Introduction

In the recent case of Barkby Real Estate Developments Limited v Cornerstone Telecommunications Infrastructure Limited [2022] EWHC 1892 (TCC), the English Technology and Construction Court (the “Court”) held a contractor liable to its employer for failing to complete its works within a “reasonable time” pursuant to section 14 of the Supply of Goods and Services Act 1982.

Background

Cornerstone Telecommunications Infrastructure Limited (“Cornerstone”) was engaged by Barkby Real Estate Developments Limited (“BREDL”) to assist with the removal, replacement and relocation of a mobile telephone mast at a development at Bexhill Road, Hastings (the “Development”). However, only email quotation was sent by Cornerstone and no formal written contract was entered into between the parties.

Cornerstone finalised its original foundation design for the mast relocation at end of March 2019, but Cornerstone was required to re-design the foundation as a result of inadequate ground conditions discovered only after works had commenced on site. The ground conditions issue resulted in a delay to completion of Cornerstone’s works of about five months. Cornerstone eventually completed its works and achieved practical completion of the Development on 7 August 2020.

BREDL claimed that the Development would have been completed and handed over to its purchaser, Hastings Borough Council by 30 June 2020, but for Cornerstone’s delay in completing its works. As a result, BREDL sought recovery of finance costs and other losses resulted from the alleged delay in handover of the Development.

Decision

The terms of Cornerstone’s contract with BREDL

Although there was no formal written contract between the parties, the Court held that a binding contract was formed on 5 September 2019, when Cornerstone acknowledged receipt of BREDL’s payment. In the absence of an express term as to the time for completion of contract, section 14 of the Supply of Goods and Services Act 1982 implied that the supplier will carry out the service within a reasonable time. However, what is a reasonable time will depend on the facts of each case.

Did Cornerstone fail to carry out and
complete its works within a reasonable time?

The Court was satisfied that had it not been for that 5-month delay, Cornerstone would have completed its works by about the end of March 2020. As to the responsibility of the ground condition issue, having considered the expert evidence, the Court agreed with BREDL that a competent designer would have arranged for a geotechnical survey to be carried out before Cornerstone finalised the foundation design. Since Cornerstone did not do this, the design produced by Cornerstone was held to be inadequate. As a result, Cornerstone had to re-design the foundations which ultimately delayed its works. In support of its finding that Cornerstone had failed to carry out its works within a reasonable time, the Court also has taken into account the following:-

·           Cornerstone had not offered any explanation as to why it took an additional five months to resolve the problems identified with its initial foundation design.

·           Cornerstone further compounded the delays by allocating the ordered mast to another site while allowing the contract for supply of fibre to lapse.

·           Cornerstone had failed to give appropriate priority to the project, which affected the progress of work.

 

On the facts of this case, the Court was satisfied that Cornerstone had failed to complete its works within a reasonable time.

Was BREDL entitled to recover the finance costs,
and if so, in what amount and are these too remote?

As to BREDL’s claim for additional project finance cost, the Court was satisfied that as a result of the delayed sale of the Development, BREDL was unable to redeem a loan within the expected timeframe, which had resulted in additional fees and interest. Cornerstone contended that the loss was too remote to be recoverable.

In deciding whether the loss claimed is too remote, the Court reiterated the following legal principles from Attorney General of the Virgin Islands v Global Water Associates Ltd [2020] UKPC 18; [2021] AC 23:-

1.       To be recoverable, the type of loss must have been reasonably contemplated as a serious possibility.

2.       What was reasonably contemplated depends upon the knowledge which the parties possessed at that time or, in any event, which the party, who later commits the breach, then possessed.

3.       The test to be applied is an objective one.

 

The Court ruled that Cornerstone was aware of the time constraint of the project and the timely completion of its works would have a direct impact on BREDL achieving completion of the main development. Accordingly, “it was held that Cornerstone knew, or should have appreciated, that this was a main development where the build period was relatively short, needed the mast removed for its satisfactory completion and that it was being sold on to Hastings Borough Council.”

Having ruled that Cornerstone was responsible for the delays, the Court found that BREDL was entitled to recover most of its additional financing costs and all of its additional management costs. These losses would not have been incurred had Cornerstone completed its works on time.

On the other hand, the Court rejected Cornerstone’s submission that these losses were too remote. Indeed, so long as it is in Cornerstone’s contemplation that there was a serious possibility that BREDL’s ability to pay off its financing was tied to practical completion (including Cornerstone’s works) of the project, that is sufficient. Knowledge of the precise details about BREDL’s financial arrangement is not necessary

Hong Kong Court’s approach

Similar to the English court’s approach, in the absence of an express term in the contract, section 6 of the Supply of Services (Implied Terms) Ordinance (Cap. 457) will imply into a contract a term that the “supplier will carry out the service within a reasonable time”. In Approach Industries Ltd v S & P Auto Ltd [2012] HKCU 1559 (unreported, DCCJ 1638/2008, 27 July 2012), there was a 7-month delay for the installation of a supercharger, but the Hong Kong court found no breach as the plaintiff was unable to adduce evidence as to what was “reasonable time”, and on the other hand there was evidence by the defendant that missing/unfit parts resulted in the installation work taking more time to complete. In essence, what is a reasonable time will always turn on the facts of the case. It will be for the plaintiff to provide evidence as to what is regarded as “reasonable time” in that particular case.

Takeaway

The above English decision serves as a reminder to contractors that in the absence of a formal contract, they are still likely to be under an implied obligation to complete their works within a reasonable time, and undue delays may render them liable for damages for breach of contract. Furthermore, contractors should also consider and be familiar with the objective of project to assess the serious possibility of loss to the employer that may arise due to the contractors’ delays to the completion to the project.

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2022