Mr Justice Akenhead Galliford Try v Mott Macdonald
Approved Judgment
Case No: HT 05 238
Royal Courts of Justice
Strand, London, WC2A 2LL
Before:
MR JUSTICE AKENHEAD
Between:
GALLIFORD TRY INFRASTRUCTURE LIMITED (FORMERLY (A) MORRISON )CONSTRUCTION LIMITED AND (B) MORRISON CONSTRUCTION SERVICES LIMITED | Claimant |
- and - | |
MOTT MACDONALD LIMITED | Defendant |
and | |
ROWEN STRUCTURES LIMITED | Third Party |
Stephen Furst QC and Julia Dias QC (instructed by McGrigors LLP ) for the Claimant
Martin Bowdery QC, Robert Howe QC and Marc Lixenberg (instructed by Fishburns ) for the Defendant
Paul Sutherland and Katie Powell (instructed by Reynolds Porter Chamberlain) appeared for the Third Party
Hearing dates: 2, 3, 7-10, 14-17, 21-24, 28-30 April and 8 May 2008
JUDGMENT
Mr. Justice Akenhead:
Introduction
This case relates to the redevelopment of the former Victorian Birmingham Children’s Hospital for commercial purposes between about 1998 and 2002. It raises interesting issues about whether, and if so the extent to which, tortious duties arise between non-contracting parties involved in the design and construction of building developments. Particular matters of legal interest are the involvement of a design and build contractor and the presence of what have been termed “disclaimers” on various design documents produced by the engineers and said to have been relied upon.
The site was bounded by a dual carriage road, Ladywood Middleway, on the north side and Francis Road on the west side. A 12 storey (appropriately named) residential building, Tricorn House, was on the south side. The development involved the demolition of most of the old buildings on the site, the retention of the old façade fronting on to Ladywood Middleway (the “Hospital Façade”), the provision of piling broadly around the perimeter of the site, three levels of largely underground parking, the provision of a multi (20) screen cinema, a bowling alley, shops, a fitness centre, hotel and some 80 residential units. The ground floor was referred to as the “Plaza” deck or floor.
The relevant parties were as follows:
Morrison Property Solutions (Birmingham Children’s Hospital) Ltd (“MPS”): this was jointly owned by Morrison Developments Ltd (“MDL”) and British Linen Properties plc. Its function, possibly amongst others, seems to have been to employ Morrison Construction Ltd (“MCL”) to carry out the works.
MDL: this was a wholly owned subsidiary of MCL who nonetheless proceeded at arm’s length from MCL to a significant extent.
Morrison One Ltd (“MOL”): this was a wholly owned subsidiary of MDL which retained Mott MacDonald Ltd (“MM”), possibly amongst others. MOL changed its name from Morrison Property Solutions (Birmingham Children’s Hospital) Ltd and is and was a different company to MPS which acquired the same name at the same time as the MOL name change. MM is the Defendant to these proceedings.
MCL: the Claimant in these proceedings (albeit its name has since changed), MCL was retained by MPS to design and build the Works by an amended standard form of JCT Contract, the contract being entered into on 27 January 2000. The contract sum was a lump sum of £35,375,000. Provision was made for the novation of the various consultants’ contracts with MOL or MDL to MCL. In fact, no novation was effected as between MCL and MM.
MM: the consulting engineers retained by MOL to provide structural and building services engineering services. MM is and was one of the largest firms of engineers in the UK with extensive experience of projects such as that with which this claim is concerned.
Damond Lock Grabowski (“DLG”): the architects retained for the development.
Rowen Structures Ltd (“Rowen”): Rowen was the steelwork sub-contractor engaged by MCL to carry out the steelwork for the project. Sometimes wrongly referred to as “Rowans”.
Citex Bucknall Austin (“BA”): the quantity surveyors for the development.
The Morrison companies were part of a large construction and engineering group and were sophisticated and experienced both in building and in design and build operations.
There are two areas of dispute. The first relates to the horizontal or “prop” forces from the piling walls (the “pile bracing issue”) and how they were to be addressed. In essence, MCL claims that it suffered substantial delays and losses by reason of the discovery, after it had entered into its contract, that pile bracing forces had been inadequately or otherwise carelessly addressed by MM prior thereto. The second issue relates to the Hospital Façade; it is claimed broadly that MM told, advised or represented to MCL at various stages prior to MCL’s contract with MPS that the Hospital Façade could be retained without special measures to support it and that the row of rooms behind could remain and form part of the development or failed to advise that this could not be done.
As a result of the pile bracing problems, there was a substantial redesign to accommodate the prop forces which caused in turn delays. Additional work had to be done to accommodate the Hospital Façade and delays are said to have arisen in consequence thereof. The losses are said to have arisen primarily in effect because, as MCL claim, it made no or inadequate allowance within its contract price or programme for addressing the pile bracing or the Hospital Facade problems in reliance upon what it had been led to believe by MM in the period leading up to their signing of their contract with MPS.
Rowen has been joined in by MM for a contribution on the basis that, if MM is liable with regard to the pile bracing issue, Rowen is said also to have been at fault. Rowen had no material involvement in connection with the Hospital Façade issue.
As no novation was entered into as between MCL and MM, there never was any contract between MM and MCL. The claim perforce is brought in tort on the basis that there was sufficient to found a duty of care in tort such as to justify the recovery of economic loss. This is said by MCL to arise from the “close relationship” between MCL and MM, MM’s “special skill” in respect of the relevant design and other structural matters, MCL’s lack of special skill, the foreseeable and actual reliance by MCL on advice and statements from MM and because it was reasonable for MCL to rely upon MM (Paragraph 14 Re-Re-Re-Amended Particulars of Claim).
When this trial started, all aspects of liability, causation, delay and quantification were to be addressed. However, MCL’s delay expert, unfortunately, was taken to hospital during the fourth week and could not take part in the trial. In consequence with regret, I decided that all aspects of delay and quantum should be adjourned except two issues to which I will return.
Following this Introduction, the judgment is divided into the following chapters:
General Description of the Works and Terms Used
The Witnesses
The General Chronology
The MM Contract with MOL
MCL’s Contract with MPS
Rowen’s Sub-Contract with MCL
The Law relating to negligence
The Pile Bracing issue-History
The Pile Bracing issue-Decision
The Liability of Rowen
Hospital Façade issue-History
The Hospital Façade Issue-Decision
Contributory Negligence
Quantum Issues
Conclusion and Determination
General Description of the Works and Terms Used
The site for the development had a 6 metre fall from the south to the north. There had to be substantial deep excavations, following demolition of the old buildings and structures on the site and piling. The perimeter retaining walls were constructed using secant piling carried out by AMEC Civil Engineering Ltd (“AMEC”) and designed by Gibb Ltd (“Gibb”); secant piling involves the provision of regularly spaced “soft” concrete piles with harder reinforced concrete piles located between them, the object being that a continuous wall is created with the softer piles acting as a type of plug preventing water and soil passing between the harder piles. After the piling was installed, excavation within the retaining walls was to be done.
It can be appreciated that in many places, but not everywhere, the perimeter retaining walls were of considerable height, being some 12 metres above the basement floor slab. It follows from this that there will have been pressures from the ground being retained by the piled walls and the groundwater within it that would bear upon these walls during and after the excavation which would need to be restrained and accommodated both temporarily and permanently. These loads are horizontal loads and have been called “prop forces” in this case; sometimes they were and are also referred to as the “horizontal” or “retaining” wall forces or loads.
In buildings, prop forces from retaining walls may and should as appropriate be restrained by the floors on a permanent basis by:
“Strut action”: this is the mechanism whereby the prop forces can be resisted by a floor structure acting in compression against a piled wall on the opposite side of the development. In a simple rectangular arrangement between walls of similar height, these forces on one wall are resisted through the floor itself by the opposing and opposite wall.
“Diaphragm action”: this is the mechanism whereby, where there are walls at right angles to each other, the prop forces from each wall may be resisted by a floor structure which transfers the forces diagonally from one wall to the other. This is the expression used by some to describe this mechanism which I will adopt. A diaphragm is in engineering terms a stiff plate and horizontal forces through the diaphragm are often but not always transferred to the wall at right angles from that wall from which those forces emanate. The expression does not imply particularly whether the forces to be accommodated by the diaphragm action will be accommodated in a particular element of the plate.
The most relevant walls in this case were known as Walls 4 and 5 which were to be at right angles to each other; Wall 4 was the piled retaining wall adjacent to Tricorn House from Gridlines VF to WX whilst Wall 5 was along Francis Road from Gridlines W33 to W57, the site being grid-lined by the design teams.
The floors, which provide the strut or diaphragm action as the case may be, will often be concrete, steel or, as here composite slabs comprising steel and concrete elements. There were to be three (largely subterranean) car parking floors known as -3, -2 and -1. The three floors above the lowest basement floor were to comprise “composite” flooring, which can be described as concrete slabs attached to structural steelwork by means of shear connectors welded to the steel beams; for the Plaza deck floor, between the steel beams (attached to vertical columns) was steel decking onto which the concrete was to be placed and which also contributed to the composite action. The two lower car park floors were to comprise pre-cast concrete planking, resting on structural steelwork, with a concrete topping whilst the Plaza deck floor was to have a cast in situ concrete floor on the metal decking.
The slab with which the prop forces claim is concerned is the Plaza deck floor which stretched across most of the ground floor areas and is above the highest of the three car parking floors. The relevant area, for the purposes of the prop forces claim is the diagonal area across the right angle formed by Walls 4 and 5. The Plaza deck floor was to be constructed at or towards the top of Walls 4 and 5 and, as will become apparent later in this judgment, was intended to accommodate the prop forces from Walls 4 and 5. The Plaza deck floor was some 130 by 120 metres in dimension (about 15,600m²) although it was not rectangular in plan as there were some nine or more walls. As a number of the other retaining walls did not extend as high as the Plaza Deck level, these could not in themselves provide support for the prop forces at this level.
The Plaza deck, as designed and indeed as ultimately constructed, was not all at one level and there were to be what have been called various “steps” or changes in level. There was to be a particularly large difference in level (some three metres or more) in the Plaza floor in the diagonal area between Walls 4 and 5. Thus, the diaphragm action between the two walls would have to allow for these changes in level, unless some other approach was adopted.
The witnesses
I found that all the witnesses of fact who gave evidence were honest or at least not dishonest. They all tried to assist the Court. Given the events with which this case is concerned happened some nine years ago, a number of witnesses on all sides, albeit not dishonestly, embellished their recollections; there was some ex post facto reconstruction of events. My impression of the main factual witnesses was:
MCL
Mr Marsh: forthright, he gave his evidence in a clipped way; I felt that he was selective in his answers.
Mr Byrne: measured and straight, he was careful in answering questions.
Mr Lewis: cautious in giving evidence.
Mr Martin: somewhat evasive on occasion.
Mr Saunders: somewhat defensive and occasionally opportunistic.
Mr Jones: he gave evidence on delay and quantum matters.
Mr Holden: a planning engineer, his evidence went primarily to delay and thus quantum.
MM
Mr Dawson: he was nervous when giving evidence and somewhat defensive.
Mr Dobson: patently honest, bright and straight; impressive.
Mr Smeltzer: answered questions straightforwardly, but only materially became involved after the MCL/MPS contract was entered into.
Mr. Lee: of Chinese extraction, English was not his first language; he was somewhat vague and clearly in 1999 overworked.
Mr Gidwani: emphatic, straightforward and a good engineer.
Mr Woodward: although straightforward, he knew little about the detail at the time.
Rowen
Mr Emerson: fairly forthright.
Mr Harper: he was more a management type than engineer
Mr Cooper: down to earth, he had a tendency perhaps most of all to reconstruct (albeit not dishonestly). I found the development of his written statements and the reasons given orally for them not particularly convincing.
The experts
All three experts, Mr Blois-Brooke(for MCL), Mr Wasilewski (for MM) and Mr Zirmer (for Rowen) were appropriately qualified and independent. I felt that all three were open and sought to be helpful. Mr Wasilewski gave his evidence in a “chatty” fashion which simply reflected his personality. As will become apparent, given my findings on duties of care and reliance, their evidence about want of care assumes only limited importance.
It must be borne in mind that, in addition to the witness evidence, there was a very substantial amount of contemporaneous documentation.
The General Chronology
I set out a General Chronology for two reasons: to tell “the story” in general terms and to provide some background to the various contracts.
In about 1996, a Mr Matt McCloskey of a company known as Property Solutions Limited was seeking to acquire and develop the site of the Birmingham Children’s Hospital. BA, DLG and MM were retained on behalf of Mr McCloskey or his company at least to carry out preliminary work in connection with a proposed development. What were described as “Team Meetings” were held in late 1996 between Mr McCloskey and various members of his project team. From this very early stage, the project team seems to have resolved that there would be a multiscreen cinema, a bowling alley and a fitness centre, together with a hotel and a large underground car park. Contact had been made with AMC, a cinema company, with regard to AMC becoming the tenant for the cinema.
On 30 January 1997, MM wrote to Mr McCloskey with an “indication of engineering fees” for the project. This covered both building services and structural and traffic engineering. MM said:
“We understand that there is a possibility of the Design Team being novated to a contractor at some stage in the project. We confirm that we have had experience of this type of situation and are comfortable with this arrangement. Our fees would still stand if novation took place.”
By early 1997, Mr McCloskey had had discussions with MDL whose representative began to attend the Team Meetings as from early January 1997. By March 1997, the team was working towards an application for planning permission for the site, albeit this was to take some time in coming.
By about April 1997, Mr McCloskey and MDL had decided to form a joint venture company consisting of MDL and Mr McCloskey’s company. That is recorded in a memorandum of Mr Barker dated 22 April 1997.
In July 1997, MM prepared a draft “Preliminary Structural Assessment”. This document referred to architects’ drawings which described three car park levels, a Plaza Level and five floors above. Features were the cinema (it being envisaged that there would need to be an early completion of the cinema shell for fit-out purposes), a suspended swimming pool in the fitness centre area and a bowling alley on the Plaza Level. At paragraph 5.2, headed “Retaining Walls”, the following appears:
“A particular feature of the scheme is the extensive boundary retaining wall requirement. Height of walls varies from approximately 2-4m at the north up to approximately 11.5m along the south boundary. All walls will be close to existing buildings or highways. Design and construction methods will have to ensure that no significant movement occurs at the top of the walls which could lead to damage to structures, road construction or underground services. Where walls are low and spaces available to excavate outside the line of the wall then in situ reinforced concrete walls can be used. Elsewhere options will include secant pile walls … and diaphragm walls ... Over 4-5m high both these types will need to be propped temporarily before construction of adjoining structure …”
On 12 February 1998, MDL sent to MM a draft form of appointment and warranty in connection with their possible full retention as consultants for the project. That draft indicated that the building contract intended to be placed was a standard JCT form of building contract (1980 edition). What was not intended apparently at that stage was that the contractor was to be retained on a design and build contract.
In response, MM wrote on 25 February 1998 with comments. Comment (b) relating to the Scope of Appointment was:
“We understood that there is a possibility that we would be novated under a Design/Build Contract in due course. Is this still the case and if so should this be referred to here?”
The response to that from MDL dated 21 April 1998 was:
“(b) – No it will be a JCT 80 contract.”
On 23 March 1998, MM wrote to BA in the following terms:
“From an initial review of the drawings, it would appear that superstructure outside the cinema area will be similar to our original proposals but with total area reduced. Within the cinema area, the main entrance floor has dropped below the Plaza Level, and the roof has been lowered …”
This reflected a design feature which led, necessarily, to the Plaza floor level containing a number of substantial changes in level, particularly in the area of the cinema.
By mid-1998, it was clearly intended that MDL would be employing MM. By 19 May 1998, when MM wrote to MDL, it indicated that the parties appeared “to be very close to final agreement on wording of our appointment”.
By June 1998, Birmingham City Council had approved the scheme subject to the possibility of the Secretary of State calling the matter in.
In mid-June 1998, MM recorded in its note of a meeting or discussion with MDL and Mr McCloskey amongst others:
“Construction probably to be by Morrison Construction with BA reviewing and commenting on all prices. Critical packages to be identified and where necessary a letter of intent given to start prefabrication etc before main contract agreed.”
On 20 August 1998, the company which ultimately became known as MOL entered into agreements to purchase the two parcels of land comprising the site as follows:
The Birmingham Children’s Hospital from the Secretary of State for Health for £3,736,000 payable in two equal instalments, the first on completion and the second 11 months thereafter;
The Institute of Child Health from the Trustees of the Former United Birmingham Hospitals Trust Fund for £150,000.
