Before:
LORD JUSTICE BALCOMBE
LORD JUSTICE LEGGATT

 
 

B E T W E E N

JUDGMENT
 
DATED: 19 November 1990

BALCOMBE LJ

This is an appeal from a judgment of Mr Assistant Recorder Morris-Coole given in the Bow County Court on 29th January of this year. In the action before him the plaintiffs (a family firm of joiners and carpenters) were suing for the price of work done in fitting new windows and doors to a house at 375 Roding Lane North, Woodford Green, Essex, recently purchased by the defendants, Mr and Mrs Sharman. The defendants deny that any money is due to the plaintiffs. They also counterclaim for damages for breach of contract. By the judgment under appeal the judge dismissed the plaintiffs' claim and awarded the defendants £1,200 on the counterclaim. From this judgment the plaintiffs appeal. Both sides have appeared in person in this court, and I would like to express my appreciation of the clear and helpful way in which they presented their cases.

The judge found that the parties had entered into an oral contract for the works to be done at a price of £5,850 including VAT. The defendants paid a deposit of £1,000. The judge found that there was no condition of the contract that time should be of the essence. However, he did find on the evidence of the surveyors called before him by both parties that ten working days were sufficient for doing the work, using at least two men working full-time. He also held that it was a term of the contract that the plaintiffs should carry out the work with reasonable care and skill.

The plaintiffs started work on 31st July 1987. The defendants were soon dissatisfied. It appears that there were not enough men allocated to the job. The judge found that the reason for that was that the plaintiffs had a priority job at Gatwick Airport. Mr Chapman, a carpenter, was there on his own for 15 out of the 21 days during which the plaintiffs were on the site. He did not finish one window before moving on to the next, with the result that there was a state of general disorder in the house. There was one particular occasion when the defendants had to stay at home overnight, when they would not otherwise have done so, due to lack of security. The judge found that the defendants' criticisms of the plaintiffs' work were justified. In addition he said there was a serious error in glazing the leaded lights of the front windows of the house.

I turn now to a passage in his judgment when he deals with the events of the final week (that was the week ending Friday, 28th August):

"There had been a meeting on Wednesday 26th, when Mrs Sharman had reached her breaking point with the plaintiffs, between her and Gerald Kirby."

(Pausing there, I should say that the plaintiffs are a family firm and that Mr Gerald Kirby is the father).

"He promised that the work would be completed by Friday 4th September. Things did not improve, and there was no positive indication from the plaintiffs that they were radically changing their approach to the job. Additional problems arose; another of the plaintiffs' men had sprayed stain over fitted wardrobes and radiators by mistake; the independent carpenter could not continue with his work, and he left; and the new leaded glass which had been promised to be delivered that day did not arrive. Mrs Sharman had had enough and ordered the plaintiffs off the site."

I should explain the reference to the independent carpenter. He was a man employed by the Sharmans to do other work, but he could not do so because of the failure by the plaintiffs to complete their part of the work. I continue with the quotation from the judgment:

"She has been criticised by the plaintiffs for not giving them the opportunity to complete the job by the next Friday. I consider this criticism to be unjustified. In effect, the plaintiffs were on continuous 'probation' after the Wednesday meeting, and they could only expect Mrs Sharman to stand by it if they showed every indication of doing so themselves. I find that they failed in this respect, and that Mrs Sharman was entitled to call a halt to matters on the Friday."

The defendants then employed other workmen to put right what they considered to be the faulty work of the plaintiffs and to complete that work. In due course, when the plaintiffs claimed for the contract price less certain allowances, the defendants counterclaimed for the sum of £3,408.50.

There are three issues which arise on this appeal. First, was this an entire or lump sum contract? Secondly, were the defendants entitled to treat the plaintiffs' failure as terminating their (the defendants') obligations under the contract? And, thirdly, had the plaintiffs substantially performed their obligations under the contract?

In relation to the first issue, I cite from the standard text book on contracts, Chitty, 26th edition, paragraph 1510:

"In an entire contract (a more accurate phrase would be 'an entire obligation') complete performance by one party is a condition precedent to the liability of the other; in such a contract the consideration is usually a lump sum which is payable only upon complete performance by the other party (hence, the reference is sometimes to a 'lump sum contract'). The opposite of an entire contract is a divisible contract, which is separable into parts, so that different parts of the consideration may be assigned to severable parts of the performance, eg an agreement for payment pro rata. It is a question of construction of the contract whether it is entire or divisible, but in the reported cases (only one of which is of recent date) the courts have tended to the view that in every lump-sum contract there is an implied term that no part of the price is to be recovered without complete performance. In most modern contracts of any size, however, payments by instalments are specified, so that the law on entire contracts is usually not relevant to them."

In this case the judge held that there was here a lump sum contract. There was no provision for interim payments, and in my judgment he was clearly right in holding that this was a lump sum contract.

The second issue was, did the defendants repudiate the contract? I have read the relevant passage from the judgment, and I do not find myself able to fault the judge's findings in this respect. I shall say a little later something about the attitude which the Court of Appeal should adopt to questions where there has been a finding in effect of mixed fact and law by a judge at first instance, but at this stage I do not find myself able to say that the judge was wrong when he held that the Sharmans were entitled to say that the plaintiffs had broken their contract to the extent that they (the Sharmans) were no longer obliged to give the plaintiffs an opportunity to complete the work.

The main issue, it seems to me, is the question of substantial performance, and it is right that I should refer to the relevant passages from Chitty which set out the law on this:

First, from paragraph 1511:

"Where a party has performed only part of his obligations under an entire contract, he can normally recover nothing, neither the agreed price, since it is not due under the terms of the contract, nor any smaller sum for the value of his partial performance, since the court has no power to apportion the consideration."

