Council defeats £1.7m claim brought by contractor over bus station

The High Court has found in favour of Blackburn with Darwen Borough Council in a dispute with a contractor which built part of the town’s new bus station.

His Honour Judge Stephen Davies, sitting as a High Court Judge, said claimant Thomas Barnes & Sons, which is in administration, had “no prospect of recovering anything in this litigation”.

The claim arose from a contract to build the bus station, which became subject to significant cost increases and delay overruns leading in turn to disputes over responsibility for these.

Blackburn with Darwen terminated the contract for alleged default by Thomas Barnes & Sons on 4 June 2015 and appointed another contractor to complete the work.

The claimant said the council’s failure to make interim payments and wrongful termination of the contract caused it to enter administration later that year.

The administrators claimed for £1,788,953.76, net of VAT and interest, which they said was due under the contract on a proper valuation of the works done at termination, and damages for wrongful termination.

HHJ Davis noted the administrators had been able to pursue the claims through financial support from members of the Barnes family who had owned the company and were secured creditors. 

The council disputed the entire claim and said Thomas Barnes & Sons owed it £1,865,975, based on contractual provisions under which it was entitled - having validly terminated the contract - to charge it for what it had to pay the other contractor to complete the work.

Blackburn with Darwen did not pursue this since “that would be a fruitless exercise given that Barnes is in administration with - according to the administrators’ progress reports - no prospect of recovery for unsecured creditors”.

HHJ Davis said Thomas Barnes & Sons' management “strongly believe that the problems which led to its being removed from the project were, in very large part, a consequence of failings by the property and infrastructure arm of the well known company, Capita plc”.

Blackburn with Darwen had hired Capita to provide a full design and project administration service.

Thomas Barnes & Sons argued those at the council and Capita responsible for the project “were very keen to pin the blame for the serious time and cost overruns on the project on someone else and that the defendant’s decision to terminate was both led by Capita and politically motivated to put the blame on the claimant”.

Giving judgment in Thomas Barnes & Sons Plc v Blackburn with Darwen Borough Council [2022] EWHC 2598 (TCC), HHJ Davis said Thomas Barnes & Sons had established an entitlement to prolongation and delay-related damages, for only 27 days beyond that already granted by the council during the contract. 

He said the council was entitled both to terminate the contract for delay-related default, and to treat the contract as discharged, remove Thomas Barnes & Sons from the site and engage replacement contractors to complete the works.

Although the council failed to follow the correct procedure for service of the notice of termination of the contract, “that did not invalidate the effectiveness of its acceptance of repudiatory breach and nor in any event was the termination notice itself repudiatory, so that the termination under the contractual provisions was still effective”.

HHJ Davis concluded: “It follows that the claimant has no prospect of recovering anything in this litigation, since any entitlement it may establish under a final account analysis would be more than extinguished by the defendant’s right to recover and to set off against such entitlement the net cost of having the contract completed by replacement contractors.”