In about late September 1998, various employees of MCL began to become involved. For instance on 29 September 1998, Mr Marsh met Mr Dawson of MM, together with a DLG representative and Mr Lewis of MDL to discuss the development. At this meeting there was a discussion about the possibility of there being a design and build construction contract with which DLG was less comfortable than MM. MCL suggests that the conversation went further and that Mr Marsh told Mr Dawson that the contract was probably going to be a design and build one. However, Mr Marsh’s witness statements do not address this point at all although he does otherwise address the 29 September 1998 meeting. He was asked about his note of the meeting in chief:
“Q. And I just want to ask you about the last, pretty much the last entry on your note, which says: "Architect less comfortable with D and B traditional, eng no problems." Can you explain what was being discussed and what that note reflects?
A.That was reference to the fact that the project would probably be a design and build project and the impression that I got from the discussion that went around the table is that the architect would have preferred a traditional scheme rather than a design and build scheme but there was no problem noted from the engineer, in respect that it would be a design and build.”
I formed the view from the note that there was simply a discussion on a “what if there is a design and build contract” basis, with DLG and MM giving the recorded answers; it is most unlikely that Mr Marsh’s recollection went further than the note and I formed the view that his oral evidence was not reliable. There clearly was no resolution about the matter. Mr Dawson’s oral evidence on the matter was presaged on the basis that he could not recall the meeting; other answers which he gave certainly did not satisfy me that he truly remembered any such conversation.
It was in September 1998 that Mr Dawson of MM first became involved and began to attend meetings. At paragraph 10.3 of the minutes of Project Meeting No 3 attended by him, the following was minuted:
“It was noted that drawings of the existing structures are stored in the old hospital buildings and it was felt that these may contain information which could be of use to the engineers in respect of the elements of the structure which are to be retained. JG [Mr Gray of MDL] to arrange for licence to cover access to this information.”
It remains unclear (and I can make no findings) as to whether these drawings were obtained by MDL or indeed even seen by MM. It is perhaps unlikely that the drawings were obtained because at Project Meeting No 6 on 17 September 1998 it was recorded at minute 10.2:
“… although the drawings of existing structures were available, these were stored in the old hospital building and ran into many thousands of drawings, with no apparent index system. Previous enquiries have confirmed that it has not been possible to locate drawings for the existing elevations and structure which were to be retained and as such it was felt that the offer was there, to the engineer and architect should they require it, but it was felt that the time spent looking for this information may be counterproductive.”
By mid-November 1998, the involvement of MCL was becoming somewhat more marked. At Project Meeting No 8 held on 11 November 1998 (attended by MCL, MDL and MM amongst others), the following was minuted:
“5.1.3 ML [Mr Lewis of MDL] confirmed that a further meeting with Morrison Construction had been held in the offices of DLG to discuss detailed design of the project. A draft programme had now been received from Morrison Construction, together with ongoing design discussions – this will be firmed up in more detail …
12.2 NF [of BA] to prepare a list of standard amendments to the D&B form of Contract as these will be required for the Agreement to lease of AMC. PR [of MDL] confirmed that standing amendments have been agreed with Morrison Construction and the two would need to be considered jointly. PR to send ML a copy of agreed amendments.”
A post meeting note on the minutes confirmed that MCL would attend all future design meetings as a member of the development team. At a Project meeting held on 30 November 1998, attended by MDL, DLG, MM and MCL amongst others, it was confirmed that MCL were looking at programming, methods of construction and buildability.
On 19 November 1998, MM wrote to MDL confirming that their fee for the structural engineering services was to be £540,000 excluding VAT. This was based, amongst other things, on a maximum capital cost of £35m.
In November 1998, MDL and MCL were between themselves discussing amendments to a design and build form of contract. MM was not made aware of these discussions. That is clear from the minutes of the Project meeting of 11 November 1998 (attended by MM amongst others) and a letter dated 27 November 1998 from MDL to BA, not copied to MM. Although the minutes record that “standing amendments [to the D&B from of contract] have been agreed with” MCL, the context was for the purposes of them forming part of the agreement for lease with AMC; it is not clear that MCL as a putative contractor was agreeing such amendments. Mr Dawson accepted under cross-examination that the contract would probably be a design and build one although the degree of probability was not clearly addressed.
By late November 1998, heads of terms had been agreed in principle with AMC with regard to the cinema area of the development. Finalisation of the AMC agreement took much longer however. Arrangements were being made with regard to the demolition contract which was to be entered into directly between MDL (or the developing company) and a selected demolition contractor.
On 8 December 1998, Sharon White, the Commercial Manager of MDL, wrote to Mr Dawson of MM with what proved to be the final version of the appointment document for MM. Indeed, this was the date selected by the parties for the agreement which was to be signed. At the time when the contract was signed, MM’s client was called Morrison’s Property Solutions (Birmingham Children’s Hospital) Limited. I will return to the terms of the appointment in the chapter of this judgment entitled “The MM Contract with MOL”. In December 1998, MM prepared their latest revision of the Demolition Works Specification. I am not satisfied that by this time a decision had been made by MPS or MDL that MCL would be employed or that MM was aware of any such development. I am also not satisfied that MM was aware that there would be a novation of their engagement to MCL or to anyone else.
Although in 1998 a joint venture company formed of MDL and Mr McCloskey’s company, Property Solutions Limited, had entered into contracts to purchase the development site in August 1998, Mr McCloskey and his company dropped out of the development and by January 1999 MPS emerged as the developer with MDL and British Linen Bank each having a 50% interest, although MM was not made aware of this.
On 12 January 1999, the benefit of the purchase contracts was assigned by MOL to MPS for a nominal consideration of £1. On the same day, the Birmingham Children’s Hospital was transferred by the Secretary of State for Health to MPS. This was all unbeknown to MM.
On 18 January 1999, MM produced its Project Plan of Work (Rev 01) which from its distribution list appears to have been for internal consumption only. Mr Dawson was to be the Project Director and Mr (Sonny) Lee to be the Project Manager. Paragraph 1.0 of the Introduction stated as follows:
“This new development in the city centre of Birmingham is by Morrison Property Solutions Limited a joint venture company between Morrison Development Limited and Property Solutions Limited. Construction of the project will be managed by Morrison Construction Limited. The project consists of the following developments:
(i) a multi-cinema complex with 22 auditoria;
(ii) retail and restaurant units;
(iii) three level basement car park for 1,400 cars;
(vi) residential units;
(v) a fitness club with 25m swimming pool.
The site is located at the former Birmingham Children’s Hospital where the façade will be retained and the rest of the old buildings will be demolished for this new development.
A particular feature of the scheme is the extensive boundary retaining wall requirement. Height of walls varies from approximate 2-4m at the north up to approximately 11.5m along the south boundaries …
The size of the site is approximately 200m x 180m.”
The Construction Managers were described as MCL. It appears that by this stage, MM was not aware, at least for certain, that MCL was to be a design and build contractor and was similarly not aware that Mr McCloskey’s company had dropped out of the picture to be replaced by the British Linen Bank as co-developer.
Under Paragraph 3 (“Scope of Work”), the following is stated:
“MMG Structures Division will provide a full civil and structural design service to Morrison Property Solutions Limited.
The work consists of the following …
• Prepare demolition specification and schedule document for the Birmingham Children’s Hospital.
• Prepare performance specification and scheme drawings for retaining wall along perimeter of the site boundary.
• Prepare preliminary design and general arrangement drawings for superstructures of multi-cinema complex, three level basement car park, retail and restaurant units, residential units and fitness club with 25m swimming pool, including roads and drainage works.
• Follow on from preliminary design work, prepare specification, detailed design and contract drawings for sub-structure foundation and superstructures of the complex …”
Under Section 8 (“Project Review”) the following was stated:
“An overall review will be carried out during April 1999. The reviewer will:
• Review design for suitability of concept.
• Check load paths for vertical and horizontal loads …”
The references to Morrison’s Property Solutions Limited were believed to be to MM’s immediate client. Mr Dawson accepted in evidence that the latter exercise was central to the design process.
In late January 1999, MDL retained a company called Wescol, a steelwork contractor, to assist in providing some ideas on pricing with regard to the proposed steelwork. Wescol proceeded promptly to provide such information. Wescol was also to examine steel and pre-cast flooring options for the car park.
As from late January 1999, from the bundles placed before the Court, it appears that MCL first began to write directly to MM. For instance, on 8 February 1999, MCL sent directly to MM Wescol costings for the car park deck options.
MCL and MM began to liaise in February 1999 about a method statement for the construction of the perimeter retaining walls. It will be appreciated that once the piled retaining walls had been installed excavation had to follow with temporary supports, usually by way of propping, provided to prevent the retaining walls from moving in.
On 12 February 1999, MDL wrote to DLG (copied to MM) in the following terms:
“I enclose for your attention the schedule for Morrison Construction showing when information is required in terms of procurement in order to obtain [bid] packages for a Design and Build Contract to be completed with firm price by the end of June.”
These showed dates for the provision of layout drawings, detailed drawings, sketches, schedules, marked-up drawings and specifications by various dates in March, April and May 1999. From this time onwards, MM knew that MCL would probably be the Design and Build Contractor.
On 19 February 1999, MCL wrote to MDL (copied to MM) enclosing a copy of their bid programme, which included proposed tender information issue dates, which suggested that MCL would be tendering for the project. On 11 February 1999, MOL had entered into its contract with MM with regard to the building services and this declared that MOL intended to place a design and build contract with MCL. It is unclear whether that filtered through then to the MM personnel working on the structural engineering aspects of the design.
In February and March 1999, MM prepared the Specification for Embedded Retaining Walls which was to be issued to obtain piling tender enquiries. MCL made various suggestions about additions and deletions to that specification, for instance in their fax to MM of 17 March 1999.
The Institute of Child Health was transferred from the Trustees to MOL on 25 March 1999 and by MOL to MPS on 31 March 1999.
The final draft (“Embedded Retaining Walls”) specification was prepared (Rev01) dated 15 March 1999. Tenders were sought and obtained from a number of piling contractors by MCL. Piling tenders were returned in early May 1999. There was some debate between MCL and MDL as to who should retain the piling contractors. It was eventually resolved between them that MCL would retain them.
MDL and British Linen Properties plc (a Bank of Scotland subsidiary) entered into a deadlock joint venture agreement at around this time. Although some finance was to be provided by the Morrison Group and the British Linen Bank, the bulk of the lending was to be obtained from the banks.
The demolition work had by then been started and was to continue until about August 1999.
In mid-April 1999, MM produced its Specification for Structural Steelwork to Car-Parking and Plaza Floor, which was circulated to MDL and MCL, amongst others. MM supplied a list of possible steelwork contractors, including Rowen, on 8 April 1999 to MCL.
By the end of April 1999, final agreement had been reached with AMC with regard to the cinema part of the development. It was clear however by then that there was likely to be significant redesign of the cinema part of the project. This is confirmed in a Morrison Construction Group plc memorandum dated 28 April 1999 to Mr Lewis of MDL.
In May 1999, MDL started having “Project Strategy” meetings internally, the first being on 27 May 1999. The minutes of that meeting record that there remained further matters to be satisfied in the AMC agreement by way of conditions precedent. Healthlands plc (“Healthlands”) had been identified as a likely tenant for the fitness centre part of the project and solicitors had now been instructed in connection therewith.
I find that throughout 1999 MDL and MCL to a substantial extent proceeded at arm’s length, although they were part of the same group. It was clear to MDL and MCL well before May 1999 that MCL would in all probability be the design and build contractor for the works with a price to be negotiated, albeit that much of the work would be done by independent subcontractors. There were after May 1999 a number of “adjudications” between MDL and MCL at which price issues were discussed and decided upon. That suggests an arm’s length relationship. Other documents indicate that it was felt necessary by MDL and MCL that a robust price for the construction works was required for funding purposes. I assume and infer that a main reason why MDL and MCL decided that they needed to proceed at arm’s length was the involvement of the British Linen Bank in the development and the need to ensure that value for money was obtained.
By late June 1999, it was appreciated that information from AMC to assist in finalising design would be delayed. This was confirmed at a procurement design programme meeting on 21 June 1999. In the May/June 1999 period, there was a substantial revision to the car park layout which had been initiated by a firm of car park design specialists, Hill Cannon. This impacted on the three car parking floors, which were substantially to be designed by MM.
On 28 June 1999, there was a “Project Strategy Meeting” attended only by representatives of the Morrison Group. The following, materially, was recorded:
“1. The “bid period” in its entirety, 23 weeks, was discussed. It was reiterated that the initial four weeks was to allow MDL to meet the Development and design freeze date and issue the “bid documentation”. There follows a 15 week period in which Construction provide a construction cost and the final four weeks has been allowed for MDL/MCL to reach financial close.
2. S McBrierty stated that Group required surety of costs by the end of the financial half year, i.e., by the end of September: this is because it is unlikely that external funding will be available until this time from British Linen Bank/Bank of Scotland …
3. S McBrierty determined that at the end of the MCL bid period, i.e. by 30th October the construction cost must be fixed as British Linen Bank/Bank of Scotland required details of the Building Contract and maximum cost as a precedent to release of funds …’”
By about mid-July 1999, Heads of Terms had been agreed with Healthlands with regard to the fitness part of the project. On 14 July 1999, a meeting had been held with potential steelwork subcontractors including Rowen. This was by way of a “beauty parade”. By this time, MCL and MDL had not agreed the cost plan for the project; they were some £5m apart. AMC’s lack of information was causing concern to MCL and MDL.
Amec re-tendered on a lump sum basis for the piling works on 14 July 1999 to MCL. This took into account various changes that had had to be introduced in consequence of the Hill Canon changes in the car park areas. On 15 July 1999, MCL placed a “letter of intent” with AMEC Civil Engineering Ltd (“Amec”) in relation to the piling; the lump sum quoted on the previous day was acceptable. Amec had decided to retain the well known consulting engineers Gibb Ltd to carry out the piled retaining wall design.
Also in August 1999, an associated Rowen company (Severfield-Reeve Structures Ltd) produced a schedule of rates, albeit not a formal tender. MCL had asked that company to produce this following the “beauty parade” meeting of some three weeks before. The choice of Rowen appears to have been entirely MCL’s.
On 5 August 1999, MDL drafted a “letter of intent” to MCL in the following terms:
“We confirm it is our intention to enter into a contract for the design and construction of the above development, subject to agreement being reached on the terms and conditions of the proposed form of contract.
Pending issue of the full suite of Main Contract Documents, please make all necessary appropriate arrangements to ensure the progress of the under noted list of advanced works packages (together with the establishment of a suitable level of on site preliminaries and off site management resources) is commence[d], in order to enable you to comply with and accommodate the current strategic programme of events:
• Contiguous piling to perimeter retaining walls – approximate anticipated cost of works £600,000.
• Enabling works and attendances associated with the contiguous piling – approximate anticipated cost of works £200,000 …”
This letter was actually sent to MCL on 1 September 1999.
By this time, 6 August 1999, the Design Team, including MM, was working to what was called a “tender design freeze” to be applied as at 9 August 1999. By this expression it was intended that there would be a pricing by MCL of that which had been designed by that date; thereafter matters would have to be priced as if for a variation. MCL’s design progress report of 6 August 1999 indicates that no design information had yet been formally received from the AMC Design Team.
On 9 August 1999, MCL wrote to the Design Team (including MM) saying that there was to be a scheme design freeze as from 9 August 1999. It was stated:
“Design development and revised layouts to suit potential tenants is to continue in parallel but be kept separate from the preparation of the bid information.”
At a meeting attended by MDL, MCL, DLG, BA and MM on 12 August 1999, some delay to the piling was notified. So far as steelwork was concerned, the minutes record:
“It was confirmed that Rowens would be brought on board as initial partners on the basis of their offer to work up the design with Mott Macdonald for a six-week period until the end of September.
At this stage Rowens were prepared to re-negotiate a tender figure or if we are unable to agree terms with them, time will allow to resubmit full tender submissions to the market.
This therefore gives us the benefit of the design sub-contract input at nil cost and the option to re-approach the market if it is felt appropriate.”
The meeting also noted that all parties were to work to the MCL bid programme. As appears below, MM was unable to do so.
By mid-August 1999, agreements had, almost, been reached with a company called Wessex Bowl with regard to that part of the project relating to the bowling facility.
On 18 August 1999, MM revised their Specification for Structural Steelwork.
By letter dated 24 August 1999, Rowen was invited to tender for the sub-contract package for structural steelwork and pre-cast concrete floors. Shortly thereafter, on 26 August 1999, representatives of Rowen attended a meeting with MM and MCL to discuss “value engineering”. That expression meant in effect engineering advice to be given to reduce the actual or potential cost to the client in connection with the steelwork package. Thus it was that from a relatively early stage, Rowen was invited to come up with sensible suggestions about saving costs by suggesting alternatives to the designs put forward or to be put forward by MM.
