Knight v Warren and Warren

• Jurisdiction: Bermuda
• Judgment Date: 14 July 2010
• Date: 14 July 2010
• Docket Number: Civil Jurisdiction 2008 No. 50
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Civil Jurisdiction 2008 No. 50

BETWEEN:

SHAWN KNIGHT (SUING ON BEHALF OF HIMSELF AND GINA KNIGHT)

Plaintiff

v

DWIGHT EUGENE WARREN AND WENDIE PATRICIA WARREN (SUED ON THEIR OWN BEHALF AND ON BEHALF OF ALL THE OWNERS OF PROPERTY LOCATED AT LOT 9 PERRY DRIVE, WARWICK)

Defendants

Mr E Johnston for the Plaintiff

Mr N Turner for the Defendants

The following cases were referred to in the judgment:

Fidelity v APP China Group LtdBDLR [2007] Bda LR 35

Re Koscot Interplanetary (UK) Ltd; Re Koscot AGUNK [1972] 3 All ER 829

Transfield Shipping Inc v Mercator Shipping IncELR [2009] 1 AC 61

Abstract:

Building dispute - Informal contract, partly written, party oral - Damages for loss of rent - Non-completion - Evidence

JUDGMENT of KAWALEY, J

Introductory

1. The present case, objectively viewed, cried out for resolution by means other than a traditional civil trial. The dispute arises out of an informal contract between friends under which the Plaintiff agreed to complete the construction of the house he had agreed to sell to the Defendants. The absence of a clear contract created a legal morass which cool heads and a mediated or negotiated settlement could have sidestepped in the interests of achieving cost-effective pragmatic result. Hot heads (particularly on the Plaintiff's part) appear to have prevailed with the claim and counterclaim being presented at trial on the improbable basis that each side was 100% right and the other side 100% wrong.

2. The Plaintiff's Amended Statement of Claim sought contractual damages from the Defendants in the amount of $330,000. The Defendants' Amended Defence and Counterclaim sought $255,024.30 by way of damages for breach of contract. It was essentially common ground that the parties agreed that the Plaintiff would be paid $400,000 to complete the relevant works and that $100,000 of the funds borrowed by the Defendants for this purposes were applied by the Defendants themselves towards the purchase of materials. Accordingly, the controversy turned on whether the Plaintiff's gross claim of approximately $300,000 was liable to be reduced by virtue of various breaches of contract on his part so that he was only entitled to receive some $50,000, the Defendants disputing liability for (a) the $15,000 originally payable to the Plaintiff when the construction was completed by virtue of his alleged failure to complete in accordance with the Contract, and (b) the Plaintiff's additional paintwork claim.

3. In addition to deciding what the terms of the contract, clearly partly oral and partly evidenced by writing, were, the Court is required to determine what breaches of contract (if any) occurred. Mr. Johnston for the Plaintiff also objected on hearsay grounds to the admission in evidence of various receipts and invoices used by the Plaintiffs to compute their own damages claim. The documents in question were of a

type routinely admitted by consent in civil proceedings, possibly following the modern English practice under evidential rules which are generally regarded as having abolished the hearsay rule in relation to the admission of documentary evidence in civil cases. This objection was raised at the commencement of the trial but I reserved my decision on this difficult admissibility issue until the present Judgment.

The Pleaded cases

4. The Plaintiff's pleaded case can be shortly summarised. By a written agreement dated July 28, 2006, he sold Lot 9, Perry Drive, Warwick ("the Property") to the named Defendants and three other persons for $1,185,000. By an oral agreement the Defendants agreed to pay the Plaintiff $15,000 when the incomplete house ("the House") on the property was completed ("the Purchase Agreement"). By an agreement made partly in writing and partly made orally between June 1, 2006 and July 28, 2006, the Plaintiff and the Defendants agreed the Plaintiff would complete the House for $400,000 ("the Completion Contract")1. The Plaintiff alleges that he was contractually required to carry out the following specific work itemised in paragraph 7.2 of the Statement of Claim:

"7.2 the Plaintiff would:

7.2.1. Slate and whitewash the roof of the Residential Unit;

7.2.2. install both interior and exterior doors and windows on the Residential Unit;

7.2.3. tile the Residential Unit throughout;

7.2.4. complete all electrical work in the Residential unit consisting more particularly in the installation of all wiring, lights and switches;

7.2.5. install sinks, bulbs, water pumps, water heaters and plumbing fixtures in the Residential Unit;

7.2.6. install cabinets and erect ceilings in the Residential Unit;

7.2.7. install a working cesspit servicing the Residential Unit;

7.2.8. prime both the inside and outside of the Residential Unit in preparation for a top-coat of paint.

