Castle Trustee Ltd & Ors v Bombay Palace Restaurant Ltd

Where an agreement requires one party to carry out defined works but contains no variations clause, additional work requested by the other party may be recoverable on a quantum meruit or under an implied term requiring payment of a reasonable sum. Whether work is additional must be decided item by item by construing the agreement and considering any expressly contemplated further agreement.

Closure compensation is not necessarily analogous to liquidated damages or an extension-of-time claim. The relevant question is causation: whether closure was directly caused by the defined contractual works. The prevention principle does not apply where the agreement contains no fixed completion obligation or mechanism making requested additional works part of the defined works.

The claim arose from an agreement under which Liberty was to redevelop a building and refurbish the defendant restaurant, while the restaurant vacated its premises during the works. Disputes arose over payment for additional or varied works and compensation for the period during which the restaurant remained closed.

The parties had previously referred the disputes to adjudication. Liberty subsequently claimed sums said to be due for additional works and argued that closure compensation was not payable, or was limited, because the defendant’s requests had prolonged the works. The defendant maintained that the works fell within the agreement and counterclaimed fees under the agreement.

The central issues were the scope of the agreed works, entitlement to payment for additional work, the proper construction and application of the closure-compensation provisions, causation of the closure, and the evidential basis for the claimed sums.

1. Additional works. The claims were to be determined item by item. The court asked whether the work fell within the agreement; whether it was within the scope as developed or varied under clause 5; whether Liberty had proved a request by BP; what work resulted from that request; its reasonable value; and any credit for work already required under the agreement. Where BP requested work outside the contractual scope, Liberty was entitled to a reasonable sum, either under an implied term or on a quantum meruit.
2. Contractual scope. The specification and drawings were the starting point. Their lack of detail did not create an open-ended design-development obligation. Where the specification expressly contemplated future agreement, the scope depended on that agreement. Otherwise, the court determined whether work was additional by reference to the evidence and the agreement.
3. Closure compensation. The agreement was a commercial arrangement, not a conventional building contract. Closure compensation compensated BP for closure caused directly by the restaurant works; it was not damages for failure to complete by a fixed date. The prevention principle therefore did not apply. The relevant issue was causation, with the burden on BP to establish entitlement and on Liberty to establish any defence based on additional works.
4. The restaurant remained closed because its entrance was unusable until 19 May 2012. A takeaway service from 1 May did not amount to trading as a restaurant. BP was accordingly entitled to closure compensation from 2 January to 19 May 2012, calculated at £784,571.43.
5. Liberty recovered the sums allowed for specified additional works, together with VAT and the agreed quantity-surveying fees. Claims lacking adequate evidential support were rejected. BP’s counterclaim for fees was dismissed.

The judgment records that BP referred the disputes to adjudication, resulting in a decision dated 23 January 2013. Proceedings were subsequently issued in December 2014. No appeal from the present judgment is stated.