The Value Of Work Not Carried Out

Construction contracts generally offer rules for valuing work carried out pursuant to the contract by reference to contract documents, such as bills of quantities or schedules of rates. Where the work is additional, or varied, and falls outside the original scope, it may be valued by reference to similar items within the contract scope, or where no similar items exist, by reference to what is fair and reasonable.

But what about situations where the work to be valued has not been carried out, either because it has not been satisfactorily completed, or because it has been omitted, and therefore falls to be deducted from the overall contract price? There have been a couple of court decisions recently which have considered the valuation of work which wasn't carried out as envisaged by the contract.

The Mul v Hutton Construction decision

In Mul v Hutton Construction Ltd [2014] EWHC 1797 (TCC), the TCC (Akenhead J) considered what constituted an 'appropriate deduction' in the context of cl 2.30 of the JCT Intermediate Form of Contract 2005 (which has not been amended in the 2011 edition) which deals with defects or faults not made good.

The project in question was a substantial extension and refurbishment to an existing home, with a contract sum of just over £3 million. Work on site started on 6 May 2008, and practical completion was certified on 14 May 2010. However, the certificate of practical completion attached a long list of incomplete or defective items, which, whilst not unusual, is not ideal (in principle only 'de minimis' items should be outstanding if practical completion is to be certified), causing the judge to note that the practical completion that was certified was not of the type envisaged by the contract conditions. A final sum of £4,050,000 was certified, but a review of incomplete or defective work compiled as the end of the rectification period approached produced 20 pages of schedules identifying numerous items which were alleged to be still incomplete or defective which Oksana Mul (Mul) wished to have remedied by others in order to be able to occupy the property. Hutton Construction Ltd (Hutton) attributed a number of these to shrinkage as the property had remained unheated for a period.

Mul eventually issued proceedings a couple of years later in October 2013, with a claim of over £1m in respect of the alleged defects. Hutton responded that Mul would only be entitled to make the 'appropriate deduction' referred to in cl...