No entitlement to payment where construction work carried out at risk

Introduction

In a somewhat novel case, the Technology and Construction Court in England has had to consider whether a party that had carried out construction work was entitled to be paid for that work, or whether he had carried out the work at his own risk.

Background

Mr Hirst and a company in which he was the sole shareholder (the Claimant) issued court proceedings against Mr Dunbar and two companies (the Defendant), claiming £474,861 allegedly due for construction works at a development site in Bradford.

The works comprised the completion of the construction of 26 dwellings. The Claimant started work in October 2011 and the dwellings were complete and ready for letting by summer 2012. The court proceedings were commenced in August 2019.

The Claimant’s case was that the works were carried out pursuant to a verbal contract which has been formed during a telephone conversation. There was no written agreement.

The Defendant disputed that there was a contract. He said that the Claimant had carried out the works at his own risk. The Claimant had proposed to buy the site, and benefit from the works by improving the value of the site. That benefit was lost as the Claimant was unable to secure funding to purchase the site.

To make matters more complicated, the parties had known one another since their schooldays, and neither “appeared to be comfortable dealing with paperwork”.

The Court was tasked with deciding, amongst other things, whether the Claimant had been engaged by the Defendant to perform works.

Decision

The Claimant’s case failed, with the Judge deciding that he did not carry out the works on foot of a contract with the Defendant, but had done so due to a belief that he would be able to buy the site and so would benefit from the performance of the works.

The Claimant was acting on his own behalf and at his own risk, with no agreement for payment from the Defendant.

It was also noted that, even if there had been a contract in place, the claim would also fail as it was statute-barred. The works were completed in 2012, and any claim for breach of contract ought to have commenced within 6 years of completion of the works. The court proceedings were commenced in 2019, meaning that the Defendant had a complete defence to the claim in any event.

Carson McDowell View

This case highlights the importance of having a written agreement in place before construction works are undertaken. It is clear that both parties would have benefited from committing their arrangement to writing. Even from the Defendant’s perspective, written confirmation that the Claimant was carrying out works at his own risk would likely have avoided the time and cost of arguing the point at court.

This case is also another reminder that parties should always be mindful of pursuing claims diligently and before any limitation periods expire. Even if the Claimant had been entitled to payment pursuant to a contract, he would have lost out due to the length of time that had passed before court proceedings were started.

If you would like further information on the issues discussed in this article, please contact John Dugdale or another member of the Construction Law team.