By the end of August 1999, differences in cost planning between MCL and MDL had come down to something just below £3m, although this was only temporary.
On 1 September 1999, Amec forwarded to MCL Gibb’s Wall 4 detailed design. This was passed on to MM. On 10 September 1999, MM (Mr Lee) wrote to MCL saying that it had reviewed Amec’s design for piling to Wall 4 and was generally satisfied with the design.
Throughout September 1999, negotiations continued between MDL and Healthlands about the possible specification for the fitness centre at the development. No final resolution was achieved at that stage.
By letter dated 8 September 1999, BA informed MM that it was then MDL’s intention to be in contract with MCL by mid-September 1999.
By early September 1999, internally MDL began to consider possible novations as between MDL and their Design Team to MCL. A draft was circulated internally on 7 September 1999. What was envisaged in a proposed draft Deed of Novation was that there would be a division of services into two categories, namely those to be performed for the benefit of MCL and those to be retained for MDL. It is asserted by MCL that a draft novation was in circulation to “the designers” by 9 September 1999 largely because a letter of that date from BA to a Mr Marshall of MCL (not copied to MM) refers to it. Neither sender nor recipient was called and there is no cover note or other record that a draft was provided to MM; a draft was sent to MM about a month later (see below). Mr Marsh, whose first statement addressed the novation refers to the October date; Mr Byrne, who was dealing with the novations suggests only the October date; Mr Dawson supports the October date. I do not accept that a draft was provided before October 1999.
By mid-September 1999, MCL and, probably, MDL was becoming concerned about the certainty of costing. Mr Marsh, for instance, wrote an internal memorandum on 13 September 1999 in the following terms:
“As the PSM meetings have been advised from 28 June 1999 and at each subsequent meeting, we have had growing concerns in respect of the sufficiency of design information being released to allow us to adequately tender the Bid packages and meet our stated intention of 60% of cost surety by the end of September: these concerns have proven to be well founded and the assessment on 9 September 1999 by myself and Mark Weaver, the Employer’s Agent, is that this may fall to as low as 25%.
In light of our video conference with Ken Gillespie, wherein the difficulties we are facing in respect of the Design Team’s release of information due to the fact that they are still responding directly to MDL as the “paymasters” were discussed at length, I confirm that a meeting has been arranged to include Martin Lewis, Alistair Paterson [DLG] and Tim Dawson [Motts] tomorrow to discuss how the problems can be mitigated and establish handover of the Design Team to MCL and under what auspices.”
This suggests that MCL was proceeding on the basis at this stage that the Design Team had not been handed over in practice or indeed in substance to MCL by that time, albeit that there had necessarily been substantial liaison between the Design Team and MCL up to that moment.
That meeting took place on 15 September 1999 to discuss bid design information release and associated matters. It was attended by Mr McMurdo of the Morrison Group, Mr Lewis (MDL), Mr Patterson (DLG), Mr Dawson (MM) and Mr Marsh (MCL). There was a discussion as to why information had been late. There clearly was some “tension” between the Morrison representatives as highlighted by minute 5:
‘J McM advised the consultants that from this point onwards they were to respond to MCL’s requirements as priority. ML [of MDL] objected to this proposal, reminded J McM that Developments were under extreme pressure to progress lettings and reiterated that both he and John Gray [of MDL] had acknowledged that their use of the shared architectural, and to a lesser extent structural, resource had impacted on the consultants’ ability to release the bid information to MCL. Notwithstanding this ML required “first call” on the Design Team to enable MD to complete the deliberations with at least Healthlands and Wessex and possibly other opportunities before they would be in a position to allow the Design Team handover to take place …’
The minutes continue:
“8. ML reminded J McM that MCL were not bidding the final scheme, TM [MCL] confirmed that this was understood and that anything not covered by the design freeze information i.e. the Healthlands/Wessex requirements would be treated as a post bid variation. AP [DLG] confirmed that separate resource was identified to deal with separate elements of the scheme in respect of variations.
9. J McM advised that at some appropriate time the Design Team would be novated to MCL and from that time forward all MDL requirements for Design Team input must come through MCL. It appears likely that this will now be at the end of next month i.e. after completion of the programmed bid period.”
A “post meeting note” was added to the minutes as follows:
“The consultants confirmed, in discussion with Neil Marshall, that all outstanding information would be made available by close of business Friday 24.09.99. This will be too late for the end of September but should allow us to utilise the procedure suggested in 4 above to provide a more accurate contract sum at the end of the programmed bid period.”
Mr Dawson accepted in evidence that he was content at that stage with the concept of MM’s engagement being novated to MCL.
By 16 September 1999, Rowen was proceeding upon the basis that it was likely to be the steelwork subcontractor, albeit that they had not put in a priced tender. There was a meeting attended by Messrs Harper and Emerson of Rowen, some seven representatives of MCL and Mr Lee of MM on 16 September 1999. The minutes (5.1) record:
“CBB [Mr Byrne of MCL] queried the design responsibilities of the team. PE [Mr Emerson] explained that MM were producing the base design in close liaison with SR (to achieve best value engineering solutions) and SR were detailing final connections.”
On 17 September 1999, MCL sent to Rowen MM’s Specification for Pre-Cast Concrete Work. There is no documentation which clearly suggests that the steelworks specification prepared by MM was ever sent to Rowen by MCL, at least prior to the eventual subcontract being entered into between MCL and Rowen.
At a Design Meeting No 3 on 23 September 1999, which was not attended by MM (who were however copied with the minutes), it was recorded that MCL took possession of the site on 6 September 1999 and that piling was starting in the last fortnight of September. With regard to steelwork, at minute 8:
“It was confirmed that insufficient information was available from Mott Macdonald and it was confirmed that all outstanding information would be with Rowens by 24 September. Rowens agreed to consider and submit a price by the 6 October …”
Under minute 8, “Contracts Report”, it was recorded as follows:
“It was acknowledged that the Design Team would probably not be novated to MCL prior to the end of October but for all intents and purposes had been under Morrison Construction’s control for several weeks.”
This final comment was not correct and was not borne out by subsequent events; as appears below (see for instance Paragraph 94) MCL did not believe it to have been the case. These minutes were only sent out four weeks later and although Mr Dawson accepted that the minute was correct, he was wrong as a matter of fact.
On 24 September 1999, there was one of several “adjudications” held between the different elements of the Morrison Group. The fact that they were having such adjudications indicates that MDL and MCL were proceeding on an arm’s length basis.
At a Morrison Strategy Meeting on 28 September 1999 (not attended by MM), it was reported, as was the case, that design work was “in delay due to the lack of information from AMC”. Final agreement had not yet been reached either with Healthlands or Wessex Bowl. By this stage MDL and MCL had reverted to being some £5m apart in terms of cost planning. The minutes of the Morrison Group Strategy Meeting held on 28 September 1999 confirm a number of these factors together with the added fact that funding with the banks had not yet been finalised with regard to the development.
On 4 October 1999, Sharon White of MDL wrote to Mr Dawson of MM in the following terms:
“As you are aware the Appointment documentation is to be novated to the Building Contractor upon completion of the Design and Build Contract.
To enable us to accomplish this, a Novation Agreement needs to be entered into between yourselves, ourselves and Morrison Construction Limited.
I enclose the form of Novation Agreement, which we use, which requires to be agreed between us. The services listed in the Second Schedule will be the services retained by [MDL] with you and the services to be included within the First Schedule are any additional services that are required from you, as agreed with the Contractor.”
Clause 2 of the attached proposed Deed of Novation stated:
“The Consultants hereby acknowledge that subject to Clause 5 below the Contractor is the party now entitled to the full benefit and burden of the Consultancy Agreement together with the full benefit of all payments already made by the Client to the Consultants thereunder and of all the services so far supplied by the Consultants.”
The First Schedule was attached but left blank.
In October 1999, there were a number of meetings and exchanges between MM, MCL and Rowen, which related to steelwork to which I will return later in this judgment.
By an Agreement for Lease dated 5 October 1999, Healthlands signed up with MPS in respect of the health and fitness centre at the development.
On 6 October 1999, Rowen submitted what it called its “Compliant Bid” in the sum of £5,575,500.83 excluding metal decking and concrete planks. Rowen also put forward what they called “Structural Steelwork Alternative Design Proposals”. The Compliant Bid offered a number of savings as well. That bid was adjusted following a meeting between Rowen and MM on 6 October 1999.
On 11 October 1999, MCL sent to Mr Dawson of MM its proposed First Schedule to the proposed Novation Agreement sent to Mr Dawson a week before by MDL. This contained some 12 types of “Additional Services”, the two most relevant of which are:
“2. Investigate and advise MCL on all potential economic design alternatives and provide sketch information sufficient for cost and comparison purposes …
11. Reference item 3 of the schedule part 1, add with full cognisance of:-
A. Main and Subcontractor cost limits. Advise Morrison Construction if any design development is likely to affect the costs of the works compared with the design contained within the contractor’s proposals.
B. The necessity to complete obligations within the specified Main Contract Programme.
C. Morrison Construction’s obligations to provide production information to its subcontractors in sufficient time for them to properly and economically complete their Subcontract Works.”
The reference to the “contractor’s proposals” is probably a reference to the same term “Contractor’s Proposals” which are identified as a document to be incorporated in the standard JCT Design and Build Contract. Somewhat confusingly, another version of the First Schedule was also provided but it contained the two paragraphs quoted above.
Rowen submitted a further quotation dated 13 October 1999. It made allowance for a number of savings which Rowen itself proposed.
At Morrison Group’s internal Project Meeting on 13 October 1999, it was confirmed that MCL would be tabling a final bid on 29 October 1999. The following was recorded:
“It was stressed that the Project Co-Ordinator, in respect of the scheme is Martin Lewis on behalf of Morrison Developments. Therefore, if actions that have been agreed at meetings are then consequently not to be pursued they must be communicated immediately to Martin Lewis, so that Morrison Developments are kept informed of progress or otherwise.”
The meeting minutes recorded at 2A that MM was still not providing satisfactory information.
On 15 October 1999, MCL, again somewhat confusingly, sent a further Additional Services First Schedule to the proposed Novation Agreement. Several of the proposed services related to Acoustic requirements.
By the latter part of October 1999, the specification for Wessex Bowl was nearing agreement. It had been through some nine revisions by that time. MM was not involved in the discussion and negotiation with Wessex so far as this is concerned.
Following discussions on 20 October 1999 between Mr Byrne of MCL and Mr Hillier of MM, Mr Byrne wrote to MM on 25 October 1999:
“Following our discussions of Wednesday 20th October 1999 we write enclosing the revised wording of the First Schedule of the Novation Agreement for your company’s services in the format agreed at our meetings.
Please would you confirm by return that the format is now agreed and that although not specifically discussed or agreed that the services do not attract additional fees to those contained within Morrison Developments’ original services agreement with your company.”
On 21 October 1999, BA as the Employer’s Agent for MPS reported to it:
“[BA] have received a report from MCL on detailing information flow for the bid…
Given the content of this report and its implications on the bid, [BA] are finding it difficult to provide Group [Morrison Group] with a market tested figure to enable a capped cost to be provided to the bank due to the fact that only 29% of the construction costs are anywhere near firm.
The overview of this situation is firstly MCL will provide a bid by 31/10/99 which will obviously due to lack of information/market tested prices include an element of contingency and risk…”
This reflected MCL’s views to a large extent as indicated for instance in Mr Byrne’s letter to MDL of 20 October 1999:
“…we write to further clarify that the release of design information from the Consultants on the project as of 18 October 1999 is continuing to affect our ability to provide fixed price certainty. We are continuing to analyse and assess through package co-ordination/interface meetings the risk associated with the information shortfall but will necessarily need to include contingency figures to compensate for these shortfalls at the end of the month.”
On 25 October 1999, MM wrote to MCL asking for a further fee to reflect what MM apparently believed was additional work which they had had to do for various redesigns and other work. The additional fee proposed was £74,550 and related at least in part to the version of the First Schedule which contained 12 types of service. On 27 October 1999, MM wrote back to Mr Byrne of MCL to say that their obligations with regard to Acoustic criteria were limited.
By late October, MM was reporting to its client, MOL, that about 90% of the steelwork design was done whilst an estimate based on tonnage had been provided for the remaining 10%. This report, as others from MM to MOL, were also these were distributed as part of the monthly project progress meetings. At this stage there was some coming and going between MM and Rowen and, independently, between Rowen and MCL; in the latter case, this was to do with price.
On 18th October 1999, MCL (without reference to MM), produced a “Tender Risk Appraisal”. It identified the value of the likely contract as approximately £35m and that overall the risk assessment on the project was classified as medium. Under the heading “Principal Risk Actions”, the following was written:
“Poor issue of information by consultant to date, particularly Structural Engineer. Allowance for contingency to be made against each trade package taking into account the level of information provided.”
This reflected the fact that from MCL’s perception MM had been proceeding too slowly. Indeed, generally MCL was sufficiently concerned at MM’s performance that they considered in early November 1999 seeking the replacement of MM with an alternative engineer, this being discussed in a Morrison adjudication meeting of 2 November 1999 and recorded in one of the attendee’s notebooks (Mr Marshall’s). Although one cannot see until later a direct complaint by MCL against MM, there were certainly some discussions between MDL and MCL personnel in October 1999 about this. It is unnecessary for me to decide whether MM was in some way to blame for any apparent delay in the production of design information. If it was necessary to make any findings on blame for the delay, on balance I would not have found that MM was to blame. It is clear that in September and October 1999 particularly, MM had been asked to get involved in some detail with and concentrate upon and prioritise significant changes to the proposed designs for, particularly, AMC areas of work. There is no doubt however that MDL, MCL and MM realised that there had been significant disruption to MM’s design process (as later confirmed in MM’s letter to Mr Lewis of 15 November 1999).
Internally within the Morrison companies, discussions proceeded with regard to reductions in the possible contract sum. This was considered important to secure funding as some £35.4 m had been allowed for in appraisals proffered for funding purposes (as referred to at an internal Morrison Project Strategy meeting of 1 November 1999). For instance in an internal memorandum, Mr Marsh of MCL wrote on 3 November 1999 following another “adjudication” between MDL and MCL of the need to reduce the contract sum by £1.8m. A number of savings were indicated including the reduction of the general contingency by £350,000 and a reduction in profit of £100,000. The discussions within the Morrison group continued, even on that day. There was a discussion between Mr Marsh and Mr McBrierty in which the following was noted:
“S McBrierty queried why the current contract sum was so high, why it had moved so much in the period since the interim adjudication and in particular why the cladding package had doubled.
T Marsh responded that at every Project Strategy Meeting and at the Interim Review it had been explained that the Design process, which MCL were trying to manage but did not control, was not keeping pace with the Bid and consequently the bid packages were being issued with big detail deficiencies …
T Marsh reiterated that the single biggest ‘failing’ of the Bid was MDL not establishing and freezing the base design and relinquishing control of the Design Team in accordance with the ‘roll-out’ document and this had been discussed on number occasion [sic] during the Bid period with C Matthews. S McBrierty responded to the effect that Developments needed the Design input to finalise their requirements. T Marsh acknowledged this but the knock-on effect to the efficiency of the Bid could not therefore be ignored. S McBrierty said ‘this always happens’ – T Marsh responded that in that case either the roll-out philosophy should be reviewed or MDL, when they appoint the consultants, should write-in the dual MDL/MCL requirement for resource so that neither party should be seen to be instructing the other.”
By 4 November 1999, MM had reviewed Gibb’s pile design for Wall 5 and was satisfied with it. This was recorded in MCL’s letter of that date to Amec.
There is an example on 9 November 1999 of MCL complaining to MM about the late supply of the information in relation to the pile wall. MCL wrote and indicated that “all costs incurred as a result of your failure to provide complete and accurate information on time will be charged to your account”.
On 11 November 1999, Mr Marsh wrote a “Commentary on information release by the Design Consultants to support the Bid process”, only for internal Morrison purposes. It was sent to Mr Gillespie of MDL. It concluded at Paragraph 21:
“The foregoing clearly demonstrates two important points
(i) MCL have voiced concerns at the ability of the Design Team to provide the necessary Bid information since 28 June, one week after week zero was set and three weeks before the commencement of the MCL Bid and consistently thereafter.
(ii) The lack of information and late release is recorded in the information review and when paraphrased in the final package summary the late issue/returns in the last three weeks of the Bid period evidences our assertion that to have achieved the costs certainty levels that we did by the end of October was a minor miracle.”
