Maggs (t/a BM Builders) v Marsh & Anor

The rule excluding subsequent conduct as an aid to construing a written contract does not apply where the court must determine terms that were agreed orally and never completely recorded. Determining those terms is a question of fact. The court may therefore consider what the parties said and did after formation, not to alter the agreement, but to test and elucidate the accuracy of their later recollections.

Where findings about contractual terms depend on accepting one party’s recollection, the erroneous exclusion of subsequent conduct capable of materially undermining that recollection may require the findings to be set aside and the dispute reheard.

A builder agreed to refurbish premises for an estimated price. The agreement was not completely recorded in writing, and the client subsequently instructed additional work. A dispute arose over which items were included in the original agreement and which were chargeable extras.

The Bristol County Court preferred the builder’s evidence and awarded £69,692.22 plus VAT and interest. In determining the original contractual scope, the recorder excluded the builder’s subsequent lists of extras. He considered himself bound by the rule against using subsequent conduct to construe a contract.

The client appealed. The central issue was whether subsequent conduct could be considered when determining the terms of an oral or partly oral agreement and testing the parties’ conflicting recollections.

1. Appeal allowed unanimously. Lady Justice Smith, with whom Lord Justice Moses and Lady Justice Hallett agreed, held that the recorder had wrongly excluded the parties’ subsequent conduct. His order was set aside and the case was remitted to the Bristol County Court for rehearing before another judge if the dispute could not be resolved.

2. The rule in Whitworth Street Estates Ltd v Miller [1970] AC 583 concerns the construction of a written record of an agreement. A written instrument must be construed objectively. Subsequent conduct generally reveals only a party’s subjective understanding and cannot change the meaning which the document bore when made. The objective approach described in Investors Compensation Scheme Ltd v West Bromwich Building Society [1198] 1WLR 896 explains that rationale.

3. That exclusionary rule does not apply when the court is determining contractual terms agreed orally and not completely recorded. Identifying those terms is a question of fact. The parties’ recollections may therefore be tested and elucidated by evidence of what they said and did after making the agreement. The evidence is used to decide whose recollection is accurate, rather than to alter the agreement retrospectively.

4. The builder’s earlier lists of extras and the substantial disparity between his original final account and amended claim were capable of materially challenging his credibility or the accuracy of his recollection. The recorder’s findings depended on preferring that recollection. His failure to assess the lists and the explanations for the disparity therefore went to the heart of the decision and fatally undermined it.

5. The Court of Appeal could not itself determine the original contractual scope. The matter was remitted, but it was not to be listed for rehearing until the parties satisfied a district judge that they had made appropriate attempts to resolve the dispute.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The recorder’s order was set aside and the dispute remitted to the Bristol County Court, subject to appropriate attempts at resolution before any rehearing.

2. Bristol County Court: Mr Recorder Lamb QC ordered Mr Marsh to pay £69,692.22 plus VAT and interest for building work. He excluded the builder’s subsequent lists of extras when determining the scope of the original agreement.