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Brandon Silver’s ‘A Case In Point’ – Contra Charges For Defects Not Made Good

June 22, 2021 | Silver Law

Brandon Silver’s ‘A Case in Point’ series reviews an interesting case, the legal principle determined in the case and its relevance and/or importance to the construction industry

Oksana Mul –v- Hutton Construction Limited [2014] EWHC 1797 (TCC)

In the case of Oksana Mul –v- Hutton Construction Limited, the Technology and Construction Court had to decide on the meaning of “an appropriate deduction” in clause 2.30 of the JCT Intermediate Building Contract and whether it should take account of an obligation on the Employer to take reasonable steps to mitigate loss in accordance with the decision in Woodlands Oak Ltd –v- Conwell.

Clause 2.30 of the JCT Intermediate Building Contract provides as follows:
“2.30 Any defects, shrinkages or other faults in the Works or a Section which appear and are notified by the Architect/Contract Administrator to the Contractor not later than 14 days after the expiry of the Rectification Period, and which are due to materials, goods or workmanship not in accordance with this Contract, shall at no cost to the Employer be made good by the Contractor unless the Architect/Contract Administrator with the Employer’s consent shall otherwise instruct. If he does so otherwise instruct, an appropriate deduction shall be made from the Contract Sum in respect of the defects, shrinkages or other faults not made good.”

In the words of the Judge:
“An appropriate deduction under Clause 2.30 of the Contract means a deduction which is reasonable in all the circumstances and can be calculated by reference to one or more of the following, amongst possibly other factors:
a. The Contract rates/priced schedule of works/Specification; or
b. The cost to the Contractor of remedying the defect (including the sums to be paid to third party sub-contractors engaged by the Contractor): or
c. The reasonable cost to the Employer of engaging another contractor to remedy the defect; or
d. The particular factual circumstances and/or expert evidence relating to each defect and/or the proposed remedial works.”

On the question of mitigation of loss, the Judge went on to say:
“Assuming that remedial works were the proper basis of an award of damages, the appropriate damages would be related to the reasonable cost to the Employer of the remedial works and employing other parties to do them, unless he or she had failed to mitigate by not offering the opportunity to the Contractor to put right the defects in question; in this latter case, the Employer would be limited to what it would have cost the Contractor to put them right (this cost often being significantly less than that of bringing in new contractors or tradesmen to do so).”
The Judgment therefore expressly states that the fact that the Contractor was not given an opportunity to make good the defects is one of the circumstances that should be taking into account in deciding the “appropriate deduction”.

The “appropriate deduction” should reflect the extent to which the Contractor could have repaired the defects more cheaply and this will require a nil valuation where the Contractor is able to repair the defects at no cost through its supply chain, as was the case in Woodlands Oak.

In summary to the foregoing, whether or not the Employer gave the Contractor an opportunity to make good the defects will have an impact on the amount the Employer will be entitled to deduct from the Contract Sum if the Employer instructs others to carry out the remedial works

If you have any questions concerning extension of time and/or loss and expense claims, you can contact Brandon directly at brandonsilver@silverllp.com.

Author Brandon Silver has recently completed the LLM Legal Practice (Solicitors) Course at BPP Holborn University, and joined the team as a trainee in order to qualify as a Solicitor specialising in Construction and Property Law


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