Plymouth South West Co-Operative Society Ltd. v ASM

The Claimant commenced these proceedings in April 2002, claiming some £3 million odd against the Defendant architects for breach of contract and negligence arising out of the refurbishment and subdivision of the Claimant's store at Derry's Cross in Plymouth. The fact that this application to strike out comes on in December 2004, just over two and a half years after the case started, is perhaps something of an indictment of the way in which the litigation has progressed. This is the first time that the matter has come before me so it is my first opportunity to review the case and to try to work out the best course for the parties to take to ensure that there is a proper and fair trial when the much delayed hearing comes on, on 7^th March next year.

The essence of the Claimant's case is that the Defendants failed to give proper advice as to how those works should be let and managed and the allegations of breach of contract/negligence now concentrate on the period in the run-up to the letting of the building contract.

It is said that the works could reasonably have been carried out for £6.7 million. In fact the works cost £8.6 million. The rough difference between those two figures, namely, £2.1 million odd, forms the basis of the damages claim now maintained by the Claimant in this action. It will be seen that the sum now claimed is less than the sum originally claimed in the claim form.

This case was last substantially before a Judge of this Court in May of this year. On the 7^th May 2004 the Defendant made an application, effectively, to debar the Defendant from relying on expert evidence that was inconsistent with its pleaded case.

His Honour Judge Seymour Q.C. dealt with the application and I shall refer to his Judgment in a little more detail below. One of his conclusions, with which I wholly agree, was that the Claimant had failed to serve a proper Scott Schedule in accordance with the earlier orders of His Honour Judge Bowsher Q.C.

Essentially, his Honour Judge Seymour Q.C. found:

Mr Virgo has helpfully confirmed to me today that it is right that the only breakdown of the £6.7 million figure is that to be found in Appendix K to Mr Jervis' report, as summarised by him in section 11 of the body of the report.

His Honour Judge Seymour Q.C. had some important comments to make about the case, which are important and relevant to the application made by the Defendants today, and I will therefore quote them. It should be noted that, with respect, I agree with every word of these passages:

"I have to say that the present status of the action is not at all satisfactory. It does seem to me plain, from the terms of the order, that his Honour Judge Bowsher QC., made on 28^th March 2003, that what he desired and intended was that the Claimant set out in the Scott Schedule not only details of alleged breaches but also a detailed case as to damages as a result of the breaches.

In my judgment it was both necessary and appropriate for the Claimant to have set out in the Scott Schedule the sort of material and detail that is now to be found in section 11 and Appendix K.

In my judgment Justin Mort correctly characterises that Order made by his Honour Judge Bowsher Q.C., as providing the Claimant with a second opportunity to set forth its case in respect of damages.

I accept the submissions of Justin Mort that the Scott Schedule in the form that I have referred can only reasonably have been intended and understood by the Defendants as doing that. I accept that Appendix A was understood as intended, and could have only reasonably have been understood as intended, to set out the Claimant's case as to why the outturn costs should have been £6.7 million.

It is correct that Appendix A has the title which I have quoted previously and that the only understanding of Appendix A is that analysis. John Virgo states that it was an analysis of the kind of cost estimate the Defendant should have undertaken before advising the Claimant on the likely cost of the works. As I now understand it, that exercise – [and that means Appendix A to the Scott schedule] – was completely without purpose unless it was originally undertaken to be the Claimant's case on damage. The whole thing therefore appears to have been a complete waste of time.

In reality Mr Jervis, when coming to prepare his expert report, must have recognised the force in the answers prepared by the Defendant to Appendix A. He must therefore have sought to justify his figure of £6.7 million in a completely different way as dealt with at section 11 and Appendix K."

Now the Judge went on to decide that it was appropriate to allow the Claimant to rely on Appendix K. He said:

"Notwithstanding the submissions of Justin Mort, which is certainly supported by the past history of the litigation, it does seem that it would not be just to the Claimant to deny them any opportunity to rely, whatever benefit it may do them, on Appendix K and section 11 of Mr Jervis' report. At the same time justice would only be done to the Defendant by giving it the opportunity to first raise questions on the underlying assumptions used in section 11 and Appendix K."

The Judge then went on to address the detail of Appendix K and described some of the entries within it as "surprisingly bald statements". What the Judge meant was that there are various items in Appendix K where a line item is asserted and a figure is attributed to that line item without any further explanation of any kind.

The Judge also decided that once the Defendants had asked questions of the Claimant in respect of Appendix K, the Defendants would be entitled to put in a supplementary report from their expert quantity surveyor, Mr Symonds, and the Judge also ordered that the experts should meet. I should also say – and it is a point that I have taken up with both counsel this afternoon – that, although the Judge made a number of criticisms of the Claimant's case, he did nothing to prevent the Claimant from sorting out the proper pleading of its case such that it represented a more user friendly set of documents.

