Over-estimation of costs in cladding repair leads to court allowing withdrawal of admission

In a rare case the Technology and Construction Court has allowed Laing O’Rourke to withdraw an admission it had made in proceedings brought by Wharfside Regeneration (Ipswich). It was also given permission to amend its defence following the Wharfside’s initial significantly under-estimated costs for cladding repair work.

Facts of the case

In the recent case of Wharfside Regeneration (Ipswich) v Laing O'Rourke and others [2018] EWHC 3858 (TCC) the defendants had contracted to carry out cladding work on several blocks of flats, which the claimant, Wharfside, alleged to be inadequate. Wharfside maintained that replacement was necessary, whilst the Laing O’Rouke argued that the alleged defects could be remedied by repair.

In December 2017, Wharfside’s estimate for replacement and Laing O’Rourke’s estimate for repair works were very similar, and Laing O’Rourke eventually admitted that replacement of cladding was the more suitable option. In May 2018, however, Wharfside produced a new schedule of loss raising the replacement costs by nearly 300%, amounting to an increase in the claim of many more millions of pounds. Laing O’Rourke subsequently applied to the court to withdraw the admission and to amend its defence, since the making of an admission was no longer commercially useful.

Paragraph 7.1 of the Practice Direction to Part 14 of the Civil Procedure Rules provides that an admission under Part 14 may be withdrawn with the court’s permission. In deciding whether or not to grant permission, the court will look at various factors, such as:

• the grounds upon which the applicant seeks to withdraw the admission;
• the conduct of the parties
• the prejudice that may be caused to any person if the admission is withdrawn or if the application is refused;
• prospects of success etc.

Court’s decision 

It is relatively rare for the court to give a party permission to withdraw an admission. However in this case the Judge found that substantial prejudice would be caused to Laing O’Rourke if it was not allowed to withdraw its admission. The Judge could not simply reject Laing O’Rourke’s expert evidence, especially given that the difference between the parties’ respective experts’ evidence on the level of compensation award was £6 million. Issues relating to repair and the defendant’s prospects of success of defending the claim would be left for the trial judge to decide, therefore on this occasion allowing the application would not cause an adjournment of the trial.

Conclusion

This case highlights the importance of providing accurate figures of loss (and providing accurate information to the court in general), and the potential consequences of initially under-estimating the claim or subsequently exaggerating it. Wharfside could have settled the case earlier had they not amended their schedule of loss, and costs sanctions may also be potentially imposed by the court, for example, if they subsequently lose the case at trial.