Donne Place Investments Ltd & Anor v McDonnell & Anor

Contractual provisions excluding or limiting damages for delay cannot be circumvented by pleading the same loss as breach of an implied term of reasonable diligence. A construction contract’s express allocation of risk may therefore provide an exhaustive agreement on the consequences of late completion. Where a professional retainer contains no equivalent exclusion, a delay claim remains legally possible, but breach and causation must still be established on the evidence. Res ipsa loquitur has no general application where delay may occur without negligence and the relevant work depends on several participants. A claim of professional negligence must be determined by the pleaded case and cannot be supplied by common sense where the expert evidence does not support it. Fraudulent misrepresentation requires proof of a knowingly false representation or recklessness; constructive knowledge is insufficient.

The claimants owned adjoining property developments at Donne Place and Ives Street in Chelsea. The defendants provided design, project management and, for Donne Place, design-and-build services. The claimants terminated the agreements in December 2008 and sought accounts, damages for delay, and relief against Ms McDonnell personally for deceit and dishonest assistance.

The principal issues were the proper calculation of sums due under the contracts, whether delays in obtaining party wall awards and London Underground approval gave rise to recoverable losses, and whether Ms McDonnell had acted dishonestly or fraudulently. The court also considered whether the corporate claimants were distinct from the individuals associated with them.

1. Accounts and contractual construction. The Donne Place account was governed by the 2006 agreements. Expenditure and fees under the earlier 2002 agreement did not fall within that account. The court construed the termination-fee provision in line with the final-cost provision, rejecting an interpretation producing anomalous results. The Ives Street claim for staged architectural fees failed because the defendants had not established completion of the relevant work stages.
2. Donne Place delay. The express term that no penalty would arise from failure to complete within 15 months constituted an exhaustive agreement that damages for late completion were not payable. The claim could not be recovered through an implied term requiring reasonable skill, care or diligence. This conclusion was supported by GLC v Cleveland Bridge and Engineering Co. Ltd (1984) 34 BLR 57, Temloc Ltd v Errill Properties Ltd (1987) 33 BLR 30, and Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH [2008] BLR 155. In any event, the evidence did not establish negligence. Res ipsa loquitur was inapplicable because delay could occur without negligence and the relevant activities were not solely controlled by MCD.
3. Ives Street delay. The professional retainer contained no equivalent exclusion of delay damages. Clause 2.4.1 merely prevented automatic breach for failure to meet an agreed timetable. Nevertheless, the claim failed on the facts. The expert evidence did not establish that MCD had failed to coordinate the approval process. The proposed failure-to-warn case was unpleaded and could not be advanced at trial.
4. Personal claims. The deceit allegations failed. Applying the civil standard of proof explained in In re B [2009] 1 AC 11, with reference to In re H [1996] AC 563, the court found no knowingly false representation, recklessness or fraudulent intent. The dishonest-assistance claims likewise failed: the accounting errors reflected disorder and confusion, not dishonesty.
5. The court dismissed the negligence claims against MCD and all personal claims against Ms McDonnell. Further submissions were invited on the order for the accounts and consequential matters.