Cunningham (t/a Urban Developments) v Buckley & Anor

An appellate court will not disturb a trial judge’s factual allocation of responsibility where the judge had evidence capable of supporting it and no legal error is shown. A reduced VAT rate for building work under Value Added Tax Act 1994 Schedule 7A Group 7 depends on the statutory conditions, including any required building-control approval. A party relying on the reduced rate must plead and prove its applicability; a late submission after evidence has closed cannot cure the omission. In a building contract, damages for defective work may be assessed by the reasonable cost of rectification even where rectification has not taken place.

The claimant builder obtained judgment in the county court for sums due for building works at a residential property. The defendants appealed the rejection of part of their counterclaim concerning bi-fold doors and the application of VAT at 17.5% rather than 5%. The claimant cross-appealed against the assessment of the defendants’ defective-work counterclaim by reference to expert evidence, despite the absence of reliable evidence of the actual rectification cost. The central issues were whether the factual responsibility for the doors was open to appellate challenge, whether the reduced-rate statutory conditions had been established, and whether reasonable rectification costs could be awarded.

1. Disposition. The appeal and cross-appeal were dismissed. The appellants were ordered to pay the respondent’s appeal costs, summarily assessed at £12,500.
2. Bi-folding doors. The county court judge had evidence on which he was entitled to find that the claimant was not responsible for measuring and fitting the doors. The expert evidence was equivocal, and determining legal responsibility was the judge’s province. The Court of Appeal therefore had no basis to interfere with the finding.
3. VAT. Under Value Added Tax Act 1994, section 2 imposed the standard rate, while section 29A and Schedule 7A provided for a reduced rate for specified supplies. Group 7 required, among other matters, any necessary planning consent and statutory building-control approval. The evidence established that the approval had not been obtained or proved, so the reduced rate did not apply. If the defendants’ case was that approval was unnecessary, that issue had to be pleaded and addressed in evidence. It could not properly be raised after the evidence had closed. The burden of establishing the reduced-rate conditions lay on the party seeking to rely on them.
4. Rectification costs. The judge was entitled to quantify the defective-work counterclaim using the expert’s evidence of the reasonable cost of rectification. In the case of a tortfeasor, it did not matter whether rectification had occurred: The London Corporation [1935] P.70. The same principle applied to breach of contract.

• Court of Appeal (Civil Division): On appeal from the county court decision of His Honour Judge Philip Hughes, the appeal and cross-appeal were dismissed. The appellants were ordered to pay £12,500 in appeal costs.
• County Court: Judgment was entered for the builder after assessment of the contract balance, deductions for defective work and VAT at the standard rate.