This illustrates amongst other things the fact that prior to June or indeed August MCL was not as such “bidding” or tendering for the project. As from April 1999 it, in parallel with BA, had been carrying out cost planning which involved estimating what the final cost might be. Bidding or tendering is the commercial and competitive quoting for the contract to carry out the works. There is no reliable evidence that a bid, as such, in the sense of a tender, was submitted until later, indeed until January 2000. Mr Marsh’s Commentary was accompanied by a memorandum in these terms:
“As discussed the attached highlights details of the late release of information that the Bid team had to contend with and demonstrates the major influx of material received between the dates of the interim adjudication and the final adjudication.
I have also taken the opportunity to add details of when we recorded our concerns, and to whom, to confirm that the original targets set by Group could not have been met and that the relatively high levels of assessed works and residual contingency should not have been a surprise to anyone involved with the Bid…”
There was another internal Morrison adjudication on 10 November 1999, recorded in Mr Gillespie’s confidential memo to Mr Marsh on 11 November. It was clearly the case that it was felt that substantial cost reductions had to be achieved:
“3. We need to collectively target a reduction on the cost. This requires MDL, MCL, the Design Team and Citex [BA], as a single team, collectively attacking the design of the scheme to achieve a more cost effective solution.
4. John McMurdo has agreed to hand over the Design Team. Please agree a date at the earliest opportunity but at latest within the next week.
5. Thereafter, we need to look more appropriately at the structure of our design management along with the structure of our consultants and how we deal with change…
9. Make sure the whole team realise our target is £35 [m]!…
14. We must prioritise our attack on cost, on the basis of both the procurement timescales and those areas likely to have the biggest impact on cost.”
It has not been established that the need to “attack” the cost or limit the overall cost to £35m was communicated to MM.
On 12 November 1999, at a meeting between Rowen and MCL, MCL asked Rowen further to quote for the Project on the basis that Rowen undertook the design of the steelwork package, hitherto being provided by MM. MM was not in any way a party to or aware of these discussions at this stage. This approach occurred because MCL was dissatisfied with the performance of MM, particularly with regard to speed at producing designs and information, as well as with a view to reducing cost.
On 15 November 1999, Rowen did re-quote upon the basis that it would be responsible for undertaking the design of the steelwork package. It offered a Gross Maximum Price (“GMP”) of £7.6m together with a possibility of savings if any could be “value engineered”. This sum was made up by reference to the “Value of steelwork based strictly upon Mott McDonald’s “Tender Drawings” and Specification” and amongst other things to 622 tonnes of “steelwork to areas not sized on tender drawings or in areas of scope not recognised on the drawings”. Although the figure of 622 tonnes does not correlate exactly to the tonnages referred to in earlier quotes from Rowen, it was clearly intended to relate to cover the tonnage estimates provided by MM on 8 October 1999 Rowen added this:
“In an attempt to resolve the issue of our contract value and enable us to commence meaningful design, to protect what is becoming a pressing programme constraint, we are willing to undertake the design work on the basis that Mott Macdonald provide us with all necessary assistance in respect of co-ordination and access to design information in their possession.”
In relation to the reference to the “Value of steelwork based strictly upon Mott McDonald’s “Tender Drawings” and Specification”, MCL’s Counsel asserted in its final oral closing that this demonstrated that MM’s steel work specification must have been passed to Rowen prior to its sub-contract entered into on 22 November 1999. This particular point (about this reference) was not explored in cross-examination; Rowen’s evidence was that the steel work was not supplied to it before the date of its sub-contract. I find that the steel work specification was not provided to Rowen before its sub-contract; I prefer the evidence of the Rowen witnesses on this, corroborated as it is both by the absence of any contemporaneous documentation transmitting that specification and the references in the Rowen sub-contract to other specifications (in Numbered Document 18). I assume that the reference to “specification” was to the Pre-Cast Concrete Specification which was undoubtedly transmitted to Rowen in September 1999.
On the same day, MCL wrote to Mr Lewis of MDL with regard to the design programme:
“We are now entering into the critical phase of the design and construction work and so I would like to make some suggestions for the management of the design. During the development of the retaining wall drawings we tried to incorporate building development concurrently with our drawings in order to minimise later construction changes. This has caused disruption to the design process of co-ordination checking, etc and criticism from the site team.
To date we have necessarily had to develop the design on a broad front to meet the costing requirements. In order to meet future milestones we need to manage the design more methodically so that the flow and quality of information can clearly be monitored. We are always last to receive information but first required on site.”
Following a telephone conversation, Rowen confirmed on 17 November 1999 to MCL that its GMP was £7.6m.
At a Project Strategy Meeting, attended by Morrison Group personnel, the following was minuted at paragraph 4.0:
“The Novation of the Professional Appointments is still outstanding, as negotiation of additional fees to Professionals requires reconciling. ML/TM [Messrs Lewis and Marsh] are to discuss this outside the meeting as it is not logical for additional fees to be required as the original appointments were both on a full design service and not the lesser Design Build service.”
Under Paragraph 5, headed “Construction Bid” the following was noted:
“TM reviewed his report and confirmed that with regard to Bid, the Adjudication Meeting held on 10 November 1999 came up with a figure of £37.6m and actions had been agreed to close the gap. MCL are reviewing again the situation next Wednesday. As Bank of Scotland require a further credit approval, a firm construction price is required before the final adjudication AJ [MDL] will discuss this with SMcB/JMcM.”
By letter dated 18 November 1999, Mr McMurdo wrote to MM as follows:
“You should be aware that Morrison Building Division have now concluded their initial bidding period and have presented Morrison Developments with their financial proposals for the above scheme. Whilst much remains to be done, on negotiating the final figure and concurrently ‘engineering’ the current design with the preferred sub-contractors; with the principal leases of AMC, Healthlands and Wessex Bowl in place, it is now appropriate to formally effect the novation of the designers from Morrison Developments to Morrison Building.
With this objective, I invite you to attend our Sutton Coldfield offices on Friday 26 November 1999 at 10 am …”
On 18 November 1999, Mr Marsh urged Mr Gillespie of MCL that Rowen’s bid of a GMP of £7.6m was competitive.
On 19 November 1999, Mr Byrne of MCL sent to Mr Dawson of MM another version of the proposed First Schedule to the Novation Agreement. There was (and is) some confusion because there were two First Schedules as well as a Second Schedule.
On 19 November 1999, Mr Marsh sent a memo to Mr McMurdo acknowledging “the provisional date for handover of the design team to construction as the 26th November 1999”. No such handover was as such ever communicated to MM.
Following a meeting between Mr Dawson and Mr Byrne, Mr Byrne wrote to Mr Dawson on 22 November 1999 with an amended version of one of the First Schedules, asking Mr Dawson to confirm that MM “accepts the revised amended contract conditions issued on 29 October 1999” and stating that:
“With respect of the steel frame design, this design will be completed by our sub-contractor Rowen Structures Limited, therefore the related section of the Scope of Design and Services will be amended to read ‘Steel frame check and co-ordinate’ only.
Please confirm your acceptance of the above revised documents and the reduction in the fee previously agreed with Morrison Developments due to the revised Scope of Services required by the First Schedule.”
Thereafter, MM proceeded upon the basis that it had no further responsibility for the design of the steel work other than to check and co-ordinate Rowen’s steel work designs..
Also on 22 November 1999, there was a meeting attended by four representatives of MCL and three of Rowen at which in essence agreement was reached between them as to the terms of the Sub-Contract between them. I will return to this under the heading “Rowen’s Sub-Contract with MCL”. Indeed it was on that day that MCL sent their formal Sub-Contract order to Rowen with the Sub-Contract works being described as:
“Design Fabrication Supply and Installation of Structural Steelwork Metal Deck and Pre-Cast Concrete …”
On 22 November 1999 Mr Gillespie wrote to Mr McMurdo in an internal memorandum as follows:
“From a technical perspective, we just need to make sure that any delays or costs to date are not ‘lost’ through the Novation process.”
There was a “Design Team Meeting” on 25 November 1999 for which there are no formal minutes. However, Mr Saunders kept some notes. The meeting was attended by representatives of MCL, DLG and MM, amongst others. There was a reference in this meeting to the involvement of Thorburn Colquhoun who, it was noted, were
“to mark out floor loadings …”
Thorburn Colquhoun was a reasonably well known firm of consultant structural engineers employed by Rowen to assist them with the design.
There was also on that day what has been termed a “brainstorming” meeting whose object was described in an agenda for it as being
“to familiarise [Rowen] of all the issues that will affect the final detailed design of the steel frame.”
It was recorded that Rowen had 13 weeks in which to design and fabricate the steelwork for the first area of the work. However, it was made clear that no minutes were to be taken. That meeting was attended by representatives of Rowen, DLG, MM and MCL.
On 26 November 1999, at a meeting to discuss the “Design Team Novation” attended by various Morrison Group company representatives, MM (Messrs Hillier and Dawson) and DLG it was recorded that so far as MM’s structural engineering contract was concerned:
“The First Schedule incorporating additional services requested by MCL had been agreed. Given MCL’s decision to go with a Contractor designed solution for the steelwork, final agreement of the fees had not been reached.”
It should be appreciated that there was to be a separate contract with MM in relation to the Building Services; that also had not been agreed finally at that stage. At minute 2.5 of this meeting the following was recorded:
“The Execution of the Novations
After the meeting C Byrne proposed to circulate final copies of the Agreements that MCL had reached with each of the designers. Documents will be signed and ‘held’, to be executed concurrently with the Building Contract.”
This identified what was to MCL, and probably MDL also, an important feature which was their intention to ensure that the Novations were in place, in a legally complete sense, by the time that MCL entered into its contract with MPS. As it turned out, this wish or intention was not fulfilled. On the evidence, I am not satisfied that agreement in principle was reached at this meeting between MCL and MM as to all the material terms of the novation as proposed by MCL. Fees had not been agreed.
On 26 November 1999, Mr Byrne duly sent to MM the “agreed First Schedule Additional Services for the Contractor of the Novation Agreement”. He added:
“Please find enclosed our updated procurement programme C dated 18 November 1999. This document will be supplemented with design information release schedules which will be issued in the coming week. These documents will form part of the Agreement and will detail when design information release is required.”
This latter point relating to information release had not been discussed, let alone agreed beforehand. The First Schedule added was the earlier version of the First Schedule. The relevant parts of the First Schedule attached to this letter were:
“2. Investigate and advise MCL on all potential economic design alternatives and provide sketch information sufficient for costing comparison purposes. …
5. Documentation supply timing shall comply with the agreed periods within the form of Contract …
8. Reference item 4 of Schedule Part 1
a. All of the above with full cognisance of Main and Sub-Contractor cost limits. Advise Morrison Construction if any design development is likely to affect the cost of work compared with the design contained within the Contractor’s proposals.
b. The necessity to complete obligations within the specified Main Contract Programme.
c. Morrison Construction’s obligations to provide production information to its sub-contractors in sufficient time for them to properly and economically complete their Sub-Contract Works.”
It was the case that at no time and in no material sense was MM consulted by or asked to advise MCL in relation to the eventual contract programme or to any aspect of MCL’s Bid. There is a record (of 16 August 1999) of some discussion between a Mr Hattersley of MM and Mr Saunders in late July 1999 about some programmes and preliminary costs, which was not explored in evidence; Mr Saunders did not address this and Mr Hattersely was not called. I am not able to find that this amounted to being consulted on the eventual contract programme or on MCL’s bid. MM did produce a drawing, RCS/230, in late 1999 which showed some structural work in the Healthlands area behind the Hospital façade which MCL priced with a view to such work being part of the works for which MCL was to be employed.
A schedule attached to the First Schedule identified the “Civil/Structural Engineering” services. With regard to the “Frame” the following was written in handwriting:
“Steel frame coordinate and checking only”
Mr Byrne and Mr Dawson at the meeting of 26 November were unable to agree at least as far as fees were concerned. MCL took the view that, because the steel frame design was to be carried out or at least completed by Rowen, there should be a reduction in the fee to be offset against any additional design costs attributable to tenant’s alternations. This was a matter which was never agreed between the parties.
By letter dated 29 November 1999 Thorburn Colquhoun on behalf of Rowen provided direct to MM their proposed design loadings for the cinema building. This was based on the provision of a composite steel deck. This letter was copied to MCL.
In an internal memo dated 30 November 1999 to Mr Gillespie of MCL from Mr Marshall of MCL, the following was stated in relation to the Steelwork Sub-Contract:
“13. The requirements for the works to the S/C [Sub-Contractor] design is as instructed and has been instigated to reduce the risks that were inherent if MMcD had continued with the design – the overall control of the design remains with MCL.”
MM wrote back to MCL on 3 December 1999 answering the latter’s letter of 29 November 1999 about the proposed Novation:
“Further to your letter I would like to advise that I do not agree with your assertion that we had a shortfall of design information and that this has offset the effects of the tenant’s changes and the reduction in design of the steelwork.
There have been considerable changes to the Project, both technically and from a programme point of view. The car park was changed to incorporate a flat plate design. I advised of our additional costs at the time. The effect of the car park changes caused considerable delays and redesign to the structure and also the highway works.
It should be noted that at the time of our fee bid/offer, it was anticipated that the car park would be a pre-cast concrete package i.e. with Contractor’s design. Therefore there is no reduction in our scope.
This is a complex Project and I believe that a significant input is required from us to assist in its success. This will require large teams to enable a fast turn around of information etc.
I must reiterate that we maintain a significant resource on the Project to achieve the costing requirements even though in my opinion the Project had not been developed in a methodical manner.
I would like to discuss our scope of work with you for the remaining work so that I can determine our fee situation.
I am very keen to resolve this issue so that we can keep the correct resources on the Project to meet your tight deadlines.”
There was no response to this letter. I do not consider that MM and MCL proceeded over the next two months as if they had agreed all material terms of the Novation or as if they already were in contract.
By December 1999 the piling work on site was well underway.
By letter dated 7 December 1999, MCL sent to MM five design release schedules for five packages including the steelwork and pre-cast concrete package. In December 1999 MCL prepared their price for, amongst other things, the Health and Fitness Centre first mezzanine floor details based on MM’s Drawing No. 230 (see below). There is no suggestion, and I find, that MM neither was asked to nor became involved in any aspect of this pricing exercise.
Over the period between about 8 December 1999 and 21 December 1999, there was an important exchange between MCL, Rowen and MM in relation to how and where the prop forces were to be carried. I will return to this in the Pile Bracing Issue – History chapter of this judgment.
I conclude that from the time when they received their order from MCL, Rowen and their in-house and independent engineers were working hard to carry out and finalise their design work.
By Christmas 1999 the piling works were completed as such although the capping beam, that is the beam which was to sit on top of the piling, remained to be completed.
On 21 January 2000, MCL put forward its Bid. Mr Marsh said in his first witness statement:
“Notwithstanding the difficulties we had encountered in obtaining sufficient design details in order to price the contract, we submitted a firm bid for the construction contract on 21 January 2000 based on the design information which had been provided by the design team, including Mott”
That Bid is not in the papers before the Court. It is clear from later documentation that this bid was reduced by £2-3m over the next few days. On 27 January 2000, Bank of Scotland provided a £43 million loan facility to MPS for the purposes of the development.
On 27 January 2000, MPS also entered into the Design and Build Contract with MCL. This was a fixed price lump sum contract for the sum of £35,375,000 the Date of Possession was agreed to be 6 September 1999 (when MCL did in fact move on to the site) and various completion dates were given for different sections, the last being 31 August 2001. There was a requirement in this contract for securing novation of MM’s contract with MOL. It is of some interest that between early December 1999 and the date of this construction contract there had been no and /or no material discussion between MOL/MDL, MCL and MM about the novation. Although I will return to this later, it is clear that the Novation agreement was never agreed. In the Contractor’s Proposals part of the construction contract there is contained a Contract Sum Analysis which shows 30 different packages of work, totalling £29,218,116 with a “Preliminaries” figure of £2.5m, a General Contingency of £400,000 and what is called “Contribution” of £1,557,363. There has been little or no evidence about how the vast bulk of the individual items in this analysis are made up, other than the structural steelwork and pre-cast concrete/metal decking price of £7.7m.
By early 2000 there had been a substantial change in the management of the project on the MM side. Mr Dawson was replaced by Mr Woodward whilst Mr Lee was replaced by Mr Gidwani as Project Director and Project Manager respectively. Messrs Dawson and Lee were transferred to the Heathrow Terminal 5 Project on which MM was involved.
