Judging construction disputes can be like sitting exams, but at least we can all learn from the results – as in this case where a builder flunked everything
Mr Justice Coulson has been sitting exams again. This week, it is Hall & Anor vs Van Der Heiden. He passed, and got another little star on his judge’s badge. Do read this judgment – it’s a real help to adjudicators and arbitrators, as well as builders. As Coulson says: “Building disputes fall into a number of categories: a claim by the contractor for unpaid sums, a claim by the employer for defective or incomplete work and claims by either or both sides for delay. Sometimes there will be claims by either or both sides if the contract came to an end prematurely. This case ticks every box.”
The lads and lasses adjudicating and arbitrating are deciding cases identical to this one every day. The guidance you give in these judgments is gold dust. Have another star!
The story is ordinary. It’s a JCT contract: completion date 22 September, liquidated damages £700 a week, architect’s certificates and all the usual extension of time clauses and variations. Got the idea? Come August it was obvious the end date had gone for a Burton but the builder hadn’t thought to crank up the extension of time machinery – most don’t. So as October, November and then Christmas passed, the gloom acquired a pea soup quality. In January the builder served up what it called an interim final account. It was not certified. So the builder walked. The architect issued a notice requiring the builder to return. It did not. A deadline was set, which came and went.
The employer was stuck with a part-finished building and began the rigmarole of surveying completed work, detecting defects, getting a new builder and of course paying a higher price than the original. By now the lawyers were lawyering.
The first row will be about the list of defects. The employer’s team will leave no stone unturned. The builder said the work was tickety-boo. When it came to court, the judge said there was no doubt the work was defective. The second row was over whether the builder’s work was incomplete. “It was incontestably incomplete,” said the judge. The third row was whether the builder was in culpable delay. The architect had given six weeks’ extension of time. “That seems to me to be generous,” said the judge. The builder wanted 10. “No,” said the judge; he stuck to the six weeks. The fourth row was over whether practical completion had been achieved before work was suspended. “No,” said the judge. “It’s plain that such a certificate cannot be issued in circumstances where there are patent defects.” The fifth issue was whether the employer was justified in declaring the contract determined. “Yes,” said the judge. The builder suspended the works without reasonable cause. It had been paid what the architect had certified, so it had no complaint of underpayment. The sixth issue was the period of culpable delay of the builder. Remember, it cleared off mid-January 2009. By the time there was a replacement builder and the job was finished, it was four months later. Well then, that’s down to the culpable builder. So, said the employer, the liquidated damages of £700 a week runs from the original contract completion date of 22 September to 17 May (less six weeks’ extension of time) = 29 weeks @ £700 = £20,300. The next issue is whether the employer had suffered distress and should be awarded damages. “Yes,” said the judge: £3,000. And finally all the strands were pulled together and the builder suffered all the consequences of badly managing the job and leaving the customer in the lurch.
Notice the judge’s guidance about the £700 weekly liquidated damages having to be paid long after the contract was determined. “I reject the suggestion the defendant’s liability to pay liquidated damages somehow came to an end when its employment was terminated.” Another exam item was the proposition that the architect’s extension of time could only be overtaken by an adjudicator, arbitrator or court, if unreasonable. Wrong, said the judge. The builder is liable for the cost of bringing in another builder to correct defective work. Liable, too, for the costs of the delay reaching practical completion and damages for distress. All ordinary exam stuff – and recommended reading.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple