Construction dispute

[Helen Birch]

Hello, first time here, and I need some help for my son's business, which is only very small.
He quoted and was instructed on quite a large job, with a signed agreement. The customer then changed the requirements of the project, my son quoted for the revisions, and this was verbally agreed but no signed contract - and no building approval, it has later become apparent.
The customer has consistently changed requirements for the job, meaning that additional costs are mounting, my son has a staged payment plan on the original contract, and the customer is consistently late making payments, which means that due to the volatility in the materials market that costs are increasing all the time. They have had a meeting to try and resolve some of these issues, but the customer believes that the job should be further along than it is, and that they have paid more than enough at this stage. I wont deny that cash-flow is a problem and my son is reliant upon the customer making payment in order to be able to purchase large items such as steel lintels.
After the meeting, when it became apparent that the relationship had broken down to such an extent as to prevent a viable partnership, )the customer has spoken to alternate contractors, surveyors etc who, she has advised my son, that they all say the job should be further along than it is,) although I doubt very much that she has told them that her interference/lack of payment is partially the problem, my son sent an email stating that he was withdrawing as the contractor, as the job was now so far from the original request as to make it impossible for him to complete, the job now requires an entire new roof, outside my son's skill set.
The customer has sent a letter stating breach of contract and inadequate workmanship and requesting a refund of £30k (47K paid to-date) and sight of all the invoices that relate to the job. (all work has been signed off by an independent building control company). She gave my son 14 days to respond on Friday, he has been to the job today and discovered that work is still going ahead, on the job that he is contracted to do. Is the customer now also in breach of contract, because surely he cant be expected to guarantee a job that has been finished by someone else.
I'm looking for guidance as to what to do, what his rights are etc - just for information, we have, we think sufficient evidence to prove the costs spent on the job to date, without including any element of profit.
Sorry for the long post

 

[Bob Morgan]

What does the Employer/Contractor Agreement say? Generally speaking, there are Standard Forms of Contract that are tried and tested - NEVER deviate from them! Employer/Client Agreements tend to be rather 'One-Sided.' Problems arise when clauses become unenforceable.

Any Variations should NEVER be undertaken unless they have been quoted for and agreed in writing.

 

[prophet01]

Back in March this year I wrote a response to a query which you migh find helpful, as paraphrased below. Here's a link to the post: Client has retained funds from invoice

Regardless of what the original signed agreement says it is automatically subject to the requirements of the Housing Grants, Construction and Regeneration Act Part II - Construction Contracts (amended in 2011 by Part 8 of the Local Democracy, Economic Development and Construction Act 2009 as summarised in the below link to Scheme for Construction Contracts)

Essentially this Act's requirements trumps any non-complaint written contract. If there is no compliant contract in place then the Scheme for Construction Contracts automatically applies.

The HGCRA strictly regulates the procedures and timescales surrounding both payments to contractors and the withholding of payments to contractors. It also confers the right, under Section 108, for either party to refer any dispute for Adjudication - a fast-track, nominally 28 day, dispute resolution process.

Further, if they haven't complied with the requirements in respect of notifying the withholding of payments, you are automatically entitled to the full payment which you notified.

 

[Helen Birch]

The agreement the customer signed, was basically, just a scope of works and a staged payment plan breakdown (no dates, but a list of payments for specific areas of the job, for example, deposit, footings, brickwork to 1st floor) very simple. My son has only been in business for around 2 years, and this is the largest job he has undertaken. As the customer changed the scope of the job to such an extent, this made the staged payments plan virtually useless.

 

[Financial-Modeller]

With a GBP30k refund and possible extra costs and liabilities, your son should be taking professional advice.

 

[Frank the Insurance guy]

As @Financial-Modeller says, we suggest getting some professional advice.

If your son has a Construction Insurance policy in place, he may have access to free legal telephone support. This would put him in touch with a specialist lawyer in this field who can guide him on his legal position and options on how best to proceed.

From your posts, I suspect your son may have grounds for counter-claiming for breach of contract on the others part, due to non-payment. Also could suggest mediation/arbitration to get independent party to decide on the correct position.

 

[AllUpHere]

If he's having to scrape around to find the money for steels etc I'm thinking that if he needs to pay the 30 grand back it's going to cause him real problems. This isn't something he should be having his Mum sort out for him. If you want to help, book him an appointment with a solicitor.

 

[brucegreig]

A £30k construction claim can quickly eat up that same amount in legal fees. These kinds of disputes often have lots of different elements to them, and often only specialist builders / surveyors can really understand the details. So you end up exchanging long letters with long lists of things (= hours of solicitors time) and you might end up having expert surveyors writing reports (=hours of expert surveyors time).

But, as others have said, he does need legal advice. If he has a reason to counter-claim, for example, that strengthens your position a lot (because it increases the risk for the claimant to continue the claim).

Your son wants to spend enough money on a lawyer to understand his legal position, so that he can negotiate from a solid position. But not so much that he's waist deep in legal fees and ends up going to trial because that's the only way to recover his legal costs. This is a hard balance to strike, for sure.

If he can get enough legal advice to understand all his options, best bet is to negotiate from there (and instruct a mediator to help with the negotiation if necessary). The householder should be willing to negotiate because he/she won't want this dragging on for years, either.