Mr Gidwani, in particular, spent a considerable time in January and February “reading” himself into the Project. After several meetings with MCL representatives and having talked to Mr Lee, on 22 February 2000, Mr Gidwani wrote a “private and confidential” letter to Mr Woodward:
“I write to confirm my acute concern and unease over the future of this Project which I have on a number of previous occasions made known to you and Mike Barker. Unfortunately neither of you appear to have so far appreciated the gravity of the situation.
I therefore have no alternative but to reiterate these concerns to you in writing so that I am sure that you are fully advised that this Project is potentially in serious jeopardy and that you are fully aware there was a serious risk of a significant claim being made against Mott Macdonald shortly.
As you are aware I attended a meeting with Alan Clark, Tim Dawson and Sonny Lee at the Contractor’s office this afternoon. From the tone of the meeting this afternoon, it is abundantly clear that Morrisons consider that this Project has had an inadequate design input from Mott Macdonald to date and that ‘everywhere they look, there are serious unresolved design issues’. Please remember this Project has just commenced on site. Morrisons claim that they are already looking at an increase on the foundations and groundworks package of the order of ‘£500,000’. They are seriously concerned that there will be further extras on the following packages. In terms of the current ‘design’ there are a number of areas to the Project that give rise to serious ongoing concern:
1. The Healthlands Unit does not appear to have been adequately schemed since inadequate attention appears to have been given to the required changes of level, the two storey load-bearing wall sitting in the middle of the span of flat slabs which are too thin and the substantial openings and framing walls and core bases required. We can design out these problems but I consider that substantial additional structural measures may be required that Morrisons may not have allowed for.
2. There do not appear to be adequate calculations to resolve how the very substantial forces arising from the embedded retaining walls where they are propped by the floor slabs are balanced and transferred. These walls are built and temporarily propped. The slabs that are to prop them are at numerous varying levels and therefore the transfer of these forces is very complex and inevitably involves axial transfer via the steelwork. There do not appear to be any calculations determining this situation and the steelwork designer apparently is not taking any axial forces in his design! We can design out these problems but I consider that substantial additional structural measures may be required that Morrisons may not have allowed for. Incidentally, some of the temporary props are currently stressed to roughly twice their design load and everyone on site is crossing their fingers …
5. The Project appears to me to have the most onerous appointment/warranty/Novation Agreement I have ever seen on a design and build project. My opinion is that this is bordering on the reckless. Alan Clark and I have been to see Mike Tullett and he has virtually forbidden us to execute the Novation in its current form yet Tim Dawson appears to have already agreed to it in principle! Recently we have all received e-mail directions from Mike Blackburn which are quite explicit on this issue.
Problems such as the above cannot be resolved by the wave of a magic wand as you and Mike seem to anticipate. Alan and I seem to be being asked to solve these problems instantly whereas Tim and Sonny have been unable or unwilling to resolve them in a year or so. Please take note that a significant increase of resources is required on the Project and a significant cost overrun is likely. This is particularly so because the Contractor is screaming for information which we are not ready to provide because basic design has not been carried out long ago and this is forcing the order and manner of our current work to be out of logical sequence and consequentially increasing the waste. All staff working on this Project appear to be under undue stress and appear demoralised as a result.
Let me make it totally clear to you that I have not formed these views lightly but have taken some weeks of careful study of the documentation (such as it is) to reach them. You are welcome to look at the drawings with me because you will only discover the full extent of Mott Macdonald’s peril by looking at the Project at this level of detail. I have yet to have a proper and meaningful briefing from the Project Director or a convincing discussion of the design philosophy from the Project Manager who both seem very keen to finish all involvement on this Project. I am most surprised and disappointed in experiencing this negative attitude which I do not believe to be constructive or based on any ‘team spirit ethic’.
As you might expect, all the above has placed an incredible and unreasonable stress on me over the last few weeks. In fact I have woken up and lay awake most of the night every night since you first talked to me about this Project and I subsequently discovered just what a mess it is. I remember you at first told me that the design had been completely finished and there was little remaining to do. How could you be so ignorant of the truth! …”
Mr Gidwani in evidence sought to explain the principal reason behind writing the letter as being to secure additional resources for the Project.
By this time the excavation works, within the now constructed piled retaining walls, were substantially underway. It was necessary as the excavation works proceeded temporarily to prop the piled retaining walls pending the construction of the car park and plaza floors which were intended to prop them in the permanent case.
It was in mid-February 2000 when the problem associated with the prop forces and whether they were to be carried by or within the steelwork and/or the concrete slab at plaza deck level first arose. It was sparked at various meetings and then by Mr Gidwani’s Technical Query of 23 February 2000 which asked:
“The floor slabs in the car park and at plaza level are generally used to prop the retaining walls, as specified in Clause G10/111 of the Specification Structure Steelwork. Could you please provide your calculations, in accordance with this clause, to demonstrate that the floor construction satisfied the loadings given?”
There then followed over the next two months or so detailed discussions, mostly orally, between Rowen, MCL and MM not only as to the responsibility for the problem but also how to overcome the problem. I will deal with this in detail under the Pile Bracing Issue Chapters of this judgment.
A Project Board Meeting held within the Morrison Group on 2 March 2000 recorded the following:
“6. The meeting was advised that the report recognised only two values; the £38.1m January Bid and the £35.375 Contract Sum …”
This highlights the uncertainty on the evidence as to how, and taking into account what factors, MCL reached their final contract sum. It appears, and I infer, that consistently with pricing done by MCL in October and November 1999, their bid tender for the Project was substantially more than the eventual Contract Sum incorporated in the Construction Contract. That contract sum was some £2-3m less than MCL had priced for the project
By early March 2000 as their Drawing Register indicated, Rowen had provided well over 50 drawings or written sets of details including a number of them in a large number of revisions. Whilst its design process was ongoing, it is clear that a very substantial part of their design had been completed by about this time.
On 13 March 2000, DLG entered into a Novation Agreement with MCL. On 15 March 2000, MCL wrote to MM with regard to Novation as follows:
“We are in receipt of your copy letter to Tim Dawson to Chris Byrne 27 October 1999 relating to the First Schedule at the Novation Agreement and had no objection to this letter being incorporated within the Agreement to clarify your company’s duties in relation to the specific clauses.
With reference to the Design Release Schedule this document was produced in November 1999 when the document was agreed in principle and records the requirement for design release at the moment in time. This Schedule will necessarily be updated during the Project to incorporate design change.
I would request that you sign the Novation document on the above basis and return to me as a matter of urgency.”
It does not seem to have been regarded by either party that the progressing of the Novation negotiation was a matter of urgency between early December and the date of this letter. This letter was inaccurate in one respect which is, as recorded in a Morrison Internal Project Review Meeting (No. 6) the proposed Design Release Schedule had not been agreed.
So far as MM’s fees are concerned, its letter to MPS dated 20 March 2000 highlights what had been happening:
“At the beginning of March 2000 our Credit Management Section were advised by the Morrison Group that our invoices for Nov ’99, Dec’99, Jan ’00, Feb ’00 were to be reissued to Morrison Construction Ltd with Edgbaston, Birmingham. This we did on 7 March 2000 including with them a new account for additional fees.
We have now received a letter from Mr N Marshall with Morrison Construction Ltd saying that the Nov ’99 and Dec ’99 invoices remained Morrison Development’s responsibility for payment and we were asked, during a telephone conversation on 20 March 2000, to reissue the two invoices to cover the Morrison Property Solutions in Edinburgh.
We trust that you will therefore find these reissued accounts in order and look forward to receiving settlement in due course.”
With regards to Novation, MM wrote to Mr Byrne of MCL on 21 March, 2000.
“We have discussed the content of this document [Novation Agreement] on several occasions and there has been correspondence between our companies attempting to find agreed wording and content.
We have now received legal advice and after consideration it has been determined that we are unable to execute the document in its present form. We therefore enclose a copy of the proposed Novation Agreement marked up with the necessary amendments. In the event that you find our proposals unacceptable, further discussions on this matter must take place with our Contracts and Legal Departments.”
Those amendments indicated that MM was not prepared to agree with MCL that they would carry out any additional services for MCL. The fees remained to be agreed. Provision about Design Release Dates was also taken out of the draft. There were discussions towards the end of March between MCL and MM about the Novation.
It was in early April 2000 that MM raised with MCL the need to do a structural investigation of the area behind the hospital façade. I deal with this and its consequences in the Chapter of this judgment headed “Hospital Façade Issue – History”.
There was a meeting between MM (Messrs Woodward and Gidwani) and MCL (Messrs Marsh, Saunders and Byrne) on 12 April 2000 to discuss structural design. The notes record problems that MCL were continuing to encounter with the structural designs including “changes in design philosophy which should have been dealt with at Bid stage, i.e. piled wall load transfer, steel frames to residential” and “problems which should have been considered and resolved by looking ahead which have not been, i.e. the Healthlands Design”. Mr Marsh explained the history as he saw it:
• “Mid 1999 the concept design was developed.
• Summer 1999 MCL were asked to bid the Project by MDL. During this period MDL maintained control of the Design Team and used the Team to develop the design to suit the tenants who they were negotiating with, this involved far-reaching changes to some of the original design principles.
• The bid stage was hampered by lack of information. Meetings were held and an assessment of steel tonnages was made by Motts, the MCL Team had to assess a significant portion of the substructure/superstructure works because of lack of design information.
• The Design Team was handed over late November 1999, the Bid period problems continued with lack of information and this led to the substructure/superstructure package being split and then the substructure package originally fixed price being placed with a £220k loss on a remeasurable basis.
• The current ongoing situation has meant that the concrete works will have to be split …”
There was not and never had been any formal or indeed informal “handover” of the Design Team by MOL/MDL to MCL. Certain it is that MM was never informed about any such handover at the time, as such.
By mid April 2000, MM put forward what Mr Gidwani described as “the right solution”, namely the design solution which was to be adopted to provide restraint to the prop forces. This scheme (worked up over the next few months) involved an independent steelwork bracing system which braced Walls 4 and 5 independently of the steelwork which was being and had been designed by Rowen as the basic steelwork for the building. On 19 April 2000 there was a somewhat ill-tempered meeting attended by Mr Woodward for MM and Messrs Martin and Marsh for MCL; at this meeting criticisms were made of MM in relatively blunt terms.
As the excavations were being completed, foundation construction commenced in and from the second week in April 2000. The main foundations in the area adjacent to Walls 4 and 5 were completed by early August 2000.
On 4 May 2000, MM wrote to MCL about the proposed Novation Agreement. Against each service in the two “First Schedules”, MM indicated why it was unable to accept those clauses. So far as the Design Release Date obligations were concerned, it was unwilling to accept them because it considered that the dates were impossible to achieve.
In an internal memorandum dated 5 May 2000, Mr Byrne wrote to Mr Martin setting out their proposed “strategy for dealing with” MM’s Novation Agreement. It is clear from this and indeed earlier documentation that MCL regarded it as important to secure a Novation. On 8 May 2000, MCL responded to MM’s letter of 4 May 2000 on this subject. They explained why the additional services were or might be required; MCL asked MM to “consider our revised proposal in order that we can deal with this issue promptly”. A meeting was held on 9 May 2000 to discuss the Novation Agreement and the First Schedules. Some amendments were made to the draft by MCL and Mr Woodward was to review the wording.
On 8 June 2000, MCL wrote to MM with a further revised wording for the First Schedules to the Novation Agreement and a revision to Clause 4 of the Agreement itself. Two fair copies of the Novation Agreement were sent by MCL to MM under cover of a letter dated 21 June 2000. The letter asserted that “the wording of the two First Schedules and Second Schedule are in the format as discussed and agreed”.
I can broadly summarise what happened in terms of general chronology after this time:
The Novation Agreement was never finally agreed, let alone signed up to by MCL and MM. Although it may well not matter as to precisely when it became unlikely that agreement would be reached, on balance I consider that it was clear by mid 2000 that this was unlikely. The negotiations, such as they were, were and had been carried out by the parties in good faith with a view to seeking to achieve a Novation. However irreconcilable differences had emerged by about May 2000 which were never finally resolved.
The independent pile propping solution decided upon in principle in April 2000 was put into effect. There is likely to have been some overall delay and some overall increase in cost to MCL as a result of the need to add in this solution at the stage at which it was first adumbrated.
A Hospital Façade retention scheme was required temporarily to support the hospital façade whilst substantial new works were done in the area immediately behind the façade. It is unclear to me at this stage whether independent delay was caused to the Project as a result of the need for this work, although it is inevitable that there was additional cost, at least additional to what it would have cost if no such work was required.
There never was any attempt by MOL specifically to enforce any obligation which it believed it had under MM’s original appointment contract to novate to MCL.
MM continued to be involved in the design and supervision or inspection of the structural works over the following 18 months or more.
The Project was completed substantially later than allowed for in the MCL/MPS Contract.
There were two adjudications between MM and MOL with decisions being issued in December 2003 and September 2004.
MCL together with various Morrison companies had been sold. There have been a number of name changes of MCL with the currently named Claimant the same company as MCL.
By February 2001, MM reported internally in a Project review report that “the Novation Agreement had not been signed but novation has, in effect, taken place”. Mr Woodward agreed that this was happening but said that MM was being employed by MOL but working to provide advice to MCL. His subjective understanding does not assist.
The MM Contract with MOL
So far as material background facts are concerned, there is little of relevance. I find that by the time of this contract dated 8 December 1998, both parties realised that a design and build contract would be the probable contractual vehicle by which the works were to be carried out. The degree of probability was not established. No final decision had been made as to this and it was realistically possible that an ordinary form of building contract would be used. In the period immediately leading up to this contract, the parties were not addressing their minds to whether there would or would not be a novation. It had not been decided who the contractor would be although it was at least distinctly possible that it would be MCL. The “Scope of Appointment” in the MM/MOL agreement stated:
“We intend to place a building contract (“the Building Contract”) in a version of the JCT Standard Form of Building Contract [1980 Edition] [with Contractor’s Design 1981 Edition] with [ ] (“the Contractor”] to construct the Development…”
Neither of these standard forms calls for any novation.
The Deed of Appointment was in the form of a letter from MOL to MM which set out “the terms of your appointment as our Structural Engineers in connection with the Development”.
Other relevant clauses of the Deed are:
“1.1 The basis of your appointment shall be the ACE Conditions of Engagement 1995 Agreement B (1)…save insofar as the terms of such Appointment are varied by or inconsistent with the terms of this deed.
1.2 You shall provide the services defined in the Appointment referred to in 1.1 and those listed in Part 1 of the Schedule hereto exercising all skill care and diligence and complying with the requirements necessary as to timing to achieve:
- the Building Contract Programme
- the obtaining of all consents
- the approval of all drawings, documents and other information
- instructions to the Contractor
1.3 You shall undertake such other professional services which reasonably be implied as forming part of your duties hereunder or as we may reasonably request and comply with all reasonable instructions given to you by us in relation to the project.
2.1 You hereby accept the Appointment as Structural Engineers for the Development.
4.1 It is a condition of your Appointment that:
4.1.1 we shall be deemed to have relied upon your skill and judgment in respect of those matters relating to the Development which lie within the scope of your Appointment;
4.1.2 in relation to the Development and in respect of all matters which lie within the scope of your professional responsibility you have used and will use all reasonable skill diligence care and attention…
7. You may not, without our prior written consent, assign any rights or obligations you have under this Appointment…We shall be entitled to assign or transfer this Appointment and/or our rights arising under this Appointment.
17. We may from time to time require you to perform any services in addition to those set out or referred to in this Appointment which may be reasonable and such additional services will be paid at a rate to be agreed between us.
20. At all times you are to abide by the reasonable instructions of our Birmingham office ref: Martin Lewis or as he directs.”
The Schedule in Part 1 sets out the services to be provided. This included at Paragraph 1:
“The Normal Services set out in the ACE Conditions as previously referred to and Additional Services as shown on the attached Appendix”.
The Appendix contained a list of “Additional Services” from the ACE Conditions with, in handwriting, some amendments and some deletions. One deletion was:
“Investigation of the nature and strength of existing structures”.
The ACE Conditions of Engagement 1995 Agreement B (1) referred to in Clause 1 was “designed for use where a Consulting Engineer is engaged directly by the Client but not as the Lead Consultant”. The Lead Consultant here was DLG.
The Normal Services included:
“2.4 Scheme Design Stage
After receiving the Client’s consent to proceed to the Scheme Design Stage:- …
(b) Develop the design of the outline proposals for the Works in collaboration with the Lead Consultant and any Other Consultants.
