the rendered invoices stopped. I am satisfied that Ms Robertson on behalf of Mr Edmonds concerned at escalating costs wanted more detail of the build-up of the actually charging particularly the detail of the backup invoices of the sub-contractors relating to labour and materials. It was not immediately forthcoming. In part because the original backup documentation may well have been in Scotland with the Lawson’s bookkeeper and accountant and in part because Mr Lawson did not seem to recognise an obligation to set out such charging details on his invoices.

I reject Mr Edmonds’ evidence that Mr Lawson promised to do the work of his project management design and procurement for free. He agreed in evidence that from the outset it was a commercial venture and that Ulrik was not simply “doing a favour for a friend” as he once expressed it. Both Mr Edmonds and Ms Robertson accepted that when it became manifest in September 2007 that Mr Lawson was charging a mark up they did not in fact protest. In 2008 Ms Robertson accepted that Mr Edmonds would pay all of Mr Lawson’s outstanding invoices provided supporting invoices were supplied “I happily agreed to this” she said in evidence.

No payments in fact were paid after September of 2007.

The contemporaneous explanation given by Ms Robertson was that Mr Edmonds had been ill and that lead to problems at work, and there were cash flow issues and that there was an insurance claim arising out of Mr Edmonds’ illness which held out the promise of payment being made in due course.

She accepted that that was the gist of what she said to Mr Lawson when he was chasing the payment of the October invoice and readily accepted in cross examination that she was lying when she told Mr Lawson this.

Mr Lawson continued to keep workers onsite and funded the provision of services and materials for the continuing construction works in reliance of assurance that payment was forthcoming, as it was intended that he should

It was not, and from this time that Mr Lawson stopped his contributions towards the maintenance and outgoings on the Wood project. By then he had made a substantial contribution to the mortgage cost and maintenance of Mr Edmond’s house.

The parties met at Christmas and the social niceties continued to be observed whilst under the surface there was seething discontent.

On the 5 February 2008 the First Defendant’s father Sir Richard Lawson intervened writing to Mr Edmonds and saying

“Dear Noel, I have a major stake in Lawson Developments, and, as you will appreciate, I am becoming concerned at the size of your outstanding account. If this is to be a continuing problem, perhaps we could meet. I’d appreciate it if you’d let me know when this would be possible”.

Mr Edmonds gave evidence that on the 7 February 2008 he met with Sir Richard Lawson. He gave a lengthy account of that meeting which included, inter alia:

“he painted a picture of a recently widowed father wary of bailing out his unsuccessful and irresponsible son. I was totally stunned by all of this and actually felt sorry for him. The mood of the meeting softened and I sensed the chance of compromise. I suggested that with regard to St Serf we should engage a reputable independent expert to assess the value of the work. He prickled a bit and there was a lengthy exchange about the way I did business not being the way he liked to do things but I stuck at it and repeated that I too was of the “old school” and a gentlemen. If we shook hands on being bound by the findings it would be binding on both of us. As he was confident that they would be exonerated and the bills could be proved to be accurate he then readily shook hands on it. The meeting closed pleasantly enough and I showed him to the door.”

The Defendants case is that no such meeting ever took place. Sir Richard Lawson gave evidence that he only met Noel Edmonds in relation to St Serf on 2 occasions, namely the 23 April 2008 and the 3 July. He had never discussed his son in those terms. And that there was no truth in the suggestion that Lawson Developments were not viable and depended on parental handout. Accountancy evidence was produced to the court which showed some commercial investment bearing interest and repayments which supported that evidence.

Mr Edmonds responded to Sir Richard Lawson’s letter of the 5 February 2008 and strikingly made no reference to a meeting of the 7 February or an agreement to be bound by a nominated expert.

In fact on the 17 March 2008 Sir Richard Lawson wrote to Mr Edmonds’ quantity surveyors PWH refusing to cooperate with them because it was viewed as a delaying tactic so far as payment of the invoices since October 2007. In the light of this, Ms Robertson’s false explanation in October 2007, and letter of comfort in December, it is hardly surprising that he reached this conclusion.

Mr Edmonds on learning of Sir Richard Lawson’s refusal of the 17 March wrote on the 20 March emphasising that from the outset the project was a commercial venture and making no reference of an agreement to be bound by a nominated expert.

Mr Edmonds’ case now, following careful cross examination, is that perhaps he was wrong about the date but that an agreement was arrived at in the circumstances and in the context that he described at length in his written statement.

