Pmp Electrical Services Ltd v Henley Homes (East) LLP [2011] EWHC 599 (TCC)

[2011] EWHC 599 (TCC)Case No HT-10-285
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 16 th March 2011
Before
HIS HONOUR JUDGE DAVID WILCOX
Between
PMP ELECTRICAL SERVICES LIMITEDClaimantHENLEY HOMES (EAST) LLPDefendant
Mr Alan Stainer (instructed by Mr Brookbanks) for ClaimantMr Robert Stokell (instructed by Silver Shemmings LLP) for DefendantHearing Hearing dates: 14 to 16 February 2011
JUDGMENT
[1]The Claimant is an electrical services contractor. Mr Paul Brooksbank at all material times was director of PMP. Over the last six or seven years PMP have been engaged in projects with the Defendants.[2]The Defendant Company is one of a group of development companies who in 2007/2008 were building flats at Carmine Wharf, in the Docklands area of London.

Background

[3]The project was valued at approximately £70m.[4]The electrical sub contracting work, involving cable connection between the main E, D, F supply in five blocks of flats were subcontracted to PMP.[5]It involved the supply of cable and laying of it, by drawing it through six inch conduits already laid by M. Allen Construction, and connecting the cable to a sub station in block B, to the EDF mains supply and to the distribution boards within each of the apartment blocks.[6]The Defendant Company was advised by a consultancy firm KUT on mechanical and electrical matters. They provided the technical specification for the procurement and supply of the cable. The consultants specified multi core armoured cable complying with BS6724 XLPE\SWA\LSOF and manufactured by BICC Limited, Pirelli Cables Limited, or AEI Cables.[7]It can be seen that it was a specification particular as to both supplier and the technical requirements.[8]The cable was purchased by the Claimant from Cleveland Cables. Mr Brooksbank in February of 2008 sought a quotation from Cleveland for the supply of two types of cable. BS6724 and a PVC coated cable BS5467. The latter was cheaper. He did not specify the manufacturer when asking for quotations.[9]The cable ordered by the Claimant was not the BS6724 as specified, but the cheaper PVC coated cable BS5467.[10]Mr Brooksbank invoiced the Defendant for BS6724 cable and was paid for it in advance.[11]After the cable had been laid it had to be tested by the Electricity supplier. EDF testing showed the cable to be defective.[12]The Defendant independently purchased new cabling and supervised its laying. Coincidently this cable which was supplied through Eastern Electrics was also provided by Cleveland, the original suppliers. The order to Cleveland complied with the KUT specification.[13]The substitute cable BS6724 proved to be effective on testing by EDF who were then willing to make the appropriate mains connection to the development.[14]The hiatus caused by the ineffective cabling was about six weeks. There is no issue between the parties as to the necessity of replacing the cable. EDF would not have permitted connection to the supply otherwise. Furthermore this all took place during the banking crisis and the interest charges on the development were considerable making delay costly.[15]The cost of the cabling was of the order of £20,000 which was insignificant in proportion to the capital and continuing costs of the scheme according to Mr Tariq Usmani, the Defendant’s director responsible for financial strategy.[16]The imperative for the developers, and those running the project was to complete the project with least delay.[17]The day to day responsibility for running the site was that of the project manager, Mr Andrew Redford. He was an employee recently engaged by the Defendants and accepted to be a man of experience in such projects. Sadly, he was a sick man who had a serious diabetic condition, and in August suffered a perforated bowel. When he tended his resignation on the 24 September 2008 he advised that he was suffering from bowel cancer. He was not able to give evidence before the court.[18]Had he been available to give evidence it is possible that the festering dispute which has led to these proceedings might not have taken place.[19]The Defendants had paid in advance for BS6724 cable believing it to be manufactured by one of the specified companies.[20]That laid was not BS 6724 and had to be replaced. In any event its performance was not such that EDF would connect the project to the main supply.[21]On the 28 July the Defendants had to purchase new cable because PMP did not have sufficient funds to do so.[22]PMP were instructed to fit the replacement cable on the 31 July 2008. The new cable was delivered to site on the 1 August of 2008 for installation by PMP.