(c) Prepare such representative sketches, drawings, specifications and/or calculations as are necessary to enable the Lead Consultant or any Other Consultant to prepare the Cost Plan…
(e) Collaborate with the Lead Consultant and any Other Consultant to prepare the scheme design and Cost Plan for presentation to the Client…
2.6 Tender Stage
After receiving the Client’s approval of the developed design and the Client’s consent to proceed to the Tender Stage:-
(a) Assist the Lead Consultant to assemble the tender Documentation and to issue it to firms selected to tender…
2.7 Production Information Stage
After receiving the Client’s consent to proceed to the Production Information Stage:-…
(c) Prepare any further drawings and schedules necessary to enable Contractors to carry out the Works…”
There was no draft Novation agreement attached to this Deed; if Novation of a Consultant’s appointment is called for, it is not uncommon at least on substantial developments that a draft is attached.
One issue between the parties relates to whether there was an obligation under the deed on the part of MM to novate this appointment to MCL. I have formed the view that there was no obligation or right to have this appointment novated to MCL. My reasons are as follows:
Novation:
“…does not involve the transfer of any property at all, for…it comprises the annulment of one debt and the creation of another” (United Railways of Havana and Regla Warehouses Ltd [1960] Ch 52, 88)
Chitty on Contracts (Para. 19.87) adds:
“It should, however, be noted that the effect of a novation is not to assign or transfer a right or liability but rather to extinguish the original contract and replace it with another”.
Thus, as novation does not as such involve a transfer of rights or obligations, the word “transfer” is not apt to describe a requirement to novate.
The words used here in Clause 7 “We shall be entitled to assign or transfer this Appointment and/or our rights arising under this Appointment” are not sufficiently clear to impose an obligation on MM to accept a novation to some other party. If what was intended was a right to require MM to novate with MCL or the design and build contractor yet to be appointed, one would expect much clearer wording than simply “we shall be entitled to transfer this Appointment”. One would need wording which explained that the Appointment would be extinguished and replaced by a new one. On balance, I consider that “assign or transfer” were synonymous.
Clause 8.1 of the MM/MOL contract required MM to provide collateral warranties to a number of persons such as Tenants, Purchasers or Funders:
“When requested by us to do so you shall execute Warranties in which you will recognise that you owe a duty to exercise reasonable skill, care and attention in the execution of your professional duties hereunder and that the duty of care owed by you extends not only to us but to third parties who might have or acquire an interest in all or part of the Development. The execution by you of such a Warranty will create contractual relationships with and/or duties of care owed to, but exclusively, Tenants, Purchasers and/or Funders (whether commercially or by way of grant) of the Development…”
Clause 1 of the draft Warranty attached to the contract states:
“[MM] acknowledges and warrants to the [recipient of the warranty] that [MM] has been appointed and properly instructed by the Developer as Structural Engineers in connection with the Development and in respect of all matters which lie within the scope of its professional responsibility in relation to the Development insofar as they relate to the Property [MM] has and will continue to exercise all reasonable skill care and attention. [MM] shall owe no greater obligations or liabilities under this Agreement than it owes to the Developer under the terms of the Appointment”
MM argues that this involved a material limitation upon its liabilities to third parties which should be taken into account when reviewing whether it owed a duty of care to MCL. There is no such limitation. All that this does is to impose upon MM an obligation owed to MOL to provide a collateral warranty to various third parties if asked to do so by MOL. Clause 1 of the draft Warranty simply limits the scope of the warranty to the due performance of the scope of responsibilities as defined under the MM/MOL contract. It does not limit MM’s responsibility to such third parties to the damages payable by MM to MOL.
MCL’s Contract with MPS
The form of contract was the standard JCT form of Building Contract with Contractor’s Design 1998 edition. Article 1 contained the fundamental obligation:
“Upon and subject to the Conditions and, where so stated in Appendix, upon and subject to the Supplementary Provisions issued February 1988 which modify the aforesaid Conditions, the Contractor will, for the consideration mentioned in Article 2, both complete the design for the Works and carry out and complete the construction of the Works.”
The financial basis of the contract was that it was a lump sum contract which meant that MCL could not obtain payment for more than the Contract Sum for anything which was its contractual risk. There was no evidence that this contract was shown in draft to MM.
Clause 2.5.1 of the Contract Conditions as amended stated:
“2.5.1 The Contractor warrants to the Employer that:
2.5.1.1 The Contractor is a qualified, skilled and professional Design and Build Contractor, experienced in carrying out projects of a similar type, nature, scope and complexity to the Works;
2.5.1.2 The Contractor will execute the design and construction of the Works in accordance with good industry practice and in accordance with the Health and Safety Plan; …
2.5.1.4 Each Section and the Works will with effect from its date of practical completion comply with and satisfy the Employer’s Requirements, the Agreements, the Lease, the Development Control Requirements and the Statutory Requirements; and
2.5.1.5 The Works shall, once completed, in all respects be suitable and fit for the purpose for which they are intended as indicated in the Employer’s Requirements or for any other purpose which might reasonably be inferred from the Employer’s Requirements.”
Clause 19 of the Conditions, as amended, dealt with the Novation:
“19.1 Where requested by the Employer, at the time of entering into this Contract the Contractor shall enter into a Novation Agreement in terms of the draft Novation Agreement reproduced in Appendix 7 hereto with the Employer and each of the following Consultants: …
19.1.2 The Project Civil and Structural Engineers – Mott Macdonald Ltd …
which said Consultants comprised the existing Design Team (the ‘Design Team’) for the Project …
19.3 The Contractor acknowledges and accepts full responsibility for the work and performance of the services of the members of the Design Team and for any negligence, omission or default on the part of the Design Team or any of them (whether before or after the date of Novation or the date of execution of this Contract) and for the accuracy and adequacy of any design and/or services undertaken and provided by them irrespective of when such design and services are or were carried out by them.”
There is nothing in the un-amended JCT Contract which requires or expressly (at least) anticipates any novation of this sort.
Attached as Appendix 6 was a proposed Novation Agreement for MM which was in a form which MPS anticipated might well be capable of agreement with MM and incorporated various suggested additional services to be provided to MCL. It should be borne in mind that MPS, MCL’s employer, was not the same company as MOL although at one stage up to January 1999 MOL had formerly been known as MPS.
Incorporated into the MCL/MPS Contract were the AMC Requirements, the Healthlands Fitness International Specification and the Wessex Leisure Group PLC Outline Specification.
Included in the Contract were the “Pre-Contract Change Orders” which had been agreed to reflect additional works which had not been priced as at the design freeze date in August 1999. This included PCCO VO21 which involved the new work to the Healthlands area behind the Hospital Façade which was being retained at least at that stage.
A substantial part of the Design and Build Contract documentation is the Contractor’s Proposals Documentation. This contains the Contract Sum Analysis together with a list of Contract Drawings. Interestingly this list of Contract Drawings includes drawings from DLG; those included from MM relate only to highway works and provide details such as kerbing, pavement, street lighting and service diversion. There is no inclusion of any steelwork drawings and no reference to MM’s Steelwork Specification. Those highway and related drawings were physically also incorporated into the Design and Build Contract.
The only reference to MM’s “Specification” is in the document in Appendix 4 to this Contract which is headed “Contractor’s Proposals – Submission of Documents”. In Paragraph 2.0 headed “Contractor’s Proposals”, the following is stated:
“For the avoidance of doubt, the following items shall comprise the minimum retractable content of the Contractor’s Proposals:- …
(f) Mott Macdonald’s Structural Engineer’s Detailed Specification
(g) Mott Macdonald’s Highways Detailed Specification
(h) Mott Macdonald’s M&E Services Detailed Specification…”
There were a large number of other documents in this list as well. It is clear as a matter of fact that there were a number of specifications produced by MM prior to the MCL/MPS Contract being entered into. It is equally clear that the Contractor’s Proposals did not as such seek to incorporate any of the drafts of MM’s Steelwork Specification.
Rowen’s Sub-Contract with MCL
The Sub-Contract was in effect a signed Sub-Contract order from MCL to Rowen dated 22 November 1999. It was signed by MCL on 23 December 1999 and by Rowen on 10 December 1999. The Sub-Contract details shown on the face of the order are:
(a) “Sub-Contract works description.
Design, Fabrication, Supply and Installation of Structural Steel Frame, Metal Deck and Pre-Cast Concrete Flooring and Pre-Cast Concrete Staircases and Auditoria Terracing.”
(b) “Sub-Contract Order value
£7,600,000.00 – Guaranteed Maximum Price as further defined in Numbered Document No. 5.”
(c) “Start Date/s
“Between 6 March 2000 and 27 March 2000 And as further defined in section 5 of Numbered Document No. 4, given the written notice as specified in section 5.1 thereof.”
(d) “Completion Date/s
Overall completion within 31 weeks And as further detailed in section 5 of Numbered Document No. 4.”
(e) “Incorporated Documents and Enclosures
As scheduled in attached Numbered Document No. 1 – Schedule of Incorporated Sub-Contract Order Documentation.”
Numbered Document No. 1 referred to an additional 18 Numbered Documents numbered 2 to 19. I will consider only those Numbered Documents that have any relevance to the issues in this case.
Numbered Document No. 2 was the Tender Enquiry documentation which was amended, somewhat, for the purposes of the signed Sub-Contract. The invitation to tender dated 24 August 1999 had a schedule of attached documents. The attachments, apart from referring to a number of drawings, refer to various Specifications, but not MM’s Structural Steelwork Specification. There is a reference to the Outline Development and Premises Specifications and also the Outline Method Statement for Structural Steelwork and Pre-Cast Concrete Enquiries.
Numbered Document No. 3 contains various letters, meeting notes and other documents. The Notes of the meeting between Rowen and MCL on 28 October 1999 referred to in the Pile Bracing issue – history chapter below – stated against paragraph 2.2 under a heading “Scope of Works”:
“The principles as discussed at the meeting 6 October 1999 were reviewed, i.e. both parties marked up a set of drawings showing the assessment in either percentage or tonnage for the areas which had not been fully designed and that [Rowen] had taken these assessments on board in agreeing an all encompassing figure for the package.”
Numbered Document No. 4 was entitled “Sub-Contract Selection Meeting Minutes” and it related to a meeting between MCL and Rowen on 22 November 1999. Paragraph 4.4 entitled “Scope of Sub-Contract Works” stated:
“The Sub-Contractor will supply – All necessary competent staff, supervision, labour, plant, small tools, fuels, materials and fixings, To Design and prepare fabrication and working drawings to fabricate, assemble, supply, deliver, distribute and fix into final position, The … Structural Steelwork Pre-Cast Concrete (excluding Residential) and Metal Deck Flooring and Pre-Cast Concrete Staircases and Auditoria Terracing and supply only of loose steelwork to the Residential only, All – Executed in strict compliance and in accordance with all prevailing and relevant British standards, European Community Regulations, codes of practice, manufacturers’ recommendations and instructions.”
Clause 4.5 was entitled “Changes To The Specification And Or Design”. Those “Proposed By The Sub-Contractor” were said to be:
“Original bid based on Engineer’s Design – Final scheme to be Sub-Contract Design.”
Clause 21.2, entitled “General Matters” stated:
“The Sub-Contractor’s rates and prices are deemed to have been based upon the information issued to MCL at tender stage by the Clients, i.e. preliminaries, specifications, preambles etc, and the Sub-Contractor has been given the opportunity to view these documents or they are otherwise incorporated into the sub-contract enquiry.”
Numbered Document No. 5 was the Sub-Contract Sum Analysis. The front page stated:
“Guaranteed Maximum Price, incorporating rates and prices abstracted from Rowen Structures tenders and correspondence dated 06/10/99, 13/10/99, 14/10/99 (cost 2), 27/10/99, 29/10/99, 15/11/99 and 17/11/99, all as the appended Sub-Contract Sum Analysis [blank] £7,600,000.00.”
The following six pages comprise a breakdown of the sum finally quoted by Rowen, with references against each rate or price of the date of the tender document in which the rate or price appears. Thus there are some 12 references for “allowances in respect of missing and unsized steelwork relating to Mott MacDonald drawings”; in particular this relates to drawings 152-159 and 165. There is thus an allowance of 75 tonnes for “level changes to Plaza level steel” in relation to MM drawing 154. There is no specific allowance or reference to steelwork to accommodate prop forces. Just over £300,000 is deducted within the calculation for what is said to be “General Value Engineering/Commercial Adjustment”. The six pages conclude with the following:
“The above is a Guaranteed Maximum Lump Sum Price for the Design and (subject always to MCL approval), Fabrication, Supply and Installation of the Structural Steelwork, Pre-Cast Concrete (excluding Residential) and Metal Deck Flooring, Pre-Cast Concrete Staircases and Pre-Cast Concrete Auditoria Terracing together with the Supply only of the loose Steelwork to the Residential Units all as detailed on the drawings listed on the appended schedule, excluding any steelwork to the glazed support …
The foregoing rates and prices, incorporating where applicable reductions for lump sum and average savings, will be utilised for the purpose of measuring and evaluating the scheme upon completion of the Sub-Contractor’s design and value engineering exercises.
Those items of value engineering already identified as savings are at the Sub-Contractor’s risk with no adjustment for the Guaranteed Maximum Lump Sum Price in the event of those savings not being realised. In the event of any value engineering savings arising over the identified £1.31 Million (noted * thus), the initial £100,000 will remain with the Sub-Contractor to fund the design costs and the remainder will be shared on a 50/50 basis between the Sub-Contractor and the Morrison Construction Group. Any further value engineering savings realised other than those previously identified will be shared on a 50/50 basis, as before.”
The drawings listed on the appended schedule included MM’s drawings 150-174 as well as a number of DLG drawings. They included MM drawings 001 to 009 relating to the retaining walls.
Numbered Document No. 17 was the Sub-Contractor Design Supplement. There are some material clauses:
“1.1 Design Warranty
1.1.1 The sub-contractor warrants to have exercised, and to exercise, all reasonable skill and care in:
the design of the sub-contract works in so far as the sub-contract works have been, or will be, designed by or on behalf of the sub-contractor …
The satisfaction of any performance specification or requirement in so far as such specification or performance requirement is included, or referred to or implied in the description of the sub-contract works included above or annexed hereto.
1.5 Co-ordination of Design
1.5.1 The sub-contractor shall ensure that his design is fully Co-ordinated and integrated with the design of the structure and/or other installations including products or components to be provided by the suppliers named in the tender documents.”
Numbered Document No. 18 contains the Outline and Premises specifications and the Mott MacDonald specification for Pre-Cast Concrete Works. There is nothing in any of these specifications which cross-references or incorporates by reference MM’s Structural Steelwork Specification. In the Outline Development Specification for the Car park, an option of either a “steel or pre-cast concrete frame” was given.
It is suggested by MM that, because on disclosure by Rowen MM’s Steelwork Specification was clipped together with Rowen’s version of the sub-contract, that document was attached originally. I am not satisfied that that was the case. It was said, and I accept, by Rowen’s witnesses that they certainly received this specification some time after the sub-contract was entered into and it is likely that such a document would have been put with the other specifications.
A key issue, at least as between MM and Rowen, is the extent to which Rowen was bound in some way as a matter of its sub-contractual obligation by the MM’s designs. There is no doubt that historically the price had to a significant extent been based, as Numbered Document No. 5 made clear, on numerous drawings prepared by MM and, indeed, DLG. However, against that, it is equally clear that Rowen was at liberty to amend the design shown on those drawings as it saw fit at the very least to achieve or effect value engineering. Indeed, the Sub-Contract Sum Analysis shows in a number of respects, by reference to the specific value engineering referred to in the breakdown, that there were to be significant departures from the MM drawings. One must also give some effect to the GMP provisions.
I have formed the view that this Sub-Contract properly construed imposed a total design responsibility on Rowen for the steel work. The terms of the Sub-Contract Order are not limited by words such as “completing” the design: the obligation is to “design”. Numbered Document No. 4 similarly makes it clear that the scope of the sub-contract works is to design the structural steelwork and that, although the original bid was based to a significant extent on MM’s design, the final scheme was to be a sub-contract design. The fact that Numbered Document No. 17 imposed the MCL Sub-Contractor Design Supplement on to Rowen emphasises that. There was no responsibility on Rowen to design the structural concrete to be placed on the steel decking at Plaza deck level albeit that the co-ordination obligation required Rowen to liaise with MCL and MM in practice about that aspect of the project.
Finally, Clause 1.5.1 of that Design Supplement imposes upon Rowen the obligation to ensure that its design was “fully co-ordinated and integrated with the design of the structure”.
