Leslie v Farrar Construction Ltd

A voluntary payment is ordinarily irrecoverable where the payer knows it may exceed the sum due but consciously chooses not to ascertain the correct amount. Agreeing a final figure to close a transaction may amount to assuming the risk of overpayment, even where later investigation would show that less was strictly payable.

The distinction between interim payments on work in progress and final payments on completed projects is material. A later reduction revealed by detailed accounting does not, without more, establish a partial failure of consideration.

Graham Leslie and Farrar Construction Ltd operated several property developments under an oral Framework Agreement. Mr Leslie funded the sites, FCL carried out the construction, and the parties shared the resulting profits. On five completed developments, they agreed final payments by reference to budget figures without detailed substantiation of actual build costs.

After the relationship ended, Mr Leslie claimed repayment of alleged overpayments. The Technology and Construction Court rejected that claim and, after setting off other sums, entered judgment for FCL in the sum of £139,428.16: [2015] EWHC 58 (TCC). The appeal concerned only the alleged overpayments on the five completed developments, including mistake, waiver, estoppel and partial failure of consideration.

1. Appeal dismissed. The trial judge was entitled to find that each development was treated as a separate transaction and that, on completion, the parties agreed the figures and closed their books. The court would not go behind that finding. Interim payments on the two uncompleted developments were different because they remained subject to a final reckoning.
2. Mr Leslie’s final payments were not made under a mistake or erroneous assumption. He consciously chose to pay the budget figures without investigating whether they represented the actual build costs, because that suited his purposes and produced an acceptable profit. The principle stated in Kelly v Solari (1841) 9 M & W 54 (exch.) applied. The same conclusion followed from the categories identified in Barclays Bank Limited v W J Simms Son & Cook (Southern) Limited [1980] 1 QB 677 and Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70.
3. The objective circumstances showed that Mr Leslie knowingly ran the risk of overpayment. The reasoning in Dextra Bank & Trust Co Limited v Bank of Jamaica [2001] UKPC 50 and Deutsche Morgan Grenfell Group Plc v Inland Revenue Commissioners [2006] UKHL 49 supported that conclusion. The principle concerning compromises and financial agreements discussed in Brennan v Bolt Burdon [2005] QB 303 was likewise applicable.
4. There was no pleaded fraud or misrepresentation. The court therefore did not need to decide the alternative estoppel analysis, although it agreed that Mr Leslie had waived any right to make a detailed inquiry into the actual build costs.
5. The difference between the sums paid and the sums that detailed investigation would have produced was not a partial failure of consideration. Mr Leslie had received the agreed benefit of the five property developments.

McCombe LJ agreed. He added that the trial judge’s ultimate factual finding was not undermined by passages capable of closer textual criticism. He referred to Piglowska v Piglowski [1999] 2 FLR 763 and emphasised the need for appellate caution when reviewing a carefully reasoned judgment based on evidence not heard by the appellate court.

• Court of Appeal (Civil Division): The appeal against the decision on the five completed developments was dismissed.
• Technology and Construction Court: HH Judge Stephen Davies rejected the claim for repayment of overpayments and, after accounting for other liabilities, entered judgment for Farrar Construction Ltd: [2015] EWHC 58 (TCC).