The reports of Mr Hevingham make clear what in fact they are. They acknowledge receipt of instructions to assist in a dispute. They advise their client Mr Edmonds in relation to the dispute and how most effectively and cheaply as against the other party the dispute can be settled. The role of Mr Hevingham was to act as a partisan advisor to his client. He was not and did not purport to be an expert whose view was accepted to be binding on both parties.

I find that there was never any such agreement entered into by Sir Richard Lawson and Mr Edmonds and Ms Robertson. I also reject their evidence both of the timing and alleged content of that meeting.

The later cooperation by Sir Richard Lawson to provide all the documentation together with the day book and diary of the labour contractor Mr Knight together with full explanations at the meeting of the 21 May sprung from a belated acceptance of the Defendants’ duty to demonstrate the basis of their costings.

Ms Robertson had lied to the Defendant in October 2008 as to why money was not available to pay the invoices pleading an inability to pay. In December 2008 she wrote a letter of comfort to the Defendants’ bank saying that payment would be forthcoming in the future. Ms Robertson had been willing to lie and dissemble to assist Mr Edmonds. Her evidence as to the time and content of these meetings I also hold to be wholly unreliable and I reject her evidence.

The real issue as to the resolution of the claim in relation to St Serf is now accepted by both parties to be what is the value of the work that was done on a quantum meruit basis.

To this end the court was assisted by two experienced quantity surveyors. Mr Paul Hevingham of PWH (Barnstable) Limited on behalf of the Claimant to whom I have already made reference and, Mr Hanna on behalf of the Defendants.

Mr Hevingham from the beginning was under the handicap of not having access to the backup invoices and builder’s explanations when he embarked upon his earlier attempts to assess the value of the work undertaken by the First Defendant. He was not able to see the quality and extent of the hidden work like the steel work and mechanical and electrical works. He therefore of necessity had to resort to the measurement approach of valuing the works. He had access to the house before it was sold and was able to undertake a measurement.

Mr Hanna throughout had the benefit of full access to the documentation and to the explanations given by the First Defendant. He did not have the advantage of seeing the house since by the time he was instructed it had been sold on.

Mr Hevingham accepted that Mr Hanna’s approach of fixing the basic costs of labour and materials provided the data is accurate gives rise to an accurate basic costs figure. Mr Hanna’s evidence was that approximately 81% of the invoices were on their face expressly attributable to the project. They bore the legend “deal” the merchant’s reference to Mr Edmonds’ television programme. The balance were attributed having regard to the type of work undertaken and the need for such material and labour on the job and the explanations of the First Defendant. Mr Hanna was satisfied as to his cost base and the accuracy of the data on which it was founded.

Mr Hevingham expressed himself not satisfied that the labour and materials in those invoices which on their face were not attributable to the project by express designation, were in fact used.

There is no cogent evidence that the labour and material that are the subject of these invoices was in fact used elsewhere. The evidence of Mr Lawson was not seriously challenged on this issue and I am satisfied that the evidence of Mr Hanna is correct that having regard to the work done, that such labour and materials would have been necessary and from the accounts of Mr Lawson in fact were necessary and used on site at St Serf.

The data giving rise to the costs base in my judgment is accurate and has been demonstrated to be so by the meticulous investigation of Mr Hanna.

Mr Hevingham’s approach in his expert’s report for the court was to adopt the measured works approach on the basis that the work could have been done in 56 weeks rather than 15 months and that only £14,000 preliminaries were allowable.

Following the meeting in May 2008 with Lawson Developments he became aware of further works which clearly had been carried out, which he valued at a further £35,276. The total costs of works and preliminaries allowed by him was £414,574.36 to which was added an adjusted overhead and profit allowance of 15% amounting to £58,736 giving a sub total of £473,310.

Mr Hevingham then added in a contingency sum for unmeasured sundries of £10,000 giving a sub total of £483,310 which with VAT at 17.5% (£84,579) gives a valuation including VAT of £567,889.85.

Mr Hanna’s comparable figure for 15 months between December 06 and February 08 for labour, materials and plant is £488,304. A 15% uplift of £73,245 gives a total of £561,549. With VAT of 17.5% (£98,262) the total figure is £659,811.

In this case I prefer the approach of Mr Hanna.

When Mr Hevingham was originally instructed he made a preliminary assessment of the value of works carried out at St Serf based on a conservative measurement of square metres. That was subject to revision in June 2008 and his estimate at that stage was £629,682. Originally preliminaries were shown for 56 weeks at £42,000 and the contingency figure of £25,500.

