Shaylor Group Limited v Valescure Property Limited

Under a termination regime applying where the employer completes the works, a provision referring to the total amount that would have been payable for the works refers to the contract price, not the value of work actually performed. That price remains subject to deductions for the employer’s properly incurred completion expenses, losses and payments already made.

An unauthorised assignee’s completion expenses may, as a matter of interpretation, be relevant to the accounting exercise even though the assignment does not transfer the contractual relationship. A declaration may be granted without other relief, but the discretion is broad. Where the defendant is absent through lack of funds and would have had a reasonable prospect of challenging material findings, the court may refuse relief to prevent an unjust windfall.

The claimant contractor sought declarations under Part 8 of the Civil Procedure Rules that an adjudicator had wrongly calculated the amount due following termination of a building contract after the contractor entered administration.

The employer had elected to complete the works and had later assigned its contractual rights and obligations to Grainger without the contractor’s consent. In a second adjudication, the adjudicator treated the value of work performed as the amount payable under clause 8.7.4.3 and awarded the claimant £356,008. The claimant sought a declaration that the correct clause 8.7.4.3 figure was the contract price, producing a substantially larger balance.

The employer was in liquidation, lacked funds to defend the claim and was not represented. The central issues were the proper construction of clause 8.7.4.3 and whether declaratory relief should be granted in the circumstances.

1. Construction of clause 8.7.4.3. The natural and ordinary meaning of the phrase referring to the total amount that would have been payable for the works was the contract price, rather than the value of work actually performed. The second adjudicator therefore erred by adopting a valuation approach. The contractual interpretation principles identified in Wood v Capita Insurance Services Ltd, Investors Compensation Scheme Ltd v West Bromwich Building Society and Chartbrook Ltd v Persimmon Homes Ltd led to the same conclusion (paras [69]-[71]).
2. The structure of clauses 8.7 and 8.8 supported the distinction. Where the employer completed the works, the contract-price regime applied, adjusted for completion expenses, losses and payments. Where the employer did not complete the works, the different regime used the value of work properly executed (para [72]).
3. The suggestion that Grainger’s expenses could be brought into account was not obviously untenable. Grainger could, for limited accounting purposes, be treated as the employer notwithstanding that the unauthorised assignment remained invalid for contractual enforcement purposes. This observation was not necessary to the result (paras [78]-[84]).
4. The court had jurisdiction to grant a declaration without other relief under section 19 of the Senior Courts Act 1981 and rule 40.20 of the Civil Procedure Rules. The discretion was broad and required consideration of justice to both parties. Claims for declarations alone have a legitimate role in TCC proceedings challenging adjudication decisions, but particular caution is required where the defendant is absent (paras [85]-[88]).
5. The defendant’s absence resulted from lack of funds, not culpable non-participation. It would probably have challenged the findings concerning practical completion, the identity of the employer and the relevance of Grainger’s expenses, and those challenges had a reasonable prospect of success. Granting the declarations risked conferring an unlawful windfall. The claim for declaratory relief was dismissed (paras [89]-[92]).

First-instance decision. No appellate history is stated in the judgment.