[23]Following failure of the EDF tests Mr Redford proposed independent testing of the cabling to see whether it was suitable “from supplier and specification issues…” He proposed testing informally allegedly through a colleague and neighbour who worked with CERA, the Central Electricity Research Authority. There was no dissent from the directors. Mr Karimjee of KUT, Consultants having been notified asked for a copy of the CERA report.[24]On the 28 July 2008 Mr Redford emailed Mr Brooksbank saying that five cable samples taken on Friday morning had been inspected and the first comment was that “the materials did not meet current regulations in regard to resistance and integrity and that the first 30% of cable testing failed at around 15% of the required load and a full report would be issued in due course, once there (sic) testing was complete.”[25]On the 4 August 2008 Mr Redford emailed the directors:
“Kashif, please remember that this was undertaken as a favour and at no cost. As such they have agreed to keep the issue away from EDF Networks. If it gets back they have to issue a full repost (sic) that would condemn the development until they dig up and confirm that the cables conform. Please keep all copies with us.”
[26]Mr Brooksbank was informed by email on the 8 August that tests were being undertaken on block A, B and D cables supplied by PMP, the results of which would be made available in due course.[27]On the 26 August 2007 Mr Redford emailed Mr Brooksbank saying that the test results were delayed due to the holiday period.[28]On the 24 September 2008 Mr Redford tendered his resignation to the Defendant by email with immediate effect.[29]On the 16 October 2008 Mr Kashif Usmani forwarded a copy report to Mr Brooksbank.[30]It condemned a number of the cables. It purported to be a CERA test.[31]Clearly, on the face of the document, it was false; there were gross spelling errors, some in common with those used by Mr Redford in his earlier emails.[32]The letter was investigated by National Grid and it was evident that Mr Brooksbank’s immediate suspicions and judgment following receipt of it on the 17 October of 2008 were correct. National Grid Legal Services wrote accepting that the letter was not a genuine report. I have come to the conclusion, reluctantly because of the absence of Mr Redford, that he was more likely than not the author of the report. From the email correspondence it is clear that he had genuine suspicions as to the origin of manufacture of the cable and its suitability.[33]He was the project manager charged with the immediate responsibility of ensuring project completion with the least delay and it may well be that he thought he was covering his back, by clothing his suspicions with the detail of a spurious report.[34]He was an employee of the Defendant Company acting in the course of his employment and in these circumstances the Defendants must take responsibility for his actions.[35]There is no evidence that the directors of the Defendant Company had any knowledge of this deceit or participated in any way in the creation of the report.[36]PMP’s case is that they must have known about it and been part of the deceit. For reasons which become apparent when I review the evidence upon which he relies, I reject that submission.[37]Having paid in advance for the original cabling and purchased the second batch of cabling, the Defendant contra charged the Claimant for both labour and materials wasted.[38]The Claimant say that the contra charge is not justified because the Defendant has not proved that the original cable supplied by PMP was in fact defective, and seek to recover £23,286 under this head of claim.[39]The Claimant decided not to pay its supplier Cleveland for the original cable, despite having been paid in advance by the Defendant.[40]When Cleveland sought payment the Claimant resisted, claiming that the cable supplied was defectively manufactured.[41]Over a period of many months, between August of 2008 and March of 2010 the Claimant and Cleveland were engaged in an expensive dispute as to the quality of the cable provided. Throughout the dispute with the Defendant Mr Brooksbank has maintained that he was not only influenced by the false CERA report forwarded to him in October 2008 but that he relied upon it, and therefore resisted Cleveland’s claim for payment. He also maintains that he was forced to compromise the Cleveland claim by paying them £30,000 apportioned as to £20,000 for cable and £10,000 for costs. In addition the Defendant incurred £20,000 costs and expended management time priced at £15,000. He seeks to recover these sums save the cost of the cable.

