Tomlinson v Wilson [2007]

© Daniel Atkinson 2007 19 June 2007

Introduction

The case of Margaret Tomlinson and Iain Wilson [2007] (QBD) (TCC) Leeds District Registry is an example of a typical small building dispute in which the litigation will have been disastrous for both parties. Because of the amounts in issue between the parties, they were in economic terms litigating about the costs of the action rather than about the underlying dispute. The case is of interest mainly because of the alternative finding and the summary of law on damages for repair in a situation where the building had been demolished.

Repudiation

Tomlinson owned a two storey house at one end of a row of three terraced cottages in Yorkshire.

In 2005 a contract was agreed with Wilson the builder for £19,500 for an extension, to be paid in stage payments. The builder carried out the extension to roof level. Work stopped on 17 June 2005 due to a dispute about the adequacy of the concrete raft foundation. The owner considered that the extension should be demolished and rebuilt.

It was an express term of the contract that works should be carried out in accordance with Building Regulations and that the foundation of the extension must be adequate for the purpose of supporting the structure.

There were defects in the work done by the builder. The main issue was whether the owner or the builder had repudiated the contract. It was agreed that it was necessary to find that one party by words or conduct had demonstrated an intention not to proceed further, and also, that the other party had accepted those words or conduct as a breach discharging him from further performance. In essence the question was did the builder walk off the job or did the owner prevent him from completing the work?

The relationship between the owner and the builder was fragile. The owner seemed from an early stage to have entertained doubts as to the competence of the builder. Each was suspicious of the other.

Up to 15 July 2005 the parties were skirting around, rather than engaging with each other. The builder felt that the owner had been deliberately avoiding him and had doubts as to the owner’s intention to make the penultimate stage payment. He admitted that he suspended work on the roof because he was anticipating a breach of contract.

The evidence showed that the builder’s suspicions were justified. The owner’s letter of 15 July 2005 constituted an announcement that she regarded the project at an end. As it was put by the judge “she had moved from the chamber of complaints into the ante-room of litigation”.

The builder’s letter of 20 July 2005 was an acceptance of the owner’s repudiatory breach. The builder claimed damages for loss of profit which he was only entitled to if the contract was being brought to an end.

The issue then was the measure of damages where the building owner acts so as to bar completion by the builder.

The judge accepted the measure of damages based on a profit ratio of 20% of turnover. Allowing that 75% of the work had been done he awarded £500 as damages.

Alternative Finding

Having disposed of the case, the judge then examined the alternative position if instead the builder had repudiated the contract.

The judge found that the extension was susceptible to repair and did not need to be demolished, so the next question was whether the owner acted reasonably in having the extension pulled down.

It was observed that a building owner, particularly if she is acting upon advice, who acts reasonably in having the work done thus far demolished with a view to starting again and recovering the cost of doing so from the builder will recover the cost The Board of the Governors of Hospitals for Sick Children v McLaughlin & Harvey plc (1987) 19 Con LR 25; McGlinn v Waltham Contractors Ltd (No 3) [2007] EWHC 149 (TCC).

The owner relied upon the decision of Judge Humphrey Lloyd QC in Birse Construction Ltd v Eastern Telegraph Company Ltd [2004] EWHC 2512 (TCC). The judge did not accept that the instant situation was analogous to that in Birse. He considered that the case of Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 All ER 268 provided the key to the answer. Birse was a “no loss” case, Ruxley was a case in which the court found an identifiable loss.

The judge considered that the cost of repair and completion was an identifiable and recoverable loss in the instant case. Birse could provide a true analogy only if it were shown, which it was not, that the owner was going to abandon her plan to have an extension and to leave the land at the rear of her cottage vacant. There is simply no evidence which would support a finding to this effect. What had occurred was that the owner was faced with alternative means whereby she might remedy the builders assumed breach of contract. She chose and unnecessarily chose, the more expensive of the options which were open to her. As part and parcel of the principle that an injured party must mitigate her loss, she was limited to recovering the cost of the less expensive option.

Accordingly the judge decided that if he had made an award of damages in favour of the owner then it would have been for the lower set of figures before him.

Commentary

McGlinn gives a very detailed review of the law in respect to reasonableness in adopting a particular remedial strategy and the relevance of an expert’s advice. In that case Coulson J distinguished McLaughlin on the facts and was followed in the instant case.

In the instant case, the judge observed that the case was an object lesson for persons who embark on complex building litigation arising from low-value contracts and to those advising them. He had twice drawn the attention of the parties that they were set on a course which seemed, in terms of money, to be one of mutually assured destruction.

The case had been heard over five days with two adjournments and experts on both sides.

Adjudication was not apparently available for dispute resolution probably because Tomlinson was a residential occupier. One wonders however whether adjudication would not have provided the parties with a swift reality check and disposed of the matter more efficiently.