Case notes

A half-baked lawsuit?

Construction gets ever more complex, often involving designing to particular performance criteria. Although this is not a construction case, it gives an insight into the way the courts regard such promises to achieve a set performance.

Pastry manufacturer Filobake wished to expand its range into the samosa-style pastry used mainly in Arab and Indian food. To do this, it needed to purchase extra equipment, and so approached specialist firm Rondo. Rondo’s quote for £195,000 (plus VAT) also included an attached (but incomplete) recipe and promised that the equipment would be able to provide pastry at the rate of 15 metres/minute. Filobake bought from Rondo on the strength of this quote.

The equipment was supplied in March, but there were soon teething troubles. In April, Filobake complained that loose oven rollers fouled the conveyors and the cooling system did not allow pastry to be packed as a continuous process. And by August, the scrapers had had to be replaced twice. So in September, Filobake rejected the equipment, saying that it could not make satisfactory pastry. It claimed damages of nearly £689k.

In court, Filobake argued that the promise that the equipment would be able to make samosa pastry to the recipe attached to the quote was the same as fitness for purpose under the Sale of Goods Act 1979. The court agreed, but said it had not produced any evidence that the equipment was not capable of producing satisfactory pastry from the recipe. Indeed, the court also found that Filobake was still running the Rondo equipment to produce pastry as late as June 2003. Clearly Rondo was not in breach of its wider obligation.

Moral: ‘Fitness for purpose’ can be quite wide

Case: Filobake Limited versus Rondo Limited and Frampton International. Court of Appeal May 2005 [Bliss IB 19/17]

What’s in a name change? Well, quite a lot

QUARMBY & Son operated as an electrical installation engineer. In March 2003 it submitted quotes to Trant for work in Halton and Falklands Avenue in Leeds. After negotiation, Trant accepted these by issuing purchase orders.

In April 2003 Quarmby & Son sent quotes to Trant for work in Sovereign Court, Sheffield and Dransfield Novelty Company in Leeds. Although Trant negotiated the prices, it did not issue orders for these projects. But it is clear that Trant gave oral instructions for the electrical work to proceed.

However, by mid-April, Quarmby & Son was in serious financial difficulties and ceased trading.

Then Mr Quarmby (‘the Son’) set up Quarmby Electrical Ltd. He said he had informed Trant’s Mr Jaber by telephone that Quarmby Electrical would be taking over the work and re-submitted four quotations in the name of Quarmby Electrical.

When Quarmby Electrical came to press for payment, Trant denied that it had any liability, arguing that the real subcontractor was Quarmby & Son (which by then was in liquidation). Trant also raised a defence of delays, damage, defects and variations.

In order to decide whether the contracts had actually been novated to Quarmby Electrical, the judge looked at a number of factors.

First, Jaber did not remember Quarmby’s telephone call. This was not surprising, said the judge. Clearly the call was not as important to Jaber as it was to Quarmby.

Second, Quarmby’s invoices showed that the work had been done after Quarmby & Son had ceased trading.

Third, Quarmby had submitted revised quotes as Quarmby Electrical. Fourth, after April 14, Trant addressed all its correspondence to Quarmby Electrical.

Finally, the Official Receiver for Quarmby & Son had no interest in recovering the money for the projects from Trant.

Therefore, even though the electrical installations were signed off on Quarmby & Son headed certificates, Quarmby Electrical was due to the payment.

The court appointed an expert to determine the sum actually due.

Moral: A letter and a 30p stamp could save the expense of a court case.

Case: Quarmby Electrical Ltd versus Jack Trant (t/a Trant Contractors), T&CC Leeds March 2005 [Bliss IB16]

Back up everything you say... It pays off

MUNKENBECK & Marshall (M&M) is a firm of architects. It had worked for Mr Harold on his properties at 54 Chester Square, London and Montrose Place, but had to sue for outstanding fees of £53,424.

Except for a small sum on Montrose Place, Harold denied liability and counterclaimed for damages for professional negligence.

However, just before the hearing was due on March 7, 2005 he settled the whole claim and dropped his counter-claim. And then came the arguments.

Clause 5.13 of the RIBA standard form of appointment allowed M&M interest on outstanding sums at 8% over bank base rate. Clause 9.6 allowed it to be indemnified its legal costs including a reasonable sum for M&M’s time spent in connection with the proceedings.

Harold first argued that as a consumer he was protected from these clauses as they were unfair under the Unfair Contract Terms Regulations 1999 and were therefore unenforceable. The judge agreed that they were unfair as, although they were standard terms, they were hidden in the small print and acted to Harold’s detriment. This was even though Harold had been powerful enough to negotiate a reduction in M&M’s fees.

However, the judge also said he had a discretion in these areas. Although the Late Payment of Commercial Debts (Interest) Act 1998 allowed for interest at 8% over bank base rate, the judge would only allow 8% in total.

M&M’s time records seemed to have been produced well after the event. Also, much court time had been spent in cross-examining Mr Munkenbeck on his witness statement, produced at the last minute and again unsupported by documents. Therefore, the judge used his discretion to allow only 90% of M&M’s legal costs, not at the higher, full-indemnity basis the firm wanted.

Moral: Support your statements

Case: Munkenbeck & Marshall versus Harold. T & CC March 2005. [Bliss IB/1610]