[1] Chiverton Construction Ltd [2] Junior Chiverton Appellants v Scrub Island Development Group Ltd Respondent

• Jurisdiction: British Virgin Islands
• Judge: Bannister J,Baptiste, J.A.,Davidson Kelvin Baptiste,Ola Mae Edwards,Michael Gordon, QC
• Judgment Date: 19 September 2011
• Neutral Citation: VG 2011 CA 10,[2011] ECSC J0919-6
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: HCVAP 2009/028,Claim No: BVIHCV 2007/0159
• Date: 19 September 2011

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE (COMMERCIAL)

Claim No: BVIHCV 2007/0159

BETWEEN

Chiverton Construction Limited Junior Chiverton

Applicant

and

Scrub Island Development Group Limited

Respondent

Appearances:

Mr. Garvin Simonette, Mrs. Hélène Anne Lewis and Ms. Sophia Vailloo of SimonetteLewis for the Applicants, Chiverton Construction Limited and Junior Chiverton Mrs. Willa Tavernier, Mr. Kerry Anderson and Mr. Malcolm Arthurs of O'Neal Webster for the Respondent, Scrub Island Development Group Limited

(Construction contract — repudiation — abandonment — damages for developer's delay; defamation — slander of a person in his trade, profession or vocation)

1 Bannister J [ag]: On 12 July 2006 the first Claimant (“Chiverton”) entered into an agreement in writing with a company called Mainsail Development Group LLC (“Mainsail”) for the construction of five retaining walls at the development being carried out at the Marina Village on Scrub Island (“the contract”“the works”). For reasons which are unclear to me it is agreed between the parties that the Defendant is to be treated as the counterparty to and bound by the contract also responsible for any actionable defamatory remarks proved to have been made by the Construction Manager for the project. I am not disposed to upset this convention if that is the way the parties wish to proceed. I shall refer to the Defendant as “the developer”. In these proceedings Chiverton makes claims against the developer for breach of contract and the second claimant (“Mr. Chiverton”) claims against the developer for defamation. Pleaded claims by Chiverton for conspiracy to injure and for unlawful interference with trade have been abandoned. I will take Chiverton's claim in contract first. I should say that Mr. Chiverton is the Managing Director and a shareholder of Chiverton and appears to be its controlling mind. It is clear that his knowledge can be treated for all purposes as that of Chiverton.

The contract claim

2 I shall refer in a moment to the provisions of the contract as they affect Chiverton's claim, but I should first set out the narrative of the events which have given rise to the dispute between the parties. The evidence of Mr. Chiverton and Mr. McCarthy, the General Manager of Virgin Islands Project Management (“VIPM”), which acted as Construction Manager for the Scrub Island project, was that the terms of the contract had been discussed between them before it was concluded on 12 July 2006. There was a number of documents incorporated within the contract and important among them were six Bills of Quantities (“BoQ's”), one covering preliminaries and one for each of the five walls. Mr. McCarthy's evidence, which I accept, was that Mr. Chiverton had been provided with the BoQ's. The contract was for work and materials and the contract sum was US$554,587.48. The contract required work to start on 17 July 2006 and for substantial completion to be achieved by 17 October 2006. It was a term of the contract that time was to be of the essence, but for reasons which will become obvious neither side has relied upon it.

3 Mr. McCarthy gave evidence showing how the labour component of the contract sum had been arrived at. He had allowed for 11,650 hours of labour and had calculated that in order for the works to be completed by 17 October 2006, Chiverton would need to have 21 men on site working a full five and a half day week. There was no evidence that Mr. Chiverton was aware of this calculation when he caused Chiverton to enter into the contract. Certainly the contract did not stipulate that Chiverton was to maintain this (or indeed any particular) level of manpower during the term of the contract. Mr. Chiverton's evidence was that he thought from his understanding of the contract that he would need an initial crew of eight men rising to eighteen at the busiest period. It was never clear how he had come to that conclusion. He never prepared a construction schedule and said merely that he “had an idea in his head” as to how the work would be progressed.

