Contract dispute resolved at Court of Session

A Court of Session case over a long running dispute between a Guernsey woman and a local building firm was so unique it made legal history when it was resolved.

Friday, 15th June 2012, 10:49 am

Lord Hodge found in favour of Jean Shaw in the case against James Scott Builders over whether a formal contract to build her and her husband’s dream home in the Galloway Forest Park was agreed between them or not. This extremely complicated dispute has taken years to reach a conclusion.

On the one hand, Mrs Shaw’s solicitor advocate Mr Drummond argued that the two parties had agreed to the terms of a formal contract sent to them by e-mail on 23 November 2005 while Mr Howie QC, representing Mr Scott, said that his client had never agreed to that contract but did recognise an informal contract formed in December 2004. In a counterclaim, Mr Scott was seeking payment for numerous items which had been included within this informal contract.

The background to this matter goes back to 2001 when Jean and Christopher Shaw began their quest to build their dream retirement home at Ferter - a remote but stunning location in South Ayrshire.

Mrs Shaw was in charge of the project and firstly hired an architect, Peter White, to draw up the plans. The building contractor then engaged to build the house he had designed was James Scott, based at Holmpark in Minnigaff. At the beginning there was no formal contract between the parties but work began on the basis of a handshake.

A guideline price of £598,000 was agreed and Mr Scott’s workforce went on site in December 2004 with Mr White paying Mr Scott a monthly sum. In his evidence to the court, Mr White said he communicated with Mr Scott during this time by telephone, fax and at meetings as Mr Scott was “not comfortable” using email.

Things started to go wrong in 2005 when Mr White was imprisoned for fraud, leaving behind him incomplete plans, meaning construction was delayed. The Shaws then employed another architect, William Grime, to take things forward.

He sought Mr Scott’s assistance to piece together the terms of the initial contract but found that Mr Scott’s paperwork was “appalling”. Mr Grime discovered that neither Mr White nor Mr Scott had kept copies of all the original drawings. There was no building warrant for the house and the building warrant for the foundations had not been issued. Mr White had not produced drawings, including drawings for the house’s drainage, forcing Mr Scott to construct the house leaving gaps for the drainage facilities to be inserted once they were designed.

At this point the Shaws were keen to get a formal contract agreed with the Mr Scott’s building firm and they hired a quantity surveyor Kenneth Percy to negotiate this. On November 23, 2005, Mr Percy sent an email to the Shaws, copied to Mr Grime and Mr Scott, with the final draft of the contract attached. In an attempt to achieve finality he asked all the parties to e-mail him back by November 28 if they objected. The Shaws duly accepted the terms but Mr Scott did not reply.

On November 28 Mr Percy wrote to Mrs Shaw and the defenders (James Scott Builders) to confirm their acceptance of the proposed contract terms. He stated: “Further to my recent meetings and correspondence with both parties, I confirm that I have received no objection from either party to the final version of the contract documents issued by e-mail on 23rd November. As agreed, I confirm that this represents the record of the contractual agreement between the parties.”

Work then continued on the house for a year until disagreements emerged between the parties in early 2007 and Mrs Shaw wrote to the defenders instructing them to stop work. It was only then that the Shaws discovered that James Scott Builders were challenging the existence of a written contract.

In his evidence at the Court of Session, Mr Scott contended that he had phoned Mr Percy after the November 28 deadline to tell him he did not accept the contract document. But Lord Hodge did not accept his account of events.

He concluded: “Mr Percy’s evidence on this matter, which I accept, was that Mr Scott did not make any objections to the contract documents. Circumstances support his position as Mr Grime and Mr and Mrs Shaw stated that they believed that a formal agreement was in place by the end of November. Both Mr and Mrs Shaw stated that if they had known that the defenders were not prepared to agree the contract document they would have halted further works until the problem had been resolved. They did not halt the project in December 2005. I accept that, at that time, each of Mr and Mrs Shaw, Mr Grime and Mr Percy believed that agreement had been reached on the contract documents by 28 November 2005 and acted thereafter in that belief.”

He added: “I found Mr and Mrs Shaw to be both credible and reliable witnesses. Mr Scott is a builder who is more comfortable with the practicalities of building than the technicalities of contract formation. He was not a reliable witness on the central issue of whether parties had agreed formal contract terms.

“Further, if Mr Scott’s evidence were correct, then both Mr Grime and Mr Percy would not only have been guilty of dereliction of their professional duties in keeping their client in the dark about his refusal to accept the contract terms but also have been lying in their evidence to this court. I do not think they were.”

The uniqueness of the case, from a legal standpoint, was the court concluding that Mr Scott’s silence was taken to be acceptance of the contractual terms contained in the e-mail of November 23.

Both Mrs Shaw and Mr Scott declined to comment.