| Date | 1 November 2006 |
|
|
| Judgment | Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd, TCC 5 June 2006 |
|
|
| The Issue | The common law defence of abatement. |
|
|
| Implication |
Identifying general principles concerning the law of abatement and set-off. |
printThe distinction between abatement and set-off often causes difficulty. Set-off, which is a form of counterclaim, concerns the deduction of damages caused by a party’s breach of contract. A set-off can be applied to reduce or extinguish payments otherwise due under the contract. Abatement, on the other hand, concerns the common law right to reduce sums otherwise payable by asserting that the sum claimed has not been earned. A claim for set-off may potentially have a wider reach than abatement. Damages claimed as a set-off may concern, for example, the cost of putting right defects in the work, but may also include damages suffered as a consequence of the manner in which the work has been carried out, for example damages for delay. The measure of abatement, on the other hand, must be limited to the difference in value of the work itself as a consequence of the defective work. Additionally, a set-off must be raised by way of a separate cross-claim. An abatement may however simply be regarded as a defence to a claim for payment in respect of defective work. These distinctions can often be quite important, particularly in the context of the Construction Act where it has been held that a set-off may not be made in the absence of a withholding notice. A withholding notice will not however normally be required for a defence of abatement to be argued. That is to say, if the work is defective, the amount due to the contractor may be reduced correspondingly and thus in reality there is no withholding against the proper amount due. The recent case of Multiplex Construction v Cleveland Bridge included a very careful analysis of the law of abatement by Mr Justice Jackson. The dispute arising out of the construction of the steelwork for Wembley stadium included allegations by Multiplex that there were extensive defects in the steelwork. Multiplex had listed these in a series of schedules. Schedule 1A comprised 90 claims in respect of the defects in the work, Schedule 1B set out a further 380 alleged defects and Schedule 1D listed 259 alleged defects. Justice Jackson made it clear that, to the extent that Multiplex would be able in due course to prove the existence of these defects, it would be entitled to apply an abatement against the sums claims by Cleveland. The correct measure of that abatement would be calculated by reference to the cost of the remedial works necessary as a consequence of the defects. It would be inappropriate to consider the market value of the partially completed steelwork, since in the conventional sense the steelwork which had been erected at Wembley had no market value except to Multiplex who were under a contractual obligation to complete the stadium. In arriving at his decision, the judge provided a very helpful review of the principal cases dealing with the law of abatement. Firstly he referred to the case of Mondel v Steel (1841) in which it was held that a ship owner could obtain a reduction from the price to be paid to the shipbuilders because the ship had not been built in accordance with the specification. Crucially, the ship owner could also commence a separate action to recover the cost of subsequent repairs to the ship, as these two actions were different in their legal nature. Gilbert Ash (Northern) v Modern Engineering (1974) further clarified that a main contractor was entitled to set-off its claims for defects and delays against sums certified as due to a subcontractor. The law was further explained by the Court of Appeal in Acsim v Danish Contracting (1989), where Lord Justice Neill confirmed that an assertion that work had not been properly executed was capable of being a matter of pure defence rather than of counterclaim or set-off. The case of Mellowes Archital v Bell Projects (1997) also distinguished between claims in respect of defective work and those in respect of delay in performance. Where the claim was for damages resulting from delayed performance, recovery would have to be by way of set-off or cross-claim complying with the terms of the contract. An abatement could only be made in respect of the difference in value of the work itself. Having carefully set out the law to be derived from this line of previous cases, Justice Jackson concluded with seven principles which he considered summed up the general law. (1) In a contract for the provision of labour and materials where performance has been defective, the employer is entitled at common law to maintain a defence of abatement. (2) The measure of abatement is the amount by which the product of the contractor’s endeavours has been diminished in value as a result of that defective performance. (3) The method of assessing diminution in value will depend upon the facts and circumstances in each case. (4) In some cases, diminution in value may be determined by comparing the current market value of that which has been constructed with the market value which it ought to have had. In other cases, diminution in value may be determined by reference to the cost of remedial works. In the latter situation however, the cost of remedial works does not become the measure of abatement. It is merely a factor which may be used either in isolation or in conjunction with other factors while determining diminution in value. (5) The measure of abatement can never exceed the sum which would otherwise be due to the contractor as payment. (6) Abatement is not available as a defence to a claim for payment in respect of professional services. (7) Claims for delay, disruption or damage caused to anything other than that which the contractor has constructed cannot feature in a defence of abatement.
CJ-0643
|
|||
|
© Brewer Consulting |
|||
 |
|||