The Claim

[42]“The Claimant’s claim is for damages sustained as a result of the Defendant’s deciet (sic) and/or the making of it be false, or negligent statements contrary to common law and/or under the Misrepresentation Act 1967: full details of which are set out in the Particulars of Claim.”[43]The Claimant, in the person of Mr Brooksbank asserts that it relied upon the CERA report to resist the claim for payment by Cleveland.[44]The Claimants had been paid in advance by the Defendants well before these issues arose. They had every opportunity on delivery and before laying the cable to examine it for marks of manufacturing provenance and other indications of suitability.[45]Prior to the 16 October Mr Brooksbank could not have relied on the National Grid letter, because it had not been provided to him. Thereafter judging by his common sense critique sent to the Defendant, it is clear that he placed no weight upon the report and in any event by the 5 November 2008, the National Grid letter, put the position beyond doubt.[46]It is for PMP to show that as a result of representations contained in the CERA report or by the Defendant’s conduct in forwarding the report to him, PMP was induced to its detriment to rely upon it. See Downs v Chappell (1997) 1WLR at page 433 in the judgment of Hobhouse LJ.[47]After the letter 5 November of 2008 PMP continued to defend the Cleveland claim. It was only after this that Cleveland issued its claim form and the matter continued to be defended until very close to trial.[48]It is apparent that the report was forwarded immediately by Mr Brooksbank to Cleveland, who were instrumental in establishing that the report had been forged. Cleveland could not have used the report to attack PMP’s credibility because it was clear that PMP and Mr Brooksbank played no part in the forgery. It is evident that if PMP had a good defence to the Cleveland claim, a forged letter fabricated by a third party, in which PMP played no part could not have prejudiced that defence.[49]This is a claim in deceit. I am satisfied that no reliance upon the false report is proved by the Claimant or that any loss was caused.[50]At paragraph 15 of the particulars, the Claimant asserts: The Defendant, correctly, knew or believed that the cause of the cables failure lay at its own door, yet took steps to falsely claim that the Cable was defective. Further, the Defendant by removing the Cable from its “bin store” (and by its subsequent disappearance) has attempted to conceal its deceit) although has in fact compounded it.[51]The Claimant further contends that the Defendant allowed the cable ducts and draw pits to become flooded with water and that the cable removed after the failed EDF testing “was stored in the secure “bin store” and that it was thereafter removed preventing any definitive testing of the cable.”

Cable Testing

[52]The cable that failed EDF tests was taken up and put into a locked compound to which a number of people had access. Sanitary ware and fittings were stored there and other building items which were not of high value. Presumably all relevant trades could have had access to the store.[53]High value items were kept in a separate special store in one of the apartment blocks near to the site office which was also situated in the apartment block. The site was a secure site and it was patrolled from time to time by security staff.[54]There is evidence that the cable was in the secure compound for a considerable time after it was taken up. It of course belonged to the Defendant who had paid for it in advance in the spring of 2008. With the acquiescence of the Defendant and with the active co-operation of PMP, samples were taken of the cable by Cleveland for testing.[55]It transpired in early 2009 that the lengths taken were considered by Cleveland or their testers to be inadequate for testing. In all, some five lengths were taken of about a metre in length.[56]Mr Brooksbank accepted that he waited for a considerable period for Cleveland to reveal to him the results of any testing they may have commissioned.[57]The Defendant meanwhile was completing the project and it appears that the temporary compound site was incorporated into a permanent bin store under a new roof structure. Presumably the sanitary fittings had all been installed and there was no need for the a temporary tradesmens’ store.[58]The directors of the Defendant Company had no idea what happened to the cable. It clearly has scrap value. There is no record that they knowingly disposed of it and certainly no evidence that there was any disposal in order to defeat any claim that the Claimant might have.[59]It is evident that any prejudice that the Claimant might have had by not having further access to cable samples for the purpose of testing was not the fault of the Defendants; rather he was lulled into a false sense of security by Cleveland. Testing may well have assisted in ascertaining the manufacturing provenance of the cable and the constituent parts of it, as well as indicating what British Standard the cable was supposed to be satisfying.[60]Insofar as moisture ingress was an issue, cable that may have been affected by moisture at the time of laying, after several months would have dried out and examination would be unhelpful.[61]There is no evidence to support the allegation that the directors of the company were privy to the removal of the cable to frustrate later independent inspection, or unreasonably failed to preserve the cable the subject of dispute.

