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Buachaill
Buachaill, Barrister
Category: Law
Satisfied Customers: 10623
Experience:  Barrister 17 years experience
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We have been working company on a project that has through

Customer Question

We have been working for a company on a project that has through no fault of ours, dragged on for nearly 18 months. At their request we left site in December 2014 as funds were no longer available from the builder. We have since found out that the end client is to fund the completion of the project and that work are to resume. We met with our client and told him that we could resume our works with a completion period of 2 weeks, however due to another project that i had got them involved in that had turned sour, i needed to speak with their MD. A few days later i received a two line email from their MD informing us that we would no longer be employed to complete the project and that they have employed another company. My question is can they legally do this, if not do we have grounds to be reinstated or compensated for loss of earning?
Submitted: 2 years ago.
Category: Law
Expert:  Buachaill replied 2 years ago.
1. Can you better explain the contractual relations in the situation. With whom was the contract with the company held with - you or the builder? Were you providing sub-contractual services to the builder? What type of services do you provide? What are your losses on the contract?
Customer: replied 2 years ago.

We had a subcontractor order from Norton Mechanical to complete the Building Management System (BMS) system

Norton Mechanical were subcontracted by Heritage, the builder on the project - a very large residential property being newly built in Surrey, the property being worth around £20million.

Our contract is for £55k. We began working on this about 2 years ago, but the builder ran into financial difficulty, and our works ceased about a year ago. In the meantime, a previous employee of Heritage has formed his own company (Legacy) to take on the completion of the project, and requested Norton to continue. We, on many occasions over the last few months have asked Norton when we are required back, but were told there were money issues, and everyone was staying away. We were then asked to visit the site a couple of weeks ago to assess the scope of completion, which we did. However, the owner of Norton did not answer any of our calls following our visit, as we sought to gain assurance that we would be paid for our works, given the events of the last year. It is our belief that Norton must have suffered financially, which explains his subsequent behaviour. He initially assured us that we would be paid within 2 weeks, but then did not take our calls. We then received a 2 line email informing us that we were no longer required to complete the job. We have completed £41k of the total £55k, and have been paid for this.

However, our question is, presumably he cannot do this, we have not been given any notice, verbally or by 7 day letter. When Legacy heard of this, they were not happy, as our work is of a very specialist nature, and it would be very difficult for someone else to complete without knowing the locations of our cabling etc, which are now shut away in walls and ceilings. Legacy then decided that they would take the BMS away from Norton and employ us directly, but then Norton piped up and said that he could do it cheaper, and that Legacy should keep them and dispense with us.

Please can you clarify our position?

I hope that this is now more clear, but please let me know if you need further clarification. Thank you

Expert:  Buachaill replied 2 years ago.
2. Here you can sue both Legacy and Norton Mechanical in contract for the loss on the contract. essentially, by terminating it in the fashion they they, both have acted in breach of contract. You can sue both as under the relevant Act you have rights against the head contractor as well as against the subcontractor who employed you. Suing both might also ensure you get re-employed. There is little point in only suing Norton as they are now a direct competitor to you on the work. If Legacy perceive that they might be paying you money for nothing (part of the price anyway), then they will probably think it better to employ you anyway. so there is a tactical element in suing both. You also have a duty to mitigate your loss. This means you must take steps to reduce your loss on the contract. However, you will be entitled to your loss on the contract being terminated early.
Customer: replied 2 years ago.

Thank you very much, although I would like to clarify one aspect. Initially, we were subcontracted by Norton who were working for Heritage. Heritage, to all intents and purposes do not exist - they are in a CVA, hence why they did a deal with the project manager to complete the project himself as Legacy. We have never had a contract with Legacy, we only got as far as verbal discussions before Norton came up with their totally unrealistic costings for completion. As far as I can see, there has been no change to our contract with Norton, because I understand that he is using the excuse that our contract no longer stands because it was made when Heritage were the main contractor, so it no longer stands.

Are you saying that, although Legacy have not employed us directly at this stage, they would be responsible for breach of contract by Norton, by virtue that they are now the incumbent main contractor?

Also, what would be the basis of the claim - loss of earnings of the remainder of the contract?

Many thanks

Expert:  Buachaill replied 2 years ago.
3. There had to be a novation of all the rights of Heritage to Legacy in order for Legacy to step into the shoes of Heritage and continue the work. so the legal relations between all the parties hasn't changed. Norton's idea about parties changing is t rubbish in law. It is only a ruse to suggest they have no liability to anyone.That is why you sue Legacy, not Heritage. Secondly, the measure of loss will be the loss of earnings on the contract. This includes monies paid to staff and all the value of the contract subject to the duty of mitigation.
Expert:  Buachaill replied 2 years ago.
4. Dear *****, please RATE the answer, as otherwise your Expert does not receive a share of the monies you have already deposited with the website.
Customer: replied 2 years ago.

Thank you for your reply. Sorry, I don't quite understand what you mean by mitigating the loss on the contract, or how we calculate what our claim will be? Will it be the remainder of the contract not carried out, or just our profit element of this?

Many thanks

Expert:  Buachaill replied 2 years ago.
5. Dear *****, for example, mitigating your loss would be by employing the workers assigned to the job elsewhere or by terminating any contracts for hire of machinery which were going to be hired and used for the job, so that your loss is reduced. Mitigation essentially means measures to reduce your loss on the contract. That is why I haven't given you a straight answer as to whether it is just your profit or the price of the contract which is the allowable loss. It is all subject to this principle of mitigation. Measures taken by you to reduce the loss you suffer on the contract.
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