It seems that following a meeting with the Claimant and Ms Robertson the preliminaries figure of £42,000 was reviewed and reduced to £14,000. As to the 5% contingency that was reduced from £25,500 to £12,000.

I accept that preliminaries, of course vary, from site to site. The approach taken by Mr Hevingham both underestimates the time and the complexity of the works undertaken. It gives insufficient weight to the fact that the house was occupied. No doubt when these figures were discussed in June 2008 it was in the context of his advising his client as to what could be a minimal range of settlement figures. It is a matter of regret that Mr Hevingham’s file with his original assessment and revised figures was not produced until he was cross examined.

The proper starting point is to establish costs of labour, materials and plant. I accept Mr Hanna’s starting figure : - £484,904

The experts agree that it is proper to charge a 15% mark-up representing overheads and profits including the costs of the head office as an administrative centre and to include the general insurances and non-site specific staff such as clerical staff. Including 15% marking up the figure becomes £549,601.

The real issue in this case is as to the mark-up and allowances for preliminaries.

Mr Hevingham takes the view that Mr Lawson’s costs form part of the overall management element of the general overhead and that Mr Knight supervised his labour, that little was required in the way of scaffolding and plant and that nothing should be allowed. Mr Hanna says from the description of the works involved items of plant such as tower scaffolding would have been required to allow safe access to works such as installing a new soil pipe, access to complete roof works, that trestles would be required for access to plaster and decorate ceilings including the conservatory timbers at high level. He noted that accro props were used for supporting ceiling/floor joists whilst floors were stripped out and structural elements replaced. Generators and breakers were used for work such as breaking out the old basement floor lowering it and putting in a sump. It is to be observed that plant forms one aspect of preliminary costs other items such as the protection of works, specific insurances, accommodation and cleaning are also costed under preliminaries. The house was occupied for the latter part of the time that works were being undertaken and had to be cleaned everyday. The experts point to a range of 9-12% as being a range. Mr Hevingham clearly took the view that in this site specific situation the preliminaries were very low and aspects such as supervision were duplicated in the labour charges of Mr Knight and overheads in relation to Mr Lawson and that no preliminaries are due; neither should the design role of Mr Lawson be reflected in the price, saying that it was minimal.

Mr Hanna is of the opinion that Mr Lawson was offering a one stop service to Mr Edmonds, obviating the necessity for professionals such as an architect, designer, engineer and a project manager. His designer function was clearly to be a large part of the preliminaries in this case. Time was spent to source specialist items, to procure them and to incorporate them into the house. It would include advice on such elements as VAT, planning and building regulations. The proper starting point, I am satisfied, is 10%

However, in respect of VAT not only did he expose Mr Edmonds to risk of further charge in respect of potentially exempt items he neglected to give value in relation to listed building consent and building regulation consent.

I am satisfied that the proper figure in this case for the preliminaries including site management coordination and design is 8.5% the total mark-up therefore on the base figure £477,914 is 23.5%. Thus £112,309 added to that base figure gives a total of £590,223 to which must be added VAT at 17.5% giving

Since some of the work was new work in a Grade II listed building, had Mr Lawson performed his duties properly by seeking and obtaining consent some of the work may have been VAT exempted. Mr Hevingham estimates this sum at £21,000. In my judgment that is an optimistic figure since permission may have been sought and not granted or there may have been delay which would have warranted the work being carried out in any event without prior VAT permission. I have already reflected Mr Lawson’s neglect when setting the correct mark-up for preliminaries but I think that a further £10,000 should be taken from the VAT gross value of the works reflecting the VAT liability as I have assessed it to be falling on Mr Edmonds.

Both experts made reference to the Building Costs Information Service (BCIS) index published by the Royal Institute of Chartered Surveyors. Indices are published monthly. They are based on cost data collected from RICS members in order to compile a data base as to tender prices, percentage additions for preliminaries, costs per square metre and other factors which are used by surveyors to predict and benchmark building costs for a wide variety of building types. The index relevant to the period of works at St Serf is based upon a very low sample size (27), and of projects of widely variable factors. I did not find it of assistance in this case.

In so far as it was used to confirm each experts differing view of costs per square metre, I note that there is no agreed square metre measurement. I do not accept Mr Hevingham’s lower measurements neither Mr Hanna’s high table top assessment. The sale particular measurements given by Strutt and Parker when St Serf was sold are perhaps the most accurate assessments since they used precise laser devices to measure square meterage acting for Mr Edmonds.

On the counter claim the Defendants are entitled to £683,512 less those monies already paid by Mr Edmonds.