Mirimskaya v Evans & Anor

Factual and Procedural Background

The Plaintiff, a foreign national resident abroad, initiated a claim seeking recovery of monies allegedly overpaid to the Defendants for building works conducted at a property in West London. The First Defendant, Mr. Evans, denied having any direct contractual relationship with the Plaintiff personally. The Second Defendant, Company B, is a small property development company directed principally by Mr. Evans, through which the building works were conducted. The dispute arose from the Plaintiff's purchase of the property as a gift for her son and her intention to refurbish it to a high standard. The Plaintiff often communicated through her personal assistant, Ms. Yuschenko, who was also connected to the Defendants.

In mid-2005, Mr. Evans was engaged to carry out the first stage of the refurbishment works, with the project divided into three stages. The Plaintiff made advance payments to Company B for the first two stages and professional fees. By late 2005, concerns about delays and lack of progress led the Plaintiff to refuse further payments until a formal contract and payment schedule were agreed, which never materialized. The Defendants eventually indicated inability to continue without further payments, leading to mutual allegations of repudiation and the Plaintiff ejecting the Defendants from the site. The Plaintiff claimed an account of monies paid and sought recovery of the alleged overpayments, while Company B counterclaimed for unpaid invoices.

During the hearing, issues arose regarding the reliability of certain documents used by expert witnesses, resulting in adjournment of quantification issues and limiting the judgment to liability and principles for damages assessment.

Legal Issues Presented

1. Whether any binding contract or contracts were made between the parties concerning the building works;
2. If so, with which Defendant the contracts were made and what their terms were;
3. Whether either party breached or repudiated any such contract;
4. If breach or repudiation occurred, what damages the innocent party is entitled to;
5. If no binding contract existed, what sums the Defendants are entitled to for work carried out and whether the Plaintiff is entitled to repayment of overpaid sums.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff contended that no binding contract was ever made with either Defendant and that payments made were merely on account to commence works, anticipating a formal contract later.
• She denied entering into any agreement with Company B, asserting all dealings were with Mr. Evans personally.
• The Plaintiff argued that payment terms requiring 100% payment in advance were unreasonable and that she would not have agreed to such terms without formal documentation.
• She alleged that a significant payment for Phase 1 was made without her authority, attributing it to an error by her staff under pressure from her personal assistant.
• The Plaintiff maintained that she repudiated the contract due to Defendants’ breach and delay.

Defendants' Arguments

• The Defendants asserted that legally binding contracts were made with the Plaintiff in respect of Stage 1 and Phase 1 works, through Company B.
• They maintained that the Plaintiff accepted the contractual proposals and payment terms, including advance payments, as evidenced by documents and conduct.
• They denied that Mr. Evans had any direct contract with the Plaintiff personally, emphasizing that Company B was the contracting party.
• The Defendants contended that the Plaintiff repudiated the contracts by failing to make further payments and by wrongfully accepting the Defendants’ conduct as repudiatory.
• They claimed entitlement to unpaid instalments and damages for loss of profit resulting from the Plaintiff’s repudiation.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court carefully examined the evidence, including the sparse contemporaneous documentation and oral testimony of the principal witnesses: the Plaintiff, Mr. Evans, and Ms. Yuschenko. The Court found the Plaintiff’s evidence to be unreliable and inconsistent, whereas Mr. Evans and Ms. Yuschenko were generally reliable except for inaccuracies in dates and some details.

The Court determined that two binding contracts were formed between the Plaintiff and Company B for Stage 1 and Phase 1 works respectively. The contracts were fixed price agreements with payment terms requiring advance payments, which the Plaintiff accepted by conduct and payment of invoices issued by Company B. The Court rejected the Plaintiff’s claim that she only made payments on account without contractual commitment and that she had no intention to contract with Company B.

The Defendants’ insistence on advance payments was a known and fundamental term due to their limited financial capacity and risk aversion. The Plaintiff’s failure to pay the second instalments due under the contracts constituted breach. The Plaintiff repudiated the contracts by wrongly accepting the Defendants’ withdrawal from the site as repudiatory and by refusing to make further payments unless new contract terms were agreed.

Regarding damages, the Court applied the legal principle that unpaid instalments due before repudiation are recoverable unless there is a total failure of consideration. On the facts, the Court found that the Defendants had only expended about two-thirds of the funds received and had not started work corresponding to the unpaid instalments, constituting a total failure of consideration for those sums. Consequently, the Defendants could not recover the unpaid instalments but could claim damages for loss of profit arising from the Plaintiff’s repudiation.

The Court also addressed the issue of professional fees charged by the Defendants, finding that mark-ups on fees for external professionals were not agreed and would not be recoverable. Fees properly incurred would be accounted for without mark-up. Party wall surveyors' fees appeared payable but were not finally decided.

Holding and Implications

HOLDING: The Court held that the Plaintiff entered into two binding fixed price contracts with Company B for Stage 1 and Phase 1 works. The Plaintiff repudiated these contracts by failing to pay the second instalments and by wrongly accepting the Defendants’ cessation of work as repudiatory. The Defendants are not entitled to recover the unpaid instalments due to a total failure of consideration but are entitled to damages for loss of profit resulting from the Plaintiff’s repudiation. No contract was made with Mr. Evans personally. The Defendants’ counterclaim for unpaid invoices remains partially reserved for further evidence and determination.

IMPLICATIONS: The decision directly affects the parties by confirming the existence and terms of the contracts and the Plaintiff’s repudiation, precluding recovery of certain unpaid instalments but allowing damages claims for lost profits. The Court reserved issues of quantification of damages, interest, and costs for later determination. No new legal precedent was established beyond the application of existing contract and restitution principles.