Monavon Construction Ltd v Davenport & Anor

An alleged construction cost ceiling is unenforceable where the scope of the works, pricing basis and remedial obligations are insufficiently defined. A contractor engaged on a cost-plus basis may charge separately for productive working-foreman services, but management time covered by the agreed mark-up is not separately recoverable.

Where a contractor undertakes to complete and inspect another contractor’s work, it must use reasonable inspection methods and remedy defects that such inspection would reveal. Failure to test defective first-fix electrical work before proceeding with second-fix work constituted a breach, and the resulting reasonable additional remedial cost was recoverable. Contractual obligations were also breached by installing an underfloor warming system instead of the required heating system and by failing properly to complete a damp-proof plasterwork barrier.

The claimant building contractor carried out extensive refurbishment works at the defendants’ London house after an earlier contractor had been dismissed. The parties made an informal oral agreement under which the claimant would complete and remedy the works on a cost-plus-20 per cent basis. The defendants alleged that the price was capped at £100,000 and brought a substantial cross-claim for defective and incomplete work.

The court determined the contractual terms, the effect of a later assurance that further work would be undertaken without additional charge, the recoverability of management and working-foreman charges, and the claimant’s responsibility for defects in both its own work and work inherited from the earlier contractor.

1. Cost ceiling. No enforceable £100,000 ceiling formed part of the contract. The scope of the work was neither clearly defined nor readily definable. There was no complete specification, schedule of work, pricing document, defined condition of the earlier works, or clear allocation of unforeseen remedial work. Objectively, the figure was a guide to the likely cost of an open-ended cost-plus arrangement.
2. Later assurance. The claimant’s principal assured Mrs Davenport that further work carried out after 9 August 2004 would not be charged. The claimant could not recover the identified post-assurance charges.
3. Charges for time and tools. Management, liaison and site administration were covered by the 20 per cent mark-up. Productive working-foreman services could be charged separately. On the evidence, full-day charges were recoverable and incomplete-day charges were not. Necessary replacement small tools were also chargeable where the agreement contained no detailed dayworks code and the tools were reasonably required.
4. Scope and inherited defects. The claimant was required to complete incomplete work, inspect the earlier contractor’s completed work by reasonable methods, remedy defects revealed by reasonable inspection, and integrate the works into a complete refurbishment. The obligation extended to checking the first-fix electrical installation.
5. Electrical works. An appropriately qualified electrician should have tested the first-fix wiring before second-fix work began. The failure to test, remove and replace the defective installation was a breach of contract. The reasonable additional cost of the necessary remedial work was recoverable.
6. Other defects. The claimant breached its obligations by installing an underfloor warming system rather than a heating system, by failing to complete a satisfactory damp-proof plasterwork barrier, and in relation to various specified workmanship defects. Claims failed where breach, causation or loss was not proved. No implied obligation existed to carry out unnecessary snagging work without further payment.
7. The parties were directed to calculate the net judgment from these findings, after which judgment, interest and costs would be considered.