Persimmon Homes (South Coast) Ltd v Hall Aggregates (South Coast) Ltd & Anor

A contractual price-adjustment mechanism which requires costs to be agreed or determined promptly and finally will ordinarily operate by reference to anticipated costs, including projected increases, rather than costs ultimately incurred. A separate provision concerning works required by third-party approvals may adjust for works omitted from, added to, or altered from the original calculation. It does not reopen the agreed pricing mechanism unless the contract clearly provides for retrospective actual-cost accounting.

Contractual waiver requires an unequivocal representation, by words or conduct, and reliance or conduct of affairs on that representation. A claimant’s failure to call on the defendant to perform does not establish waiver where its conduct is equivocal. Damages for failure to perform contractual works are limited to the notional cost to the defaulting party of performing them, subject to mitigation.

RMC sold a former sand, gravel and landfill site to Persimmon under an agreement pricing the site as if it were clean and serviced land. Clause 7A provided for the prompt and final agreement or expert determination of estimated remediation costs and a corresponding price adjustment.

Persimmon contended that clause 14A.5 entitled it to recover the actual costs of certain highway and utility works required by approvals. Coulson J rejected that claim. RMC cross-appealed against the finding that it had breached clause 12.2 by failing to carry out void-space remediation which Persimmon had performed itself.

The central issues were the construction of clause 14A.5, whether Persimmon had waived RMC’s clause 12.2 obligations, and the measure of damages for their breach.

1. Appeal and cross-appeal dismissed. Rix LJ, with whom Wall and Aikens LJJ agreed, held that clause 14A.5 concerned anticipated, not incurred, costs. Clause 7A was intended to fix the remediation costs and the price shortly after the agreement, including projected increases in future costs, on a final and binding basis.

   Clause 14A applied separately because approvals from utility and highway authorities might require unanticipated works, remove anticipated works, or alter them. The requisite comparison was between the anticipated cost of approval-required work not taken into account in the price and the anticipated allowance for work which had been taken into account. The wording of clause 14A.5 did not authorise a later comparison between actual expenditure and an estimated allowance. Its reference to costs was capable of covering anticipated costs, while clause 14A.4 expressly used the word “incurred” where incurred negotiation costs were intended. Persimmon’s construction would also make clause 7A redundant for two scheduled items without clear language to that effect.

2. Aikens LJ held that clause 12.2 imposed primary and imperative obligations on RMC to provide haulage and remediate the void space. The words requiring performance in accordance with Persimmon’s reasonable requirements governed the manner and timing of performance. They were not a condition precedent requiring Persimmon first to direct RMC to undertake the works. RMC was therefore in breach by not doing them.

3. Persimmon had not waived that breach. Waiver required an unequivocal representation and reliance or conduct of affairs on its basis. Persimmon’s unexplained performance of the work was equivocal, since RMC knew that Persimmon might simply have misunderstood the allocation of contractual responsibility. RMC neither relied nor changed its position. The facts were materially different from those considered in The Bunga Saga Lima, [2005] 2 Lloyd’s Rep 1.

4. RMC bore the burden of proving a failure to mitigate. It had not shown that Persimmon acted unreasonably by failing to call upon it to perform. Alfred C Toepfer v Warinco AG, [1978] 2 Lloyd’s Rep 569, concerned preventable loss which would have been avoided by stopping non-conforming delivery and was distinguishable. The recoverable damages were the notional cost to RMC of performing clause 12.2, as supported by analogy with Pearce and High v Baxter, [1999] EWCA Civ 789, and no more.

• Court of Appeal (Civil Division) — by [2009] EWCA Civ 1108, dismissed Persimmon’s appeal and RMC’s cross-appeal.
• High Court, Queen’s Bench Division — Coulson J rejected Persimmon’s clause 14A.5 claim and held that RMC was liable in damages for breach of clause 12.2.