Law Report: Damages not precluded by failure to notify

4 March 1999 Pearce & High Ltd v Baxter and another Court of Appeal (Lord Justice Evans, Lord Justice Tuckey and Mr Justice Hidden) 15 February 1999

AN EMPLOYER'S common law right to damages for breach of contract was not removed by his failure to notify a contractor of defects in building work within the time limit specified in clause 2.5 of the JCT form for Minor Building Works.

The Court of Appeal allowed the appeal of Mr and Mrs Baxter against a preliminary ruling that they had no cause of action against the respondent builders, in respect of defects in the works which had not been notified to the builders within the contractual liability period.

The works were carried out under a contract in the JCT form for Minor Building Works. A certificate of practical completion and a penultimate certificate valuing the works at pounds 35,442.80 excluding VAT were issued by the architect. The net sum payable under the certificate after allowing for earlier payments was pounds 3,919.23 excluding VAT. The plaintiffs issued proceedings in the county court in respect of that and other amounts.

The district judge directed that four preliminary issues, all of which raised questions as to whether the defendants could rely in their defence to the claim on alleged defects and omissions in the works, be determined. As a result of the decision of the House of Lords in Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1998] 2 All ER 778 it was conceded that two of those issues were no longer relevant.

The remaining issues were whether the defendants retained a cause of action in respect of defects which had become apparent during or before the defects liability period, but which had not been notified to the plaintiffs until long after that period had expired; and whether or not the plaintiffs were entitled to summary judgment under Order 9, rule 14 of the County Court Rules.

Clause 2.5 of the JCT form provided:

Any defects, excessive shrinkages or other faults which appear within [six months] . . . of the date of practical completion and are due to materials or workmanship not in accordance with the contract or frost occurring before practical completion shall be made good by the contractor entirely at his own cost unless the architect shall otherwise instruct. The architect shall certify the date when in his opinion the contractor's obligations under this clause 2.5 have been discharged.

The Recorder ruled that clause 2.5 made it

a condition precedent for the right to recover damages that the building owner has notified the building contractor of patent defects within the six-month liability period.

The defendants appealed, contending, in reliance on the decision in William Tomkinson and Sons Ltd v the Parochial Church Council of St Michael 1990 CLJ 319, that the judge had erred.

Martin Gibson (James S. Barnett, Hungerford) for the plaintiffs; Michael Daiches (Morrison & Masters, Swindon) for the defendants.

Lord Justice Evans said that, on the true construction of clause 2.5, "defects [etc] which appear" was a description of those defects to which the clause applied. Whilst the clause gave the contractor a right during the six-month period to make good the defects at his own expense and a licence to enter the property for that purpose, and also gave the employer a right to require the contractor to return to remedy the defects, it did not remove the common law right of the employer to employ another party and to recover damages for breach of contract.

Where, however, the contractor had been denied the right to return in order to repair the defect, the employer could not recover more than the amount which it would have cost the contractor himself to remedy the defects. The employer's failure to comply with clause 2.5, therefore, whether by refusing to allow the contractor to carry out the repairs or by failing to give notice of the defects, limited the amount of damages he was entitled to recover.

That did not, however, exclude the employer's right to recover consequential damages for the contractor's breach of contract in failing to carry out the works with appropriate materials and workmanship.

Kate O'Hanlon,

Barrister