Now the questions that were asked in consequence of the Order that Judge Seymour Q.C., made in May of this year were dated the 24^th May 2004. The answers were dated the 18^th June and I think they reached the Defendants on 21^st June. The key questions, for the purposes of this application, are questions 40 to 43 inclusive and 46 and 47. Questions 40 to 43 read as follows:

"40.

Please provide details of any calculation that you used as at the time of preparing your report dated 29^th March 2004 in order to reach the figure of £60,000, including but without prejudice to the generality of this question:

i)

any assessment of the quantity of work involved, (including any assessment of the works omitted from this item in the course of the scope reduction);

ii)

any assessment as to rates appropriate to such work;

iii)

any rounding up or down;

iv)

any assessment of cost to take into [account] the conditions in which the work was to be executed."

Then underneath, in brackets, the questions went on:

"(For the avoidance of doubt, if in fact the figure of 60,000 is not based upon any calculation as such but is an essentially arbitrary assessment, then please say so. You are not being asked now to justify the figure of 60,000 retrospectively, only to clarify what if any justification you had at the time that you had prepared the report and to provide particulars of such justification available at that stage.)

"41.

Please provide copies of any record made of such calculation used for this item in the preparation of Appendix K of your report.

"42.

If you did carry out a calculation but have not made or retained any written record of the calculation, please say so.

"43.

Please provide like clarification as has been requested in relation to paragraph (2)"

That last question was in relation to all the items on pages 237 to 240 of Appendix K.

Request 46 was slightly different because that related to the deduction of 150,000. It asked:

"Please provide details of any calculation that you used as at the time of preparing your report dated the 29^th March 2004 in order to reach the figure of 150,000. (For the avoidance of doubt, if in fact the figure of 150,000 is not based upon any calculation as such, but is an essentially arbitrary assessment, then please say so).

"47.

Please indicate what, if any, contribution to the total figure of 150,000 was made by each of the elements listed, namely disruption, lack of design, design development and increased phases."

Now it will be seen at once that those questions were not as wide as they might have been because they were essentially limited to asking Mr Jervis what information he had in order to justify the figures at the time that he came up with them, in other words how he had arrived at those figures originally. As request 40 made plain, he was not being asked to justify the figure of £60,000 retrospectively.

The answer to all the questions set out above is essentially contained in the Answer to question number 40, so I shall read that Answer in full.

"The item as described by me as "assessed value" because it is based upon allowances made in the contract documents and/or costs incurred by PSW in similar works during the Derry's Cross Project. As I explained throughout my report, there are very few, if any, details in the documents of this work and therefore it has not been possible to quantify or cost the works precisely. This is, therefore, my best assessed estimate, bearing in mind the problems I have just stated. It does seem strange to me, given this complete lack of an audit trail, that ASM were themselves able to agree any figures with EBC because there appears to be no record of how, or why, ASM decided these figures to be correct."

Now, as far as the narrow point within the questions was concerned, namely the extent to which there was a detailed calculation at the time that Mr Jervis did his report, it might be thought that this Answer was a very long-winded way of Mr Jervis saying "No".

As far as the general intent and relevance to this action of both Appendix K and the questions of 24.5.04 are concerned, I consider that it is beyond argument that those answers were singularly unhelpful. No detail was given by Mr Jervis as to how those figures have been calculated or broken down. Furthermore, the references to allowances in the contract documents and/or costs incurred actually on the project, betray what does seem to me to be an essential muddle at the heart of at least some of Mr Jervis' work. I know that Mr Jervis says that it is others who are confused, but it seems to me that, since the £6.7 million figure was a "notional" figure, a reasonable cost which did not happen or, to put it another way, a "hypothetical" figure – which is the word that Mr Jervis himself uses – it seems to me that these references by Mr Jervis to actual costs and the like are actually misconceived. The starting point for an expert quantity surveyor doing an exercise of this kind is to start with a blank sheet of paper and a pricing book. It may be that from time to time, he can find assistance or corroborative support for the figures that he reaches, by reference to the actual costs, but I am bound to say that the essential exercise should be based on ascertaining a reasonable cost figure calculated from scratch.

Now a point arose in Mr Virgo's skeleton argument to the effect that: "well, if further information was wanted, then it was available" and he now complains that further offers made by Mr Jervis to, "provide any further data if required", have been, as it were, declined. But it seems to me that that complaint cannot work here. Either there is further information available to Mr Jervis beyond his answer to question 40 or there is not. If there is, it should have been provided in June 2004, in accordance with the Court Order. If not, then there can be no relevance in relation to any further documentation.