The Ground Conditions

[62]The second ingredient of PMP’s pleaded plot is that the Defendant permitted the conduits in which the cables were to be laid, to become waterlogged and thereby caused the cable to fail by virtue of moisture ingress.[63]The cables manufactured to compliance with BS6724 are not specifically designed as submarine cable or for laying in water logged conditions.[64]They are however water resistant other wise they could not be used on the average building site or stored on a building site or laid in the ground.[65]It is common ground that waterlogged conditions may cause ingress of water into BS6724 cable and could be responsible for electrical resistance such as observed in the testing by EDF and PMP. Mr Bashford from KUT Consultants says that the causes of water ingress are many and varied. They could include physical damage to the sheath when cable is drawn through a conduit or when there is snagging material in the conduit, or it could be caused by a flaw in manufacturing in the sheath, or it could be that the cell size could have been larger than designed causing vapour to enter the core of the cable.[66]The replacement BS6724 cable was laid in the same ground conditions as the original. It had passed the requisite EDF resistance tests and the site is connected to the main supply. The inference is warranted that if BS6724 is properly laid and manufactured to the BS specification, its performance will be satisfactory matching the specification of the M & E Consultants.[67]The only difference in the laying technique was that whereas the original was drawn through conduits, the replacement was laid in open trenches in which some shingle was laid. The shingle has a dual purpose; it indicates the presence of cable to any subsequent excavator. It may assist in drainage. Such laying in a trench as opposed to an conduit is acceptable if the roadway is not to be adopted.[68]I am satisfied that there was no flooding in the conduits as would cause the original laid cable to malfunction. I prefer the evidence of Mr Allan as to the drainage and the state of the site when the original cable was laid. In rainy conditions on a building site there is always some moisture and the need for pumping from time to time. Whilst Mr Hosein spoke of requiring some pumping on the 11 March. I prefer the evidence of Mr Allan as to the state of the site and the absence of flooding in the conduits during the period in which the cables were laid.[69]In Annex B of BS6724 there are recommendations for the insulation of cables.

