Gartell & Son v Yeovil Town Football & Athletic Club Ltd [2016] EWCA Civ 62

The Appellant – a partnership specialising in ground works to sports fields – appealed a decision of the Court firstly to dismiss its claim for payment under a contract with the Respondent football club and secondly to allow the Respondent’s entire counterclaim.

Background

The Respondent wanted its main pitch and training pitches to be improved, aspiring to be promoted from League 1 of the Football League to the Championship. The Appellant was contracted to carry out these works to bring the pitches up to Championship standard. The contract price was £16,159.20. However, the works, which involved a treatment of top dressing rather than complete re-turfing, were carried out in wet weather conditions, meaning that the treatment did not work properly.

As a result, the Respondent withheld payment on the basis that the works had not been carried out to the requisite standard in accordance with the contract. The Appellant therefore issued proceedings for the sum due under the contract.

In its defence, the Respondent successfully argued that it was not liable to pay because there had been a breach of the implied term of reasonable care and skill. It further counterclaimed for the total cost of remedial works, which had been carried out by a second contractor who had followed an alternative method for improving the pitches.

The judge in the first instance held that the Appellant was in breach of contract and that the pitches’ standard was worse than if the Appellant had done no work at all. It was also decided that there had been a total failure of consideration. The Respondent did not have to pay the contract price and judgment was given for the full amount of the counterclaim: the invoice submitted by the second contractor – £21,494 – and overtime paid to the Respondent’s employees in the sum of £5,000.

The appeal

Whilst the Appellant admitted that there had been a breach of contract on its part, it maintained on appeal that:

  1. The first instance judge was wrong to find a total failure of consideration, because the Appellant had provided the materials and labour as contracted; and
  2. The judge was also wrong to allow the entirety of the counterclaim, because this was a sum greater than required to restore the pitches to the position they would have been in had no works been carried out, thus the Respondent had been over-compensated.

On the first point, the Court of Appeal found that there was no argument in the Appellant providing its own materials and labour. The vital elements of performance of the contract were that the works were carried out with reasonable care and skill and that the works made an improvement to the pitches. Arguing that materials were provided looked at performance “at the wrong level”. The judge was therefore right to find that the Respondent had received no part of the contractual performance it had expected.

On the second point, as the Court reasoned that there was a total failure of consideration, the Respondent was discharged from its obligation to pay the contractual sum to the Appellant. Alternatively, it reasoned that there had been a breach of the contract that was so serious that the Respondent was deprived substantially of the whole benefit of the contract. However, even when using either reasoning, the Respondent was still not entitled to insist that the Appellant should be denied payment and also rendered liable for the entire cost of obtaining a substitute performance. By analogy, the Court said, a purchaser who fails to receive goods under a contract does not receive a substitute from a different supplier for nothing at all.

Furthermore, the second contractor had gone further than to merely restore the pitches to the condition they would have been in had the Appellant not carried out the works. By using an alternative (and seemingly better) method, the second contractor actually improved the pitches. The most the Respondent could recover was the amount by which the cost of the second tranche of works reasonably exceeded the contract price. By over-compensating the Respondent, the judge in the first instance had completely relieved the Respondent of their obligation to pay anything at all.

On a technical point, the Respondent had also failed to ask in its Respondent’s Notice that, in the event the appeal succeeded on this point, the Court substitute a judgment for the amount by which the contract price had been succeeded. The Court refused to engage in a financial analysis of the value of both works.

Accordingly, the appeal was allowed in part.

The case serves as a reminder of the Court’s approach to compensation in contractual claims and the general rule that a monetary award to the injured party should not necessarily punish the wrongdoer. In the event of a party’s breach of contract, the Court will not allow counter-claims for improvement works when it has already allowed for non-payment of the contract sum.