4 Although Mr. Chiverton gave evidence (and, astonishingly, pleaded) that he was under the impression that payment would be made in two tranches, one after six weeks and one at the end of the three month contract period, the contract clearly provided for monthly progress payments to be made on a valuation of work basis, with the contractor providing its own valuation of the work done to date and the developer making the appropriate payment, subject to retentions, unless the contractor's valuation was objected to by the construction manager or architect. In fact, Chiverton did not calculate or proffer its own valuations. They were prepared by VIPM and payment was made against a Chiverton invoice based upon the relevant valuation. During the course of the contract, five such valuations were prepared by VIPM, four of which were countersigned by Chiverton. Payment was made to Chiverton in respect of those four. The fifth valuation was negative. It was never signed by Chiverton. In addition, Chiverton was paid US$10,000 “up front” on 1 August 2006.

5 I should mention here the manner in which the contract provided for materials to be dealt with. Given the island nature of the site, the contract stipulated that contractors were not to buy their own materials from third party suppliers and bring them or have them delivered to the island independently. Instead, the developer would maintain a stores dump on Scrub Island, from which contractors were obliged to requisition materials required by them on site. The developer would transport requisitioned materials from the dump to the contractor's site. A materials price list was provided as part of the contract documents. It was the evidence of Mr. McCarthy, which I accept, that the materials had been imported duty free by the developer and were sold to the contractors at the relevant import value without mark up. The total value of the materials delivered to the contractor during the period covered by each progress payment was then deducted from the amount of the progress payment. It is fair to say that once materials were incorporated in the measured work, the contractor would receive an additional 18.25% (because for the purposes of the estimates the materials were given a mark up of 10% and because an additional 7.5% of that figure was allowed in the estimate as part of the contractor's profit). Nevertheless, the system was capable of imposing severe economic constraint, because it allowed contractors only a maximum of one month's credit on their purchases of materials. In cases where materials had been delivered immediately before the end of the period covered by the progress payment, the credit could be 24 hours only.

6 Chiverton went on site on 17 July 2006. The footers necessary for it to commence work on the first wall to be constructed had not been cut, so that Chiverton was unable to start the work of erecting it. I should make clear that it was provided in the BoQ for each wall (and was thus incorporated as a term of the contract) that the site for its construction was to be handed over to Chiverton with the footer already cut by another contractor. It was the evidence of Mr. Chiverton and I find as a fact that no footers for the first of the walls to be constructed were cut until after 10 August 2006. The evidence of both Mr. McCarthy and of Mr. Bercow, an employee of VIPM, which I accept, was that it would be impractical, if not unsafe, to cut more footers that could be quickly filled with the necessary steel and concrete. The reason for this was the risk that cut footers left empty would fill with water and cause a landslip risk—more particularly since the work was being done during the rainy season. The footers therefore could not be cut except in sections as Chiverton was in a position to commence work on them. Mr. Chiverton agreed that footers could not be left exposed for too long and said that nobody expected that any footers would have been cut when Chiverton went on site.

7 On first going onto the site Chiverton built itself a shed and tool box. About three days later, according to Mr. Chiverton, Chiverton personnel applied themselves to the tasks of cutting steel for matting and of bending reinforcing bar (“rebar”). Mr. Chiverton's evidence was that some three weeks was spent on this, by the end of which time he said that Chiverton had “prepped” the steel for over 90% of the whole works.

8 The footer for the first wall appears to have been cut by about mid August 2006 and work then started on putting the steel in place and erecting the first of the retaining walls. Almost immediately, a landslip occurred in the ground above this part of the site. Work on the retaining wall necessarily ceased while the footer was re-excavated. It is accepted that this involved a delay of some three weeks. So-called “allocation sheets” (attendance records showing tasks carried out by Chiverton's men and compiled by VIPM) show that during this period an average of very roughly nine men attended for work on site each day. Some continued to work on prepping steel and selecting stone for a wall which, as will be seen, was never built; but work was found for others by the developer through VIPM. This work was directed to be carried out by non-conforming documents, but the instructions were accepted by Chiverton and were paid for by the developer under certificates signed off by Chiverton. It is not necessary for me to set out the nature of the work carried out in this way. Chiverton was paid some US$6,600 in respect of it.

9 Some time in late August 2006 the developer decided to raise the height of the first wall from twelve to sixteen feet. It was accepted by Mr. McCarthy that this set the progress of the work back by about a month. It also involved some additional work for Chiverton, which...