The Law relating to negligence
In Hedley Byrne & Co v Heller & Partners Ltd [1964] AC 465, the House of Lords addressed a tortious duty arising out of a careless statement reference given by a bank about a customer. This is, rightly, regarded as a key decision in the development of the law of negligence. Their Lordships’ judgments bear repeating:
Lord Reid:
“I shall therefore treat this as if it were a case where a negligent misrepresentation is made directly to the person seeking information, opinion or advice, and I shall not attempt to decide what kind or degree of proximity is necessary before there can be a duty owed by the defendant to the plaintiff. (Page 482)
The law ought so far as possible to reflect the standards of the reasonable man, and that is what Donoghue v. Stevenson sets out to do. The most obvious difference between negligent words and negligent acts is this. Quite careful people often express definite opinions on social or informal occasions even when they see that others are likely to be influenced by them; and they often do that without taking that care which they would take if asked for their opinion professionally or in a business connection. (Page 482)So it seems to me that there is good sense behind our present law that
in general an innocent but negligent misrepresentation gives no cause of
action. There must be something more than the mere misstatement. I
therefore turn to the authorities to see what more is required. The most
natural requirement would be that expressly or by implication from the
circumstances the speaker or writer has undertaken some responsibility,
and that appears to me not to conflict with any authority which is binding
on this House. Where there is a contract there is no difficulty as regards
the contracting parties: the question is whether there is a warranty. The
refusal of English law to recognise any jus quaesitum tertio causes some
difficulties, but they are not relevant here. Then there are cases where a
person does not merely make a statement but performs a gratuitous service. I do not intend to examine the cases about that, but at least they show that in some cases that person owes a duty of care apart from any contract, and to that extent they pave the way to holding that there can be a duty of care in making a statement of fact or opinion which is independent of contract. (Pages 483-4)A reasonable man, knowing that he was being trusted or that his skill
and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or enquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the enquirer which requires him to exercise such care as the circumstances require. (Page 486)The Appellants founded on a number of cases in contract where very
clear words were required to exclude the duty of care which would otherwise have flowed from the contract. To that argument there are, I think, two answers. In the case of a contract it is necessary to exclude liability for negligence, but in this case the question is whether an undertaking to assume a duty to take care can be inferred: and that is a very different matter. And, secondly, even in cases of contract general words may be sufficient if there was no other kind of liability to be excluded except liability for negligence: the general rule is that a party is not exempted from liability for negligence" unless adequate words are used"—per Scrutton L.J in Rutter v. Palmer [1922] 2 K.B. 87. It being admitted that there was here a duty to give an honest reply, I do not see what further liability there could be to exclude except liability for negligence: there being no contract there was no question
of warranty. (Pages 492-3)I am therefore of opinion that it is clear that the Respondents never under-
took any duty to exercise care in giving their replies.” (Page 493)
Lord Morris of Borth-y-Guest:
“The legal issue which arises is, therefore, whether the bank would have
been under a liability to Hedleys if they had failed to exercise care. This
involves the questions whether the circumstances were such that the bank
owed a duty of care to Hedleys, or would have owed such a duty but for
the words " Without Responsibility ", or whether they owed such a duty
but were given a defence by the words " Without Responsibility " which
would protect them if they had failed to exercise due care. (Page 494)If someone who was not a customer of a bank made a formal approach to the bank with a definite request that the bank would give him deliberate advice as to certain financial matters of a nature with which the bank ordinarily dealt the bank would be under no obligation to accede to the request: If however they undertook, though gratuitously, to give deliberate advice (I exclude what I might call casual and perfunctory conversations) they would be under a duty to exercise reasonable care in giving it. They would be liable if they were negligent although, there being no consideration, no enforceable contractual relationship was created. (Page 495)
My Lords, these are but familiar and well known illustrations, which
could be multiplied, which show that irrespective of any contractual or
fiduciary relationship and irrespective of any direct dealing, a duty may be
owed by one person to another. It is said, however, that where careless
(but not fraudulent) misstatements are in question there can be no liability
in the maker of them unless there is either some contractual or fiduciary
relationship with a person adversely affected by the making of them or
unless through the making of them something is created or circulated or some situation is created which is dangerous to life, limb or property. In logic I can see no essential reason for distinguishing injury which is caused by a reliance upon words from injury which is caused by a reliance upon the safety of the staging to a ship or by a reliance upon the safety for use of the contents of a bottle of hair wash or a bottle of some consumable liquid. It seems to me, therefore, that if A claims that he has suffered injury or loss as a result of acting upon some misstatement made by B who is not in any contractual or fiduciary relationship with him the enquiry that is first raised is whether B owed any duty to A: if he did the further enquiry is raised as to the nature of the duty. There may be circumstances under which the only duty owed by B to A is the duty of being honest: there may be circumstances under which B owes to A the duty not only of being honest but also a duty of taking reasonable care. The issue in the present case is whether the bank owed any duty to Hedleys and if so what the duty was. (Pages 496-7)Leaving aside cases where there is some contractual or fiduciary relation-
ship, there may be many situations in which one person voluntarily or
gratuitously undertakes to do something for another person and becomes
under a duty to exercise reasonable care. I have given illustrations. But
apart from cases where there is some direct dealing there may be cases
where one person issues a document which should be the result of an
exercise of the skill and judgment required by him in his calling and where
he knows and intends that its accuracy will be relied upon by another. (Page 497)My Lords, I consider that it follows and that it should now be regarded
as settled that if someone possessed of a special skill undertakes, quite
irrespective of contract, to apply that skill for the assistance of another
person who relies upon such skill, a duty of care will arise. The fact that
the service is to be given by means of or by the instrumentality of words
can make no difference. Furthermore, if in a sphere in which a person
is so placed that others could reasonably rely upon his judgment or his
skill or upon his ability to make careful inquiry, a person takes it upon
himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise. (Pages 502-3)
Lord Hodson:
“Was there, then, a special relationship here? I cannot exclude from
consideration the actual terms in which the reference was given and I cannot see how the Appellants can get over the difficulty which these words put in their way. They cannot say that the Respondents are seeking, as it were, to contract out of their duty by the use of language which is insufficient for the purpose if the truth of the matter is that the Respondents never assumed a duty of care nor was such a duty imposed upon them. The first question is whether a duty was ever imposed, and the language used must be considered before the question can be answered. In the case of a person giving a reference I see no objection in law or morals to the giver of the reference protecting himself by giving it without taking responsibility for anything more than the honesty of his opinion which must involve without taking responsibility for negligence in giving that opinion. I cannot accept the contention of the appellants that the responsibility disclaimed was limited to the bank to which the reference was given nor can I agree that it referred only to responsibility for accuracy of detail.” (Page 511)
Lord Devlin:
“Now, it is not, in my opinion, a sensible application of what Lord Atkin
was saying for a judge to be invited on the facts of any particular case to
say whether or not there was "proximity” between the plaintiff and the
defendant. That would be a misuse of a general conception and it is not
the way in which English law develops. What Lord Atkin did was to use
his general conception to open up a category of cases giving rise to a special duty. It was already clear that the law recognised the existence of such duty in the category of articles that were dangerous in themselves. What Donoghue v. Stevenson did may be described either as the widening of an old category or as the creation of a new and similar one. The general
conception can be used to produce other categories in the same way. An
existing category grows as instances of its application multiply until the
time comes when the cell divides. (Pages 524-5)I think, therefore, that there is ample authority to justify your Lordships
in saying now that the categories of special relationships which may give
rise to a duty to take care in word as well as in deed are not limited to
contractual relationships or to relationships of fiduciary duty, but include
also relationships which in the words of Lord Shaw in Nocton v. Ashburton at page 972 are " equivalent to contract" that is, where there is an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract. Where there is an express undertaking, an express warranty as distinct from mere representation, there can be little difficulty. The difficulty arises in discerning those cases in which the undertaking is to be implied. In this respect the absence of consideration is not irrelevant. Payment for information or advice is very good evidence that it is being relied upon and that the informer or adviser knows that it is. Where there is no consideration, it will be necessary to exercise greater
care in distinguishing between social and professional relationships and
between those which are of a contractual character and those which are not. It may often be material to consider whether the adviser is acting purely out of good nature or whether he is getting his reward in some in direct form. The service that a bank performs in giving a reference is not done simply out of a desire to assist commerce. It would discourage the customers of the bank if their deals fell through because the bank had refused to testify to their credit when it was good. (Pages 528-9)I have had the advantage of reading all the opinions prepared by your
Lordships and of studying the terms which your Lordships have framed
by way of definition of the sort of relationship which gives rise to a responsibility towards those who act upon information or advice and so creates a duty of care towards them. I do not understand any of your Lordships to hold that it is a responsibility imposed by law upon certain types of persons or in certain sorts of situations. It is a responsibility that is voluntarily accepted or undertaken either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction. In the present case the Appellants were not, as in Woods v. Martins Bank, Ltd. and Another [1959] 1 Q.B. 55, the customers or potential customers of the bank .Responsibility can attach only to the single act, i.e. the giving of the reference, and only if the doing of that act implied a voluntary undertaking to assume responsibility. This is a point of great importance because it is, as I understand it, the foundation for the ground on which in the end the House dismisses the appeal. I do not think it possible to formulate with exactitude all the conditions under which the law will in a specific case imply a voluntary undertaking any more than it is possible to formulate those in which the law will imply a contract.
Rut in so far as your Lordships describe the circumstances in which an
implication will ordinarily be drawn, I am prepared to adopt any one of
your Lordships' statements as showing the general rule; and I pay the same
respect to the statement by Denning, L.J. in his dissenting judgment in
Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164 about the circumstances in which he says a duty to use care in making a statement exists. (Pages 529-530)I do not go further than this for two reasons. The first is that I have
found in the speech of Lord Shaw in Nocton v. Ashburton and in the idea
of a relationship that is equivalent to contract all that is necessary to cover
the situation that arises in this case. Mr. Gardiner does not claim to
succeed unless he can establish that the reference was intended by the
Respondents to be communicated by the National Provincial Bank to some unnamed customer of theirs, whose identity was immaterial to the Respon-dents, for that customer's use. All that was lacking was formal consideration. The case is well within the authorities I have already cited and of which Wilkinson v. Coverdale is the most apposite example. (Page 530)I shall therefore content myself with the proposition that wherever there
is a relationship equivalent to contract there is a duty of care. Such a
relationship may be either general or particular. Examples of a general
relationship are those of solicitor and client and of banker and customer.
For the former Nocton v. Ashburton has long stood as the authority and for the latter there is the decision of Salmon, J. in Woods v. Martins Bank
which I respectfully approve. There may well be others yet to be established. Where there is a general relationship of this sort it is unnecessary to do more than prove its existence and the duty follows. Where, as in the present case, what is relied on is a particular relationship created ad hoc , it will be necessary to examine the particular facts to see whether there is an express or implied undertaking of responsibility. I regard this proposition as an application of the general conception of
proximity. (Page 530)A man cannot be said voluntarily to be undertaking a
responsibility if at the very moment when he is said to be accepting it he
declares that in fact he is not. The problem of reconciling words of exemption with the existence of a duty arises only when a party is claiming exemption from a responsibility which he has already undertaken or which he is contracting to undertake. For this reason alone, I would dismiss the appeal.” (Page 533)
Lord Pearce:
“The reason for some divergence between the law of negligence in word and that of negligence in act is clear. Negligence in word creates problems
different from those of negligence in act. Words are more volatile than
deeds. They travel fast and far afield. They are used without being
expended and take effect in combination with innumerable facts and other
words. Yet they are dangerous and can cause vast financial damage. How
far they are relied on unchecked (by analogy with there being no probability of intermediate inspection—See Grant v. Australian Knitting Mills Ltd. [1936] A.C. 85) must in many cases be a matter of doubt and difficulty .If the mere hearing or reading of words were held to create proximity, there might be no limit to the persons to whom the speaker or writer could be liable. (Page 534)Was there such a special relationship in the present case as to impose on
the defendants a duty of care to the plaintiffs as the undisclosed principals
for whom the National Provincial Bank was making the enquiry? The
answer to that question depends on the circumstances of the transaction.
If, for instance, they disclosed a casual social approach to the enquiry no
such special relationship or duty of care would be assumed (see Fish v.
Kelly 144 E.R. 78, 83). To import such a duty the representation must
normally, I think, concern a business or professional transaction whose nature makes clear the gravity of the enquiry and the importance and influence attached to the answer. It is conceded that Salmon, J., rightly found a duty of care in Woods v. Martins Bank, Ltd. [1959] 1 Q.B. 55, but the facts in that case were wholly different from those in the present case. A most important circumstance is the form of the enquiry and of the answer. Both were here plainly stated to be without liability. Mr. Gardiner argues that those words are not sufficiently precise to exclude liability for negligence. Nothing, however, except negligence could, in the facts of this case, create a liability (apart from fraud to which they cannot have been intended to refer and against which the words would be no protection since they would be part of the fraud). I do not, therefore, accept that even if the parties were already in contractual or other special relationship the words would give no immunity to a negligent answer. But in any event they clearly prevent a special relationship from arising. They are part of the material from which one deduces whether a duty of care and a liability for negligence was assumed. If both parties say expressly (in a case where neither is deliberately taking advantage of the other) that there shall be no liability, I do not find it possible to say that a liability was assumed.” (Pages 539-540)
One can then move onto Caparo Industries Plc v Dickman [1990] 2 AC 605. This involved an application of the law as adumbrated in the Hedley Byrne case where auditors were sued by shareholders for negligence in relation to carrying out an audit and making a report for the annual accounts. The various judgments are illuminating and consistent with each other:
Lord Bridge:
“But since Anns a series of decisions of the Privy Council and of
your Lordships' House, notably in judgments and speeches delivered
by Lord Keith of Kinkel, have emphasised the inability of any
single general principle to provide a practical test which can be
applied to every situation to determine whether a duty of care is
owed and, if so, what is its scope: see Governors of Peabody
Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [1983] A.C.
210, 239F-241C; Yuen Kun Yeu v. Attorney-General of Hong Kong
[1988] A.C. 175, 190E-194F; Rowling v. Takaro Properties Ltd.
http://www.bailii.org/uk/cases/UKPC/1987/2.html[1988] A.C. 473, 501D-G; Hill v. Chief Constable of West
Yorkshire http://www.bailii.org/uk/cases/UKHL/1987/12.html[1989] A.C. 53, 60 B-D. What emerges is that, in
addition to the foreseeability of damage, necessary ingredients in
any situation giving rise to a duty of care are that there should
exist between the party owing the duty and the party to whom it
is owed a relationship characterised by the law as one of
"proximity" or "neighbourhood" and that the situation should be one
in which the court considers it fair, just and reasonable that the
law should impose a duty of a given scope upon the one party for
the benefit of the other. But it is implicit in the passages
referred to that the concepts of proximity and fairness embodied
in these additional ingredients are not susceptible of any such
precise definition as would be necessary to give them utility as
practical tests, but amount in effect to little more than
convenient labels to attach to the features of different specific
situations which, on a detailed examination of all the
circumstances, the law recognises pragmatically as giving rise to a
duty of care of a given scope. Whilst recognising, of course, the
importance of the underlying general principles common to the
whole field of negligence, I think the law has now moved in the
direction of attaching greater significance to the more traditional
categorisation of distinct and recognisable situations as guides to
the existence, the scope and the limits of the varied duties of
care which the law imposes. We must now, I think, recognise the
wisdom of the words of Brennan J. in the High Court of Australia
in Sutherland Shire Council v. Heyman (1985) 60 A.L.R. 1, 43-44,
where he said:"It is preferable in my view, that the law should develop
novel categories of negligence incrementally and by analogy
with established categories, rather than by a massive
extension of a prima facie duty of care restrained only by
indefinable 'considerations which ought to negative, or to
reduce or limit the scope of the duty or the class of person
to whom it is owed."'One of the most important distinctions always to be
observed lies in the law's essentially different approach to the
different kinds of damage which one party may have suffered in
consequence of the acts or omissions of another. It is one thing
to owe a duty of care to avoid causing injury to the person or
property of others. It is quite another to avoid causing others to
suffer purely economic loss. A graphic illustration of the
distinction is embodied in the proposition that:"In case of a wrong done to a chattel the common law does
not recognise a person whose only rights are a contractual
right to have the use or services of the chattel for purposes
of making profits or gains without possession of or property
in the chattel. Such a person cannot claim for injury done
to his contractual right." (Elliott Steam Tug Co. Ltd. v.
Shipping Controller [1922] 1 K.B. 127, 139 per Scrutton L.J.)The proposition derives from Cattle v. Stockton Waterworks Co.