Prevention of Moisture Ingress

[70]“Care should be exercised during installation to avoid any damage to cable coverings. This is important in wet or other aggressive environments. The protective cap should not be removed from the end of the cable until immediately prior to the termination or jointing. When the caps have been removed, the unprotected ends of the cable should not be exposed to moisture. The possibility of damage to moisture seals during handling and installation or during storage of the cable should be borne in mind. Where such damage may have occurred the seals should be inspected and remade if necessary”[71]As to ground conditions Mr Brooksbank in his letter of the 1 April 2009, to Cleveland said:[72]“We record that five separate lengths of cable were provided totalling three hundred and sixty five metres. All cables were installed in the same conditions, yet two passed insulation resistance tests and three cables failed …”[73]On the 11 November 2009 in a letter to Cleveland, paragraph 7.7 he said:[74]“We agreed that the specifications of the cables were not allowed to be laid in a submarine condition and would confirm that they were not laid in a submarine condition.”[75]In a letter to DLA Piper, Cleveland’s solicitors, of the 5 March 2010 he had this to say:[76]“all the theories extended by your client’s representatives about the conditions of which the cables that failed may or may not have been laid were rendered entirely spurious when it is a single fact that the cables that passed the test when (sic) laid in the same ground conditions.”[77]I reject the explanation that the cables failed because of ingress of moisture through the sheathing by virtue of being laid in waterlogged conditions.[78]Mr Brooksbank sought to persuade the court that the SWA BS5647 cable was satisfactory. He is correct in asserting that the core composition is the same as that in BS6724, but the vital difference is in the composition of the sheath.[79]BS6724 was specified to be used according to Mr Bashford of KUTs because it ensured that safety compliant cable was used throughout, both underground and within the five blocks of apartments. It is a common safety requirement that SWA BS6724 cable should be used in residential common parts because the sheathing is low smoke zero halogen which emits non toxic levels of halogen and low levels of smoke when exposed to fire.[80]The SWA cable BS6724 meets the requirements of British Standard BS6724 having LSZH bedding and a black LSZH sheath.[81]After the Kings Cross fire it became mandatory to use BS6724 on all London Underground installations.[82]BS5647 does not comply with the safety requirements specified by the KUT partnership.[83]Mr Brooksbank told the court that he sought the permission of the Defendants to use BS5647 in substitution for BS6724 and that they agreed because Cleveland was unable to supply enough of BS6724, and that BS5647 had the same functionality. I am satisfied that had permission been sought the matter would have been referred to the KUT Partnership for advice. It clearly was not. I reject Mr Brookbanks’ evidence. Had express permission been given to a change of specification he would have had no need to supply a false and misleading invoice showing that BS 6724 had been supplied and fitted throughout.[84]There are a number of subsidiary issues of fact that I should deal with. To support the Claimant’s case on deceit, and that the Usmani brothers were personally responsible for the creation of the spurious CERA report Mr Brooksbank sought to prove that directors of the Henley Homes Group systematically employed deceit in their business dealings.[85]First he relied upon the admitted use of a false occupation certificate by the Usmani brothers in relation to the Lumiere flats in Battersea and secondly sought to prove that the Inland Revenue had been defrauded in relation to CICS deducted monies. As to the first matter I heard the evidence of Mr Tariq Usmani and Mr Khasif Usmani who gave evidence which was subjected to searching and testing cross-examination on behalf of the Claimant. They accepted that false certificates were created in relation to the unoccupied flats at the Lumiere site to show that completed tests had been carried out on electrical and control equipment demonstrating the requisite compliance with safety and technical requirements.[86]The object of using the certificates was to enable one prospective purchaser to obtain a mortgage for one of the dwellings to be occupied following searches and title investigation three or four weeks hence.[87]The contractor engaged to conduct the testing had been unable to complete his work in time in order for the prospective purchaser to commence the process of purchase using the certificate to show his mortgagee that the flat was fit for occupation. I am satisfied that having received a comprehensive analysis by a safety expert that the flats in fact were safe at the material time although there was no question of immediate occupational use.[88]I am further satisfied that the period that the bogus certificates covered was for a very short time before the genuine certification came into force. Mr Usmani said, and I accept, that the commencement of sales was crucial to achieving compliance with banking covenants in a delicately balanced financing operation when failure could have been financially catastrophic for the group. He was candid in his acceptance of responsibility as was his brother. The conduct was deliberate and borne out of desperation. It was bound to be discovered, and it gave commercial leverage to PMP who were concerned in later equipment testing and inspection.[89]I accept Mr Tariq Usmani’s explanation as being truthful. Nonetheless the conduct of the directors was distasteful and wholly unacceptable.[90]Whilst the contractors whose names were used temporarily have been apologised to in writing, it albeit briefly, risked bringing into question the integrity of honest tradesmen.[91]There was benefit derived from what was done. PMP were beneficiaries insofar as they participated in later equipment testing and the Henley House group of companies were perhaps in part enabled to maintain their business and make payments to valued subcontractors.[92]In relation to the allegation as to CICS deductions it is clear that PMP had misconceived the position.[93]The period covered 2007 to 2008. PMP even now have not achieved a reconciliation of their own figures for accounting purposes covering the period, Mr David Thoday, the commercial director of the Defendant produced evidence which brought into question the reliability of the Claimant’s own schedule of figures used to support their argument. The contents of at least four of PMP’s own invoices were demonstrably misrepresented in their own schedule.[94]To be fair to Mr Brooksbank the CICS discrepancy initially was raised by the Revenue. Mr Brooksbank seeing an advantage, thought he could denigrate the Defendants, but failed to do his homework. The allegations of impropriety were withdrawn by Counsel at trial.[95]On the incomplete figures that were produced to me it is possible to argue that the Defendant far from benefiting from an apparent discrepancy in fact may be entitled to a repayment.[96]The relationship between the parties spans some years. There was a friendship at one time and they socialised together. The souring of the personal relationship has led to both parties having a distorted perception of each other. Both parties have clearly been bruised by the bleak economic conditions affecting each of them over the past several years.[97]Mr Brooksbank has displayed a tenacity bordering on obsessiveness in resisting the claim by Cleveland and in pursuing the claim against the Defendants.[98]In March of 2010 PMP had to pay £30,000 in order to settle the Cleveland action.[99]In March 2009 he could have compromised the claim in the sum of £14,000 plus VAT. That offer was renewed on the 20 May of 2009.[100]It is clear beyond doubt that whilst the settlement that he ultimately reached may have been reasonable then, his resistance cost him dear.

Conclusions

[101]I reject the Claimant’s claim because he was not deceived by the CERA letter.[102]Mr. Brooksbank placed no reliance upon that letter in his conduct in relation to the Cleveland claim. He admitted in the witness box that he lied in his sworn statement when he said he did.[103]BS6724 cable was appropriate in the ground conditions on site, both when originally laid and then relaid. If failure occurred because of moisture ingress, it was not because of waterlogged conditions.[104]PMP failed to comply with the specification to supply BS6724 and instead supplied BS5467. BS5467 was not appropriate for use in residential common parts.[105]PMP failed to comply with the specified requirements as to manufacture.[106]The Claimant was not denied access to the cable or opportunity to take samples for testing by the Defendant.[107]Mr Brooksbank did not give to Mr Tariq Usmani certificates of provenance as he asserted in the witness box or as he asserted in his statement send them to Henley Homes (East). To have done so would serve to emphasise that he had deceived Henley Homes as to the type of cable he supplied and laid and for which he had been paid and shown that the requirement as to named manufacturers was not complied with.[108]The claims stand dismissed.