In Iliffe & Anor v Feltham Construction Ltd  fire destroyed a large house which was in the course of construction. The fire started in the roof.
The Claimants sued the Defendant building contractor [“Feltham”] claiming damages in excess of £3,500,000.
They applied for summary judgment for damages to be assessed, and for a substantial interim payment. For the Claimants to succeed in getting summary judgment they had to show that the Defendant has no real prospect of successfully defending the claim and that there is no other compelling reason why the case should be disposed of at a trial.
The Specification for Phase 1 of the build stated that the JCT Intermediate Building Contract with Contractor’s Design 2005, Revision 2, 2009 would apply.
Even before the contract for the Phase 1 works was executed, the parties conducted themselves as if the terms of the standard form of contract applied. So, for example, Feltham submitted valuations of work done to the architect who then certified payments due from the Claimants to Feltham on documents headed “Certificate of Progress Payment issued under the JCT Intermediate Building Contract with Contractor’s Design 2005”; and the architect issued architect’s instructions and took other administrative steps as he would as architect acting under the Standard Form Contract.
When the architect later sent the Phase 1 contract documents to the defendant for signature, the architect wrote:
“The [Phase 1] contract documents will then be used as a basis for Phase 3 with [those] works being a variation to the contract based on the agreed sum for Phase 3.”
Later in its instruction to the Defendant the architect said Phase 3 “generally would include the mechanical subcontract installation, comprising the supplying and installation of … a two way logburning stove with heat exchanged [sic], all with insulated stainless steel flues … the design and installation for the mechanical systems will be carried out by Affleck Mechanical Services Limited.”
Affleck sub-sub-contracted the design and installation of the flues to Docherty Chimney Group Limited [“Docherty”] who in turn sub-sub-subcontracted it to Mr Calloway who carried out the installation of the flues in or about late 2011.
At first instance, the High Court concluded that the parties entered into a contract which incorporated the terms of the JCT Intermediate Building Contract with Contractor’s Design 2005, Revision 2, 2009, for the following reasons:
1. The tender package which was sent to Feltham invited it to tender on the terms set out in that package, with the intention that the parties would enter into a contract.
2. The Specification stated that the work would be on the terms of the JCT Form and that the Contractors Designed Portion would include the design of and construction of the heating system.
Whilst it was anticipated that the work of producing the design and carrying out the heating installation would be carried out by sub-contractors, that did not derogate from responsibility for the design remaining with Feltham because that aspect was to be included in the Contractors Designed Portion.
The inclusion of the logburner’s and flue’s design in the Contractors Design Portion did not matter in other respects since none of the parties had suggested that the chimney or its installation were inadequately designed. The case brought by the Claimants alleged defective workmanship and not defective design. Nor had there been anything to suggest that the flue was inherently unsuitable. The Claimants’ case against Feltham rested on the workmanship of subcontractors beneath it in an area of work which fell squarely within its responsibility.
Feltham’s tender did not contradict the proposal that the JCT terms should apply, so by necessary implication, Feltham tendered on the basis that the terms would apply as set out in the employers’ tender package.
The effect of the tender was that the installation of the logburner and flue was included in section 10 of Feltham’s priced tender.
Nothing in the tender documents either said or implied that Feltham’s obligations as to the logburner and flue, would be limited to placing an order with Affleck. Feltham had contractual responsibility for the acts and omissions of Affleck.
The architect’s email instructing Feltham to carry out the Phase 3a works was an acceptance of Feltham’s tender to the extent of the Phase 3a works and, as such, incorporated the JCT Terms, which the Specification said, and Feltham’s tender accepted, would apply to all of the Phase 3 works.
The architect’s instruction email was also an acceptance of Feltham’s tender so far as it related to the Contractor’s Design Portion, on which both the Specification and the Tender were consistent, and which covered the works being sub-contracted to Affleck.
Feltham understood the architect’s email in that manner because it immediately entered into its sub-contract with Affleck on terms which included the DOM/1 standard form of sub-contract and even put Affleck on express notice that the main contract provisions were the JCT Intermediate form of contract.