Now, given that very unsatisfactory situation following the provision of this information in June, one might have expected the Defendants to bring the matter back to court either in July or, at the latest, at the PTR, which was then fixed for the 1^st September 2004. They did not do so. They did, however, serve a supplementary report from Mr Symonds, their expert quantity surveyor.

Mr Virgo takes two points about Mr Symonds' report. The first seems to me to be a bad one and that is the point that because Mr Symonds in this respect sets out Sections 10 and 11 of the Jervis report and then makes various corrections to those numbers, it is said, that it appears that Mr Symonds is broadly agreeing Mr Jervis' figures. In fact, those manuscript changes were simply corrections that required to be made to Mr Jervis' own figures because some of them had not been transposed correctly.

However, the second point that Mr Virgo makes has him on stronger ground, so it seems to me. That is the point that the report served by Mr Symonds addresses the items with which we are concerned in section 4 and does not appear to identify any difficulties that he had in being able to address the points being made by Mr Jervis, notwithstanding the alleged rounded or unparticularised nature of the figures. My attention was drawn to paragraph 4.15 in which Mr Symonds says:

"In summary, although I have demonstrated that a number of the rates in the Jervis estimate are low, they do not add up to a significant total, particularly when offset by the overpriced riblath and the final unspecified 2.5 per cent to finishings. The difference between Mr Jervis' estimate and the final account cannot therefore be explained by underpricing of the individual rates."

A similar point arises at paragraph 4.26 where Mr Symonds says:

"Having commented in detail upon the figures, they do not explain the difference between Mr Jervis' figures and the final cost borne by Plymco. I shall deal with this issue in the next section of my report."

Then when he deals with that issue at paragraph 5 and in particular 5.1, he concludes that:

"The measurements for the balance of the areas outside the Argos area do not affect the figures with any significance. The pricing and assumptions of the balance of the work, though I find much to comment upon, again will not of themselves explain why the project cost what it did. All of these minor adjustments are insignificant when considered against the items that have been omitted from Mr Jervis' figures."

That then becomes his principal point, namely that the key difference between himself and Mr Jervis is that Mr Jervis' figures – including those which are the subject of the questions and the inadequate answer – are very little to the point, because what actually matters is that other items have been omitted from Mr Jervis' figures.

On the 1^st December 2004 the Defendants issued this application to strike out and no explanation for the delay in making the application has been provided.

When I looked at the documents, it seemed to me that, in truth, what the Defendants were after was an order debarring Mr Jervis from giving any evidence in relation to those items that are covered by questions 40 to 43 and 46 and 47. However, Mr Mort, who appeared for the Defendants, goes further than that because he says that what effectively should happen is that the references to the £6.7 million figure in the pleading should be struck out because that figure is based on a number of items and it is these – the ones that are the subject of the questions and the inadequate answer – which are at the heart of the disputes in relation to that figure. He says there may be a few miscellaneous items remaining but the Court should strike out the £6.7 million amount.

The application is supported by a statement from Mr Thomas, the defendant's solicitor. The application is opposed by the statements from Mr Seal, the Claimant's solicitor, and, possibly more relevantly, Mr Jervis. I have considered all that material. I do attach particular importance to Mr Jervis' statement and I will read one or two of the paragraphs that do seem to me to be of importance.

At paragraph 19, Mr Jervis confirms the significance of Appendix K when he says:

"As an entirely separate exercise, in February 2004 I carried out an exercise to hypothetically cost the scheme as built to arrive at a value for what it would have cost if different advice had been given by ASM and acted upon by PSW. This exercise is recorded in Appendix K."

Mr Mort makes the point, I think entirely fairly, that it would therefore appear that, although the original claim documents alleged the £6.7 million figure, those predated February 2004. In other words, what Mr Jervis was doing was, at least in part, a back calculation in order to try to justify the figure that had originally been pleaded, because the £6.7 million figure was asserted before the only breakdown of that figure, (which is Appendix K) was carried out.

In paragraph 28 of his statement, Mr Jervis says this:

"The constituent parts of Appendix K were, I believe, explained in considerable detail in my 240 page report of the 20^th March 2004 and in my replies to the written questions. In terms of the figures, they appear at Appendix K. They are a mixture of either figures that reflect actual cost incurred by EBC. Where that information is available, it has been extracted and assessed by myself as to its reasonableness. Where reasonable, they have been used in Appendix K. Where that information is not available, I set out my assessments of what that cost ought to have been by reference to quantities, as far as I know them, and rates that either did apply, because I know that from the documents, or alternatively reasonable rates, for example Spon's rates. In other words, all my assessed figures are the product of an appraisal by me as to the reasonableness of the known outturn cost of the bill of quantity cost."

