Steps Needed for Implementing a Time and Cost-Effective Way of Resolving Domestic Property Renovation Building Contract Disputes

 

The dispute related to a building contract entered into between a claimant building contractor and defendant houseowner for alterations to a residential property. The defendant had acquired the property in 2015 and the claimant building contractor was engaged in 2016. Before the works had been completed, the building contract was terminated by the claimant in April 2017.

The claimant issued proceedings in December 2019 for the payment of outstanding invoices and damages for loss of profit on the remaining works.

The case was not a straightforward one.  There were many issues in dispute, including issues relating to contract formation, contract terms, termination of the contract and calculation of the final account, which had to take into consideration contract variations as well as the cost of completing the works and remedying any defective works. Each party had been given permission to rely on expert evidence from a building surveyor, a mechanical engineer, an electrical engineer and a quantity surveyor.

His Honour Judge Stephen Davies determined in his judgment that nothing further was due to the claimant and in the absence of a counterclaim, nothing was due to the defendant either.

He was of the view that it was a great shame that the parties had not been able to settle this matter prior to the final hearing. He was alive to the fact that the outcome would likely be a financial disaster for one of the parties or if not, likely expensive and unrewarding for both.

Interestingly he gave specific views on the steps he believes are needed for implementing a time and cost-effective means of fairly resolving domestic property renovation building contract disputes. He suggested that one option worth considering would be for the directions to be given at the first Costs and Case Management Conference to be along the following lines:

•  Disclosure limited to documents relied upon and to known adverse documents;
•  A single joint expert building surveyor to be instructed in all cases to address all items in issue, both liability and valuation, with questions to the expert strictly for the purposes of clarification only;
•  A stay for mediation on receipt of the report and questions and, if the parties are not willing to mediate and the judge does not consider it appropriate to order mediation, then there should be an order for compulsory early neutral evaluation before another judge in the Technology & Construction Court. He considered that most cases turn on the contemporaneous documents and the expert evidence. If settlement is not achieved at this stage, then there should be further directions as follows.
•  Witness statements, limited to the matters remaining in dispute, strictly complying with the new Practice Direction 57AC and limited in length and/or number;
•  A trial, which should not normally exceed one day in length, at which each party would have produced in advance detailed written opening submissions; no oral openings allowed and no more than one hour each for cross examination of each party’s witnesses on their key evidence. The single joint expert should attend remotely to answer questions from the judge and parties for no more than one hour in total. There should then be one hour each for oral closing submissions, followed by a judgment, orally or in writing at the judge’s discretion, which would be as summary as the trial process.

HHJ Stephen Davies noted that a judge would probably need a half day pre-reading time, ideally the day before the trial, and up to a full day judgment time, ideally the day after the trial.  His view is that a judge could produce a judgment after a fair and open but summary trial process which is reasonably speedy and inexpensive in which the key issues were aired, where the result in his view would not be significantly different to the result from a more lengthy intensive trial process.   

In terms of costs budgeting, his view was that the approved costs going forwards should not normally exceed £25,000 per party, allowing £2,500 for disclosure; £5,000 for expert evidence; £5,000 for mediation; £2,500 for witness statements and £10,000 for trial preparation, trial and post judgment matters.  Whilst this would not address disproportionate costs incurred pre-action, a judge may be prepared to record this in any costs management order.

The judge appreciated that this process may not work for every case, but parties to domestic building disputes should consider whether following a similar set of directions would allow parties a better chance to settle with the benefit of independent expert opinion before being thrust into the costs and risks of a full trial process.