 

[prophet01]

@Helen Birch

It appears clear that your son is out of his depth, at least in respect of contract administration. If it helps I'm aware of many seasoned professionals who, even now, would look blankly back at me if I casually mentioned the HGCRA.

So he should absolutely seek appropriate professional help. Not necessarily via an expensive solicitor, in the first instance, but perhaps via a qualified sector adjudicator whom he could appoint as a consultant to initially review all matters and events leading up to the present situation and propose various options including adjudication.

My view, from the information provided, is that he should go down the adjudication route which precludes drawn out litigation and, in any case, is the default legislated dispute resolution process for construction contracts. Done and dusted within, nominally, a month.

A little anecdotal tale:
I first came across the the HGCRA in 1999 whilst on contract with a loacl authority. I was acting as Project Manager for them in respect of a Bus/Rail interchange upgrade being undertaken by Tarmac Ltd. They perfomed appallingly throughout the 18 week contract period which, as a result, ended up over-running by 12 weeks.

They submitted fanciful claims to the tune of £80K which I rejected on the basis of my solid evidencial records of their incompetent performance and poor project management. Of course, being a massive company they refused to accept my evidence and attempted to steamroller the Council with the threat of adjudication under the new HGCR Act. The Council subsequently considered meeting Tarmac halfway financially rather than go through adjudication. Effectively giving away taxpayers money.

Never having heard of the HGCR Act I did some research to educate myself, found and bought a government publication (10 page booklet) explaining the Act's very straightforward adjudication procedure. Armed with that new information I persuaded the Director that I could defend and win the threatened adjudication due to the extent of my solid evidence records. I also persuaded him to pay for 10 hours of consultation with a listed, professional adjudicator whom I'd found and contacted, to review the case and assist me with drafting a defence. He charged £40/hour.

Six weeks later we received the adjudicator's report confirming the dismissal of about 95% of Tarmac's claims and confirming their entitlement to an extension of time of only 2 weeks out of the 12 week over-run. I'd previously agreed 3 weeks so they even lost out on that. What a result. the Director was rather happy.

That wasn't the end of it though. As Tarmac had attempted to screw the Council I persuaded the Director to allow me to invoke the 'liquidated damages' clause of the contract which, historically, they never did. I took great pleasure in sending the following statement of account letter

"Following receipt of the draft fifth interim account from your Mr. XXXX in respect of the above
contract, I have pleasure in enclosing my assessment of the amount that in my opinion is due.

As you will be aware, Clause 47 of the ICE Conditions of Contract provides for the recovery
from the Contractor by the Employer of a sum representing the damages suffered in the event
that the whole of the works are not completed within the time prescribed. The liquidated
damages sum in this instance being £1500 per week.

Following the recent adjudication decision, the adjudicator found that of the 59 days delay in
completion of the contract, Tarmac were entitled to an extension of time of 12 days (2.4 weeks)
thereby implying that the remaining 47 days (9.4 weeks) delay were attributable to Tarmac.

In accordance with Clause 47 I am therefore deducting the sum of £14,100 in liquidated damages
from this interim sum of £29,980.34 due under the contract as shown in the enclosed assessment.

This leaves a balancing payment to be made on this interim valuation of £15,880.34
I would be grateful if you would submit a VAT invoice to this value in order that payment may
be made immediately.
​

Tarmc's commercial dirctor squealed like a stuck pig. He complained to the Council's legal team but they confirmed the legitimacy of invoking the liquidated damages clause. Happy days.

​

 

[Michael Gerard]

You need to consult a solicitor that specialises in building disputes - and quickly.

From your outline, I fear for your son. He should not have pulled off the job without, in the first instance, seeking professional advice, as his act could be a repudiatory breach.

I see that Prophet01 has provided some 'advice' in relation to the contract and the HGCRA 1996 (as amended). With all due respect (and I am sure Prophet means well), if the employer is a consumer / residential occupier, the HGRA will not apply - it only applies to B2B contracts or where a private individual has work done on a property that is not the main residence (ie, perhaps a rental property or a property that will be flipped for profit and there is no intention to live there).

With the stakes so high and the problem being complex (for the lay person), you must not take advice from an open forum - notwithstanding any recommendations of a suitable professional. Your son needs to instruct a specialist solicitor and he must also acknowledge that it will cost.

 

[prophet01]

You're quite rigth to point out that there is an exemption.

My 'advice', as you put it, was based on the assumption that this was not an exempt case. The OP needs to provide clarification.

 

[WaveJumper]

Hopefully your son was able to follow up on @Frank the Insurance guy's advise and checked his Insurance policy to see if he had access to free legal telephone support if so hopefully they will be pointing him in the right direction. If not and you can see the message here on the forum is coming through loud and clear........ do go and get some legal asap.

 

[Helen Birch]

my son has tradesman insurance via Direct Line and I have just filled in claim form, to make them aware of the circumstances, I hope that they can help. For information, the property is currently not being used as a residence, but I believe that it will be once the work has been completed.

 

[OldWelshGuy]

Is your son a sole trader or a LTD company?

 

[Paul Norman]

With sums this large it is vital to let professionals handle it - as it sounds you have begun to do.

The outcome is going to depend on the details of the written agreement, and what it says about payments. Late payments might constitute breach of contract on the part of the customer, for example, which would obviously strengthen your son's hand.

I hope this gets resolved in his favour. He has been naive in taking a large work without a water tight contract, but I would not want that to mean a disaster for him.