He effectively concludes, at paragraph 42, with these words: "At the risk of labouring the point, as a quantity surveyor with 45 years' experience, I have put forward Appendix K as an assessment of a reasonable cost for the scheme of works actually carried out at Derry's Cross. I repeat that I am of the considered opinion that the scheme of works carried out could, if managed differently, have been executed for that cost."

I do not think that it is unfair to say that those various statements by Mr Jervis really amount to no more than this. He is saying: "I am an experienced quantity surveyor. This is my estimate. You should accept it."

Therefore I do accept the point made by Mr Mort that that is an unsatisfactory basis for progressing litigation of this kind because one has only to imagine a witness giving that sort of answer in the witness-box, and not giving any further detail, for the difficulties inherent in this approach to become obvious.

I also believe that the approach as set out there by Mr Jervis is wrong, for the same reasons that Judge Seymour Q.C., found it wrong when he said that the statements in Appendix K were very often "surprisingly bald". It is the same problem. It does therefore seem to me to be very odd that, having been in a situation where a Judge, in a Judgment, took a dim view of the Claimant's case and made it plain that he thought that proper information should be provided, the Claimant has not provided that information. In that context it is worth remembering that at the end of the Judgment, when the Judge was considering various points with Counsel, he did say, in respect of Mr Jervis' evidence:

"I do not want his evidence to change again. This really is the last chance saloon."

However, contrary to the approach adopted by Mr Jervis in his statement, in those paragraphs which I have just read out, at paragraph 38 of his statement he refers to a further document that he has drafted for the purposes of that statement, setting out what he calls the "assessed sums". That document takes the "assessed sums" including, but not limited to, the figures which are the subject of Mr Mort's complaint and provides, under the heading, "RGJ comment", a paragraph of information as to the calculation of the figure.

These are not particularly detailed or particularly clear in terms of their calculation but, so it seems to me, they provide at least the starting point for an expert on the other side, or the Defendants generally, to see how the claim is put, and I note with considerable surprise that here, for the very first time, Mr Jervis is identifying various rates, including some from Spon's, although he does not give page references, which he says he has used in order to arrive at these figures. I am bound to say that this seems to me precisely the sort of exercise that should have been done in June.

For all those reasons, therefore, it seems to me that the Claimant's case is, as it presently stands, in a certain amount of difficulty and things will need to be done about those difficulties because, as presently constituted, the case is not in an appropriate state to go for trial in March.

However, the detail of what needs to be done seems to me to be, at least in part, something that can be shaped only by Mr Symonds. I agree with Mr Mort that it is not for the Defendant's expert to tease out, in some slow and expensive process, precisely what the information is that ought to have been provided first time by Mr Jervis. On the other hand, it is clearly contrary to the overriding objective in the CPR for the position to be reached when claims might be struck out in circumstances where, as matters presently stand, I do not know what Mr Symonds says about the individual items. After all, if Mr Symonds is simply unable to deal with these items and cannot respond to the figures and considers that prejudice arises as a result, then he cannot possibly provide the necessary assistance to both his clients and to the court.

Therefore it does seem to me that the absence of any evidence of such concern from Mr Symonds is a point that, in considering the overriding objective, I have to take into account in dealing with this application. If there had been significant problems as a result of the failure by Mr Jervis to provide proper answers to the questions, it seems to me that those would have been highlighted by Mr Symonds in the normal course of events, in the summer or early autumn of this year. Furthermore, I have already made the point that the supplementary report that Mr Symonds did put in appears on its face not to identify particular problems being created as a result of Mr Jervis' failure to answer the questions. It is also right to point out, of course, that there is no material from Mr Symonds in respect of this particular application.

The other point that, of course, arises, is the question of the experts' meetings. I have made it quite clear to Counsel, and repeat, that, since it was apparent that there was going to be a dispute between the parties as to what had or might have been agreed at experts' meetings and who might or might not have been creating a delay in the provision of an agreed note in accordance with CPR Part 35, I have not read (and therefore had no regard whatsoever to) any correspondence relating to the experts' meetings. All I know is that the Judge envisaged by his order that there would be such meetings. It appears that meetings may have taken place but there is no agreed Part 35 note.

That highlights the difficulty that I have in concluding this application today, because, as Mr Virgo points out, it is difficult for the Court to strike out potentially vital allegations in circumstances where the points in dispute may effectively be of a very minor nature.

Accordingly, in those circumstances, I am not at the moment prepared to strike out the £6.7 million figure or, if it is a proper alternative, to debar Mr Jervis from giving the relevant evidence in sections 10 and 11 of his report. However, I am not going to dismiss this application; neither am I going to allow the Claimant to leave both its pleaded case and its expert evidence in what I regard as an unsatisfactory state.

I therefore make the following orders. The time periods identified are necessarily short because this application is standing adjourned rather than anything else.