7.2.9. complete all work at the Residential Unit approximately 3 months after receiving the said payment of $400,000.00 was made available to the Plaintiff for draw-downs."

5. It is the Plaintiff's case that he began work in or about September 2006 but the initial agreement was modified by the parties on or about October 20, 2006 by (a) reducing the payment due to the plaintiff from $400,000 to $300,000 (to allow the defendants to purchase their own tile and cabinets), and (b) by replacing the Plaintiff's right to make periodic draw-downs with a right to payment post-completion of the work. The Plaintiff completed the required work on or about May 31, 2007, in accordance with the plans save where modifications were agreed. The Defendants failed to pay the agreed $300,000 and further failed to pay the Plaintiff the $15,000 he incurred through the additional expense of hiring painters to apply the top coat of paint to the House.

6. The Defendants in their Amended Defence and Counterclaim averred that the Completion Contract was "entered into…based upon various oral representations made by the Plaintiff to the Defendants and based upon the design plans…provided by the Plaintiff. The Completion Agreement was effectively a design and build lump sum contract" (paragraph 7). In terms of what work the Plaintiff was contractually required to perform, the Defendants alleged in paragraph 9 as follows:

"9. Paragraph 7 of the Statement of Claim is denied. The Completion Agreement included the following express terms;

a. The Residential Unit would be completed to a "turnkey" standard, that is, that the key could be turned and everything would be ready.

b. The Property would be constructed using plans provided by the Plaintiff to the Defendants prior to the Completion Agreement.

c. The Plaintiff was responsible for labour and materials required to complete the Residential Unit.

d. The Residential Unit was to be completed in three months by no later than December 2006.

e. The Defendants would obtain a $400,000 loan "the Loan" from the Bank of Butterfield ("the Bank") to finance the Completion Agreement upon the understanding that the Plaintiff would obtain draw downs from the Loan "the Drawdown Facility".

f. The Plaintiff was responsible for Contactors All Risk Insurance.

g. The Plaintiff was to complete the following elements of the Residential Unit;

i. First Floor Slab

ii. Upper Floor Walls and Belts

iii. Roof carcase and finish

iv. External plastering

v. Internal plastering and ceilings

vi. Doors, hardware and windows throughout

vii. Carpentry and joinery throughout

viii. Tiling and finishes throughout

ix. Painting and decorating throughout to include external painting

x. Electrical installation throughout

xi. Plumbing installation throughout

xii. Air conditioning installation throughout

xiii. External works generally - to include boundary wall construction, entrance pillar construction, soak away pit construction, external staircase Construction, external asphalt driveway, soil and seeding and horticultural landscaping "

7. Issue is joined on various matters. The most important appears to be the following issues. It is denied that the Completion Contract was amended to defer the Plaintiff's payment entitlement until the works were finished. It is averred that "the Plaintiff could have drawn funds from the Loan using the Drawdown Facility at any time having taken the appropriate steps with the Bank" (paragraph 13). The Defendants aver that the Plaintiff requested them to travel to Florida to buy materials to enable completion to occur by December 2006, and they were compelled to expend their own monies (over and above the $100,000) to do so. It is denied that the Plaintiff completed the works in accordance with the contract by May 31, 2006 and averred that the Defendants completed it themselves. As far as the painting costs claim for $15,000 is concerned, it is averred that this was the Plaintiff's responsibility and that the $15,000 completion fee was not due by virtue of the Plaintiff's failure to complete.

8. The Counterclaim (paragraphs 31-45) is based on various alleged breaches of contract on the Plaintiff's part. These may be summarised as follows:

i. failure to obtain Contractor's All Risk Insurance;

ii. failure to purchase all materials;

iii. failure to complete by December 2006;

iv. breach of promise on March 21, 2007 to complete within seven days;

v. breach of implied term that the House would be of satisfactory quality;

vi. breach of implied term that the House would be reasonably fit for occupation of the one and two bedroom units by family members and the three bedroom unit for rental purposes.

9. The Defendants claim compensation for the cost of materials they purchased in excess of $100,000, the costs of completing the House and repairing defects, loss of rental income arising from the delay. These costs are particularised and assessed at $255,024.30, of which it appears that (a) $2890 is claimed for insurance costs, (b) $64,712.63 is claimed in respect of...