Mashael Alebrahim v BM Design London Limited

Where a contract establishes a process under which a client approves itemised estimates before orders are placed, the agreed estimate may constitute the relevant cost of the works for calculating a percentage-based design fee. The calculation of the estimate does not become contractually material unless the contract makes it so.

A court must construe the contract principally from its language and agreed commercial machinery. It should not add words to convert an agreed-price procurement arrangement into a cost-plus arrangement. In particular, an obligation to disclose or pass on trade discounts requires clear contractual language.

The appellant engaged the respondent interior-design company to source and procure furniture and fittings for the refurbishment of a flat. The parties’ agreement provided for itemised estimates, client approval, staged payments and a design fee of 20% of the total cost of works.

After their relationship broke down, the appellant claimed, among other matters, that furniture and fittings should have been charged at the respondent’s cost plus the 20% fee. The High Court dismissed the claims: [2020] EWHC 3393 (TCC). Permission to appeal was confined to the construction issue.

The central question was whether the total cost of works meant the respondent’s cost, requiring trade discounts or mark-ups to be accounted for, or the prices in estimates accepted by the client.

Appeal dismissed. Lord Justice Coulson held, with whom Lord Justice Snowden and Lady Justice King agreed, that the judge’s construction was correct.

1. The contractual machinery was decisive. The respondent supplied detailed weekly, itemised estimates. Once the appellant accepted an estimate and paid the related invoice, the respondent placed the relevant orders. The accepted figures were therefore part of the total cost of works on which the 20% design fee was calculated.

2. Applying the established principles of construction stated in [2001] UK SC 50, [2015] UKSC 36 and [2017] UKSC 24, the contract had to be construed principally through its language, read in its commercial setting. Clause 10, the payment schedule and the terms and conditions consistently made accepted estimates the basis for payment.

3. The appellant’s interpretation required the court to add words making the total cost the cost to the respondent. It also required a notional-cost mechanism, because the respondent did not incur supplier costs until it had received payment from the appellant. Neither addition appeared in the agreement.

4. Nothing required the respondent to disclose supplier prices, calculate estimates without a mark-up, or pass trade discounts to the appellant. The appellant could reject any quoted item, source it elsewhere while paying the design fee where applicable, or choose a different item without incurring a fee. The contractual process therefore gave her the information necessary to decide whether to accept each estimate.

The court added, as practical drafting guidance, that interior designers should make clear whether quoted figures will be further broken down. That observation did not alter the conclusion that the respondent was entitled to its invoiced sums under this contract.

• Court of Appeal (Civil Division): Dismissed the appeal and upheld the contractual construction adopted below: [2022] EWCA Civ 183.
• High Court, Technology and Construction Court: Dismissed the appellant’s claims. Permission to appeal was granted only on the construction issue: [2020] EWHC 3393 (TCC).