The logburner and its flue had been used on a number of occasions for the equivalent of 2-3 weeks before the fire happened.
The High Court found that the fire was caused by the installation of the chimney and that, if properly installed, the fire would not have taken place. The flue had been installed too close to combustible material in the roof space.
The flue would not have caused the fire if it had been installed properly and with adequate separation from that material.
As there was no realistic prospect of any alternative explanation or cause coming to light if the case went to trial, those conclusions were reached with the certainty necessary to justify summary judgment against Feltham.
Feltham was contractually responsible for the acts and omissions of its subcontractors. It followed that Feltham was in breach of Clause 2.1 of the JCT Intermediate Standard Form Building Contract and that it was liable to the Claimants for the fire.
Even if the court was wrong and Feltham had not been subject to the relevant JCT Standard Form terms, Section 13 of the Supply of Goods and Services Act 1982 applied and Feltham would have in breach of the condition implied by that section that the works be designed and carried out with reasonable care and skill.
It did not matter whether the cause was entirely attributable to the acts or omissions of Affleck and the sub-contractors beneath it or, whether (as Mr Calloway suggested) Feltham was directly responsible for “scalloping” or otherwise ensuring that there was adequate separation around the flue. Feltham’s contractual liabilities would be the same.
The summary judgement has now been set aside by the Court of Appeal who were persuaded to require a full hearing of the case before any judgment is arrived at since Feltham might have some arguable defences.
The court accepted that there was unquestionably a contract between the Iliffes and Felham for the execution of the Phase 3 works. On 5 July 2011 the parties were agreed that Feltham should carry out the Phase 3 works in accordance with Feltham’s tender and subject to the conditions of the JCT contract. After that both parties acted on that basis.
Feltham carried out the Phase 3 work. The interim payment certificates were issued under the JCT contract. Mr Iliffe paid the sums certified to Feltham. The fact that the Iliffes reserved the right to withdraw the latter stages of the Phase 3 works (which never happened) did not diminish the existence of the contract.
But that, was not the only contractual issue that arose. There was also an issue, or a potential issue, concerning design responsibility.
Had it been a contractor’s design and build contract, it would not have mattered how the fire started the fire was obviously attributable to a design or construction fault and Feltham would have been liable.
The High Court Judge had accepted that principle, though he concluded that it did not matter, since defective construction rather than design had caused the fire.
The Court of Appeal disagreed it was at least arguable that the design responsibility of Feltham was limited to part only of the mechanical works of the heating system.
The specification and the schedule of works required Feltham to “complete” the design of the heating system rather than undertake the whole of that design.
That made sense because Affleck had done most of the design work (in direct consultation with Mr Iliffe and his architect) before Feltham received the tender package.
Furthermore Feltham’s priced schedule only allowed a relatively small sum (£4,000.00 of £209,877.00) for that remaining design work.
All parties knew Feltham had adopted Affleck’s costings without any mark-up. It appeared from Affleck’s quotation and the accompanying narrative that that quotation did not include designing the flue system.
So the documents had not been sufficiently clear to establish, for summary judgment purposes, that Feltham’s contract included responsibility for the design of the flues.
Also, the Court of Appeal felt unable to uphold a summary judgment on liability in favour of one party, when very similar issues were going to be the subject of a full trial between the other four parties.
It seemed highly likely that the Iliffes would, at trial, prove that defective installation work caused the fire. But, the courts still did not know what actually caused the fire. There had been no judicial investigation of the facts. The courts had only seen the result of various experts interviewing the factual witnesses. At a number of points one of the reports said that the expert needed to know what particular witnesses would say about various issues.
The position as to causation of the fire had not been so clear as to justify the grant of summary judgment on liability in favour of the claimants. Also it was inappropriate to do so when similar issues were yet to be determined at a full trial as between the other parties.
In the particular circumstances of this case that was a “compelling reason” not to enter summary judgment within the meaning of CPR 24.2(b). A judge in multi-party litigation must aim to do justice as between all parties involved in the case.
So the summary judgement was quashed.
This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.