Then from paragraph 1512:

"Although nowadays building contracts of any size normally provide for payments by instalments, the common law rule on entire contracts was developed in cases concerning building contracts, or contracts for work and materials. Where the builder under a lump-sum contract fails to perform some of the agreed work, then, subject to the doctrine of substantial performance, he can recover nothing for the work which was actually completed, despite the fact that the other party may have received substantial benefit therefrom. The building cases take" — I suspect that should read "make" — "the distinction between substantial non-feasance where recovery is denied, and misfeasance, where recovery is permitted subject to a cross-action for damages. If, however, under such a lump-sum contract the builder is guilty of a serious misfeasance, so that the work is substantially deficient, he can recover nothing."

Then in paragraph 1513, the heading of which is "The doctrine of substantial performance":

"The main exception to the principle that the partial performer of an entire contract cannot recover the agreed price is the doctrine of substantial performance; by this doctrine a failure to complete only an unimportant part of the plaintiff's obligation does not prevent his claim for the agreed price, subject to a counterclaim for damages which will go in diminution of the price."

I stress the words "unimportant part of the plaintiff's obligation". And the penultimate sentence from the same paragraph in Chitty is a quotation from Bolton v. Mahadeva [1972] 1 WLR 1009, 1013:

"In considering whether there was substantial performance ... it is relevant to take into account both the nature of the defects and the proportion between the cost of rectifying them and the contract price."

Those being the principles of law applicable, what were the facts in this case? It was common ground between the parties, as stated by the judge at page 7 of his judgment, that the job was 75 to 80 per cent complete. The actual quotation from the judgment is as follows:

"Mr Sargood" — the surveyor — "estimates that the job was 75-80 per cent complete, and the plaintiffs do not disagree with that. I therefore accept this estimate in physical terms."

And in the judge's notes of the evidence at page 26 of our bundle, Mr J Kirby said in re-examination that it would take four days with four men to complete the work after they had been ordered off the site on the Friday, and "about one quarter of the job was left to be done." Then again I read a passage from the judgment, starting near the foot of page 9. The judge cites the passage I have referred to from Bolton v. Mahadeva, and at the top of page 10 says:

"The rule applies to unimportant matters of non-feasance as well as to unimportant matters of misfeasance."

He then gave a very careful and detailed consideration of all the defendants' complaints, by no means all of which he accepted as being proved. Eventually, at page 18 he came to the conclusion that the deductions from the contract price which were needed to give effect to the completion of the work not done by the plaintiffs in putting right what was necessary amounted to the sum of £1,931.79 as compared with the contract price of £5,850, and he commented that that was approximately one-third of the original price. He then went on to deal with the question of substantial performance in these terms:

"I come back to the question of whether there has been substantial performance of the contract by the plaintiffs. There is no hard and fast rule on this, and bearing in mind the considerations I have already referred to, I take the view that the plaintiffs acts of non-feasance and misfeasance cannot be described as unimportant, or as of only minor detail. Harsh as it may seem to the plaintiffs, I find that there has not been a sufficient act of performance to be 'substantial' within the ambit of this doctrine. It follows that the plaintiffs can recover nothing under this contract, and their claim fails."

He then proceeded to give judgment to the defendants on the amended counterclaim in the sum of £1,000 for the return of the deposit and in the sum of £200 for damages for the nights they had to spend in the property when the security was inadequate.

I accept that the doctrine of "the entire contract" coupled with the doctrine of "substantial performance" can operate harshly. Nevertheless, it represents the law by which we are, and the judge was, bound. In most cases, of course, the doctrine is mitigated by the terms of the contract providing for payment by instalments, and I rather gather from a remark which Mr Kirby dropped at the beginning of the hearing before us that the plaintiffs have now learned this particular lesson.

I turn now to the point that I mentioned earlier, namely the principles by which the Court of Appeal operates. At page 898 of the Supreme Court Practice 1991 under the rubric 59/1/30 there appears this quotation:

"On an appeal in an action tried by a Judge alone, the burden of showing that the trial judge was wrong in his decision as to the facts lies on the appellant ... and if the Court of Appeal is not satisfied that he was wrong the appeal will be dismissed."

And at a later stage there comes the point made time and time again in this court:

"Not to have seen the witnesses puts appellate Judges in a permanent position of disadvantage against the trial Judge, and unless it can be shown that he has failed to use or has palpably misused his advantage — for example has failed to observe inconsistencies ... the higher Court ought not to take the responsibility of reversing conclusions so arrived at merely as a result of their own comparisons and criticisms of witnesses, and their own view of the probabilities of the case."

That has been said time and time again in this court, and the lord justices of appeal (who have all at one time sat as judges of first instance) realise the disadvantages of not seeing the witnesses and not getting what is sometimes called "the flavour" of the case. I find myself unable to say that I am satisfied that the judge was wrong in his finding that there was not substantial performance of the contract in regard to the matters to which he referred.

I would therefore dismiss this appeal.

I agree. Although the defendants feel that they should be entitled to substantial damages for the inconvenience and harassment to which they say they were subjected by the plaintiffs, the assistant recorder only awarded them £200 under this head and there is no cross-appeal. I cannot help regretting that in the result the defendants will admittedly have had this job done for appreciably less than the keen price quoted by the plaintiffs, but that is a consequence of a combination of circumstances which the judge found, namely (a) a lump sum contract, (b) repudiatory conduct by the plaintiff which it was open to the defendants to accept, as they did, by ordering the plaintiffs off the job, and (c) performance of the contract which, on any ordinary meaning of the word, fell short of being substantial. For the future, if they have not already done so, the plaintiffs will no doubt be well advised to ensure that their forms of contract provide for stage or interim payments.

With this said, I therefore agree that the appeal fails and must be dismissed.