(1875) L.R. 10 Q.B. 453. It has recently been reaffirmed in
Candlewood Navigation Corpn. v. Mitsui O.S.K. Lines Ltd. [1986]
A.C. 1 and Leigh & Sillavan Ltd. v. Aliakmon Shipping Co. Ltd.
http://www.bailii.org/uk/cases/UKHL/1985/10.html[1986] A.C. 785. In the former case Lord Fraser of Tullybelton,
delivering the judgment of the Privy Council, said [1986] A.C. 1,
25:"Their Lordships consider that some limit or control
mechanism has to be imposed upon the liability of a
wrongdoer towards those who have suffered economic
damage in consequence of his negligence. The need for
such a limit has been repeatedly asserted in the cases, from
Cattle's case, L.R. 10 Q.B. 453, to Caltex, 136 C.L.R. 529,
and their Lordships are not aware that a view to the
contrary has ever been judicially expressed."The damage which may be caused by the negligently spoken
or written word will normally be confined to economic loss
sustained by those who rely on the accuracy of the information or
advice they receive as a basis for action. The question what, if
any, duty is owed by the maker of a statement to exercise due
care to ensure its accuracy arises typically in relation to
statements made by a person in the exercise of his calling or
profession. In advising the client who employs him the
professional man owes a duty to exercise that standard of skill and
care appropriate to his professional status and will be liable both
in contract and in tort for all losses which his client may suffer
by reason of any breach of that duty. (Pages 617F-619D)The salient feature of all these cases is that the defendant
giving advice or information was fully aware of the nature of the
transaction which the plaintiff had in contemplation, knew that the
advice or information would be communicated to him directly or
indirectly and knew that it was very likely that the plaintiff would
rely on that advice or information in deciding whether or not to
engage in the transaction in contemplation. In these circumstances
the defendant could clearly be expected, subject always to the
effect of any disclaimer of responsibility, specifically to anticipate
that the plaintiff would rely on the advice or information given by
the defendant for the very purpose for which he did in the event
rely on it. So also the plaintiff, subject again to the effect of
any disclaimer, would in that situation reasonably suppose that he
was entitled to rely on the advice or information communicated to
him for the very purpose for which he required it. The situation
is entirely different where a statement is put into more or less
general circulation and may foreseeably be relied on by strangers
to the maker of the statement for any one of a variety of
different purposes which the maker of the statement has no
specific reason to anticipate. To hold the maker of the statement
to be under a duty of care in respect of the accuracy of the
statement to all and sundry for any purpose for which they may
choose to rely on it is not only to subject him, in the classic
words of Cardozo C.J. to "liability in an indeterminate amount for
an indeterminate time to an indeterminate class" (Ultramares
Corporation v. Touche (1931) 174 N.E. 441, 444); it is also to
confer on the world at large a quite unwarranted entitlement to
appropriate for their own purposes the benefit of the expert
knowledge or professional expertise attributed to the maker of the
statement. Hence, looking only at the circumstances of these
decided cases where a duty of care in respect of negligent
statements has been held to exist, I should expect to find that the
"limit or control mechanism . . . imposed upon the liability of a
wrongdoer towards those who have suffered economic damage in
consequence of his negligence" rested in the necessity to prove, in
this category of the tort of negligence, as an essential ingredient
of the "proximity" between the plaintiff and the defendant, that
the defendant knew that his statement would be communicated to
the plaintiff, either as an individual or as a member of an
identifiable class, specifically in connection with a particular
transaction or transactions of a particular kind (e.g. in a
prospectus inviting investment) and that the plaintiff would be very
likely to rely on it for the purpose of deciding whether or not to
enter upon that transaction or upon a transaction of that kind.I find this expectation fully supported by the dissenting
judgment of Denning L.J. in Candler v. Crane, Christmas & Co.
[1951] 2 K.B. 164, 179-184… (Pages 620H-621G)No doubt these provisions establish a relationship between
the auditors and the shareholders of a company on which the
shareholder is entitled to rely for the protection of his interest.
But the crucial question concerns the extent of the shareholder's
interest which the auditor has a duty to protect.” (Page 626B-C)
Lord Roskill:
“My Lords, I confess that like my noble and learned friend,
Lord Griffiths, in Smith v. Eric S. Bush [1989] 2 W.L.R. 790, 813,
I find considerable difficulty in phrases such as "voluntary
assumption of responsibility" unless they are to be explained as
meaning no more than the existence of circumstances in which the
law will impose a liability upon a person making the allegedly
negligent statement to the person to whom that statement is
made; in which case the phrase does not help to determine in
what circumstances the law will impose that liability or indeed, its
scope. The submission that there is a virtually unlimited and
unrestricted duty of care in relation to the performance of an
auditor's statutory duty to certify a company's accounts, a duty
extending to anyone who may use those accounts for any purpose
such as investing in the company or lending the company money,
seems to me untenable. No doubt it can be said to be foreseeable
that those accounts may find their way into the hands of persons
who may use them for such purposes or indeed other purposes and
lose money as a result. But to impose a liability in those
circumstances is to hold, contrary to all the recent authorities,
that foreseeability alone is sufficient, and to ignore the statutory
duty which enjoins the preparation of and certification of those
accounts.I think that before the existence and scope of any liability
can be determined, it is necessary first to determine for what
purposes and in what circumstances the information in question is
to be given.” (Pages 628F-629B)
Lord Oliver;
“The question is, I think, one of some importance when one
comes to consider the existence of that essential relationship
between the appellants and the respondent to which, in any
discussion of the ingredients of the tort of negligence, there is
accorded the description "proximity," for it is now clear from a
series of decisions in this House that, at least so far as concerns
the law of the United Kingdom, the duty of care in tort depends
not solely upon the existence of the essential ingredient of the
foreseeability of damage to the plaintiff but upon its coincidence
with a further ingredient to which has been attached the label
"proximity" and which was described by Lord Atkin in the course
of his speech in Donoghue v. Stevenson http://www.bailii.org/uk/cases/UKHL/1931/3.html[1932] A.C. 562, 581 as:"such close and direct relations that the act complained of
directly affects a person whom the person alleged to be
bound to take care would know would be directly affected
by his careless act."It must be remembered, however, that Lord Atkin was using these
words in the context of loss caused by physical damage where the
existence of the nexus between the careless defendant and the
injured plaintiff can rarely give rise to any difficulty. To adopt
the words of Bingham L.J. in the instant case [1989] Q.B. 653,
686:"It is enough that the plaintiff chances to be (out of the
whole world) the person with whom the defendant collided
or who purchased the offending ginger beer."The extension of the concept of negligence since the decision of
this House in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.
http://www.bailii.org/uk/cases/UKHL/1963/4.html[1964] A.C. 465 to cover cases of pure economic loss not resulting
from physical damage has given rise to a considerable and as yet
unsolved difficulty of definition. The opportunities for the
infliction of pecuniary loss from the imperfect performance of
everyday tasks upon the proper performance of which people rely
for regulating their affairs are illimitable and the effects are far
reaching. A defective bottle of ginger beer may injure a single
consumer but the damage stops there. A single statement may be
repeated endlessly with or without the permission of its author and
may be relied upon in a different way by many different people.
Thus the postulate of a simple duty to avoid any harm that is,
with hindsight, reasonably capable of being foreseen becomes
untenable without the imposition of some intelligible limits to keep
the law of negligence within the bounds of common sense and
practicality. Those limits have been found by the requirement of
what has been called a "relationship of proximity" between
plaintiff and defendant and by the imposition of a further
requirement that the attachment of liability for harm which has
occurred be "just and reasonable." But although the cases in
which the courts have imposed or withheld liability are capable of
an approximate categorisation, one looks in vain for some common
denominator by which the existence of the essential relationship
can be tested. Indeed it is difficult to resist a conclusion that
what have been treated as three separate requirements are, at
least in most cases, in fact merely facets of the same thing, for
in some cases the degree of foreseeability is such that it is from
that alone that the requisite proximity can be deduced, whilst in
others the absence of that essential relationship can most
rationally be attributed simply to the court's view that it would
not be fair and reasonable to hold the defendant responsible.
"Proximity" is, no doubt, a convenient expression so long as it is
realised that it is no more than a label which embraces not a
definable concept but merely a description of circumstances from
which, pragmatically, the courts conclude that a duty of care
exists. (Pages 632C-633C)I think that it has to be recognised that to search for any single
formula which will serve as a general test of liability is to pursue
a will-o'-the wisp. The fact is that once one discards, as it is
now clear that one must, the concept of foreseeability of harm as
the single exclusive test - even a prima facie test - of the
existence of the duty of care, the attempt to state some general
principle which will determine liability in an infinite variety of
circumstances serves not to clarify the law but merely to bedevil
its development in a way which corresponds with practicality and
common sense. (Page 633E-G)The damage which may be occasioned by the spoken or
written word is not inherent. It lies always in the reliance by
somebody upon the accuracy of that which the word communicates
and the loss or damage consequential upon that person having
adopted a course of action upon the faith of it. In general, it
may be said that when any serious statement, whether it takes the
form of a statement of fact or of advice, is published or
communicated, it is foreseeable that the person who reads or
receives it is likely to accept it as accurate and to act
accordingly. It is equally foreseeable that if it is inaccurate in a
material particular the recipient who acts upon it may suffer a
detriment which, if the statement had been accurate, he would not
have undergone. But it is now clear that mere foreseeability is
not of itself sufficient to ground liability unless by reason of the
circumstances it itself constitutes also the element of proximity
(as in the case of direct physical damage) or unless it is
accompanied by other circumstances from which that element may
be deduced. One must, however, be careful about seeking to find
any general principle which will serve as a touchstone for all
cases, for even within the limited category of what, for the sake
of convenience, I may refer to as "the negligent statement cases,"
circumstances may differ infinitely and, in a swiftly developing
field of law, there can be no necessary assumption that those
features which have served in one case to create the relationship
between the plaintiff and the defendant on which liability depends
will necessarily be determinative of liability in the different
circumstances of another case. (Pages 635F-636B)In his dissenting judgment in Candler v. Crane, Christmas &
Co. [1951] 2 K.B. 164, Denning L.J. suggested three conditions for
the creation of a duty of care in tort in such cases. First, the
advice must be given by one whose profession it is to give advice
upon which others rely in the ordinary course of business, such as accountants, surveyors, valuers and the like (p. 179). Secondly, it
must be known to the adviser that the advice would be
communicated to the plaintiff in order to induce him to adopt a
particular course of action (p. 180). Thirdly, the advice must be
relied upon for the purpose of the particular transaction for which
it was known to the advisers that the advice was required (p. 182).
It is plain, however, from other passages in his judgment, that
Denning L.J. did not consider these conditions as necessarily
exhaustive criteria of the existence of a duty and the speeches in
this House in the Hedley Byrne case http://www.bailii.org/uk/cases/UKHL/1963/4.html[1964] A.C. 465, where his
judgment was approved, indicate a number of directions in which
such criteria are to be extended. (Page 636G-H)Leaving this on one side, however, it is not easy to cull
from the speeches in the Hedley Byrne case http://www.bailii.org/uk/cases/UKHL/1963/4.html[1964] A.C. 465 any
clear attempt to define or classify the circumstances which give
rise to the relationship of proximity on which the action depends
and indeed Lord Hodson, at p. 514, expressly stated (and I
respectfully agree) that he did not think it possible to catalogue
the special features which must be found to exist before the duty
of care will arise in the given case. Lord Devlin, at p. 530, is to
the same effect. The nearest that one gets to the establishment
of a criterion for the creation of a duty in the case of a
negligent statement is the emphasis to be found in all the speeches upon "the voluntary assumption of responsibility" by the
defendant. This is a convenient phrase but it is clear that it was
not intended to be a test for the existence of the duty for, on
analysis, it means no more than that the act of the defendant in
making the statement or tendering the advice was voluntary and
that the law attributes to it an assumption of responsibility if the
statement or advice is inaccurate and is acted upon. It tells us
nothing about the circumstances from which such attribution arises. (Page 637E-G)The most recent authority on negligent misstatement in this
House - the two appeals in Smith v. Eric S. Bush and Harris v.
Wyre Forest District Council which were heard together [1989] 2
W.L.R. 790 do not, I think, justify any broader proposition than
that already set out, save that they make it clear that the
absence of a positive intention that the advice shall be acted upon
by anyone other than the immediate recipient - indeed an
expressed intention that it shall not be acted upon by anyone else
- cannot prevail against actual or presumed knowledge that it is in
fact likely to be relied upon in a particular transaction without
independent verification. (Pages 638G-639A)To widen the scope of the duty to include loss caused to an
individual by reliance upon the accounts for a purpose for which
they were not supplied and were not intended would be to extend
it beyond the limits which are so far deducible from the decisions
of this House.” (Page 654C-D)
Lord Jauncey:
“Once foreseeability of likely harm from a careless statement
has been established, it becomes necessary to examine the
circumstances in and the purposes for which the statement was
made in order to determine whether there are also present the
further ingredients necessary to establish the requisite proximity of
relationship between the maker of the statement and the person
who has acted upon it. As Bingham L.J. observed in the present
case, the concept of proximity is somewhat elusive, extending as it
does beyond mere physical proximity. It might be described as the
circumstances in which the law considers it proper that a duty of
care should be imposed on one person towards another. If in any
given circumstances a relation of proximity is found to exist,
consideration must still be given to the scope of the duty which
arises therefrom. In the case of physical proximity, few problems
will arise, but where there exists a duty of care in relation to the
making of statements, written or oral, problems may arise if those
statements are capable of being used for more than one purpose.
It is not disputed in the present case that economic loss to the
plaintiff as a shareholder was foreseeable by the auditors as a
result of any failure on their part to exercise reasonable care in
the conduct of the audit. What is disputed is whether the auditors
owed any duty to individual shareholders, and if so, what was the
scope of that duty.” (Page 655D-G)
In Phelps v Hillingdon London Borough Council [2001] 2 AC 619, their Lordships considered the “assumption of responsibility” test for the creation of a duty of care in tort:
“It is clear on principle that where a professional person gives advice, knowing, or being taken to know, that another will rely on that advice in deciding how to manage his affairs, the adviser may owe a duty of care to that other person. Opinion has differed on the question whether the language of an assumption of responsibility is useful or not. In Smith v. Bush http://www.bailii.org/uk/cases/UKHL/1990/1.html[1990] 1 A.C. 831 Lord Griffiths observed (at pp. 862 and 864) that he did not think that voluntary assumption of responsibility was a helpful or realistic test for liability, at least in most cases. That opinion was followed by Lord Roskill in Caparo Industries plc v. Dickman http://www.bailii.org/uk/cases/UKHL/1990/2.html[1990] 2 A.C. 605, 628. On the other hand the use of the expression received the support of Lord Goff of Chieveley in Henderson v. Merrett http://www.bailii.org/uk/cases/UKHL/1994/5.html[1995] 2 A.C. 145, 180-181. The expression may be descriptive rather than definitive, but the point does not seem to me of significance in the present context.” (Lord Clyde Page 670D-F)
In Williams v Natural Life Ltd [1989] 1 WLR 830, the House of Lords, through Lord Steyn, made some observations which are helpful:
“In this case the identification of the applicable principles is straightforward. It is clear, and accepted by counsel on both sides, that the governing principles are stated in the leading speech of Lord Goff of Chieveley in Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145. First, in Henderson it was settled that the assumption of responsibility principle enunciated in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 is not confined to statements but may apply to any assumption of responsibility for the provision of services. The extended Hedley Byrne principle is the rationalisation or technique adopted by English law to provide a remedy for the recovery of damages in respect of economic loss caused by the negligent performance of services. Secondly, it was established that once a case is identified as falling within the extended Hedley Byrne principle, there is no need to embark on any further inquiry whether it is "fair, just and reasonable" to impose liability for economic loss. Thirdly, and applying Hedley Byrne, it was made clear that "reliance upon [the assumption of responsibility] by the other party will be necessary to establish a cause of action (because otherwise the negligence will have no causative effect)." Fourthly, it was held that the existence of a contractual duty of care between the parties does not preclude the concurrence of a tort duty in the same respect.” (Page 834 D-H)
In Customs & Excise Commissioners v Barclays Bank plc [2007] 1 AC 181, their Lordships were concerned with a possible duty of care owed to the Claimant by a bank whose customer’s accounts were frozen by injunctions obtained by the Claimant but who nonetheless allowed payments out. The House addressed the various tests for a duty to arise:
A. Lord Bingham:
“The parties were agreed that the authorities disclose three tests which have been used in deciding whether a defendant sued as causing pure economic loss to a claimant owed him a duty of care in tort. The first is whether the defendant assumed responsibility for what he said and did vis-à-vis the claimant, or is to be treated by the law as having done so. The second is commonly known as the threefold test: whether loss to the claimant was a reasonably foreseeable consequence of what the defendant did or failed to do; whether the relationship between the parties was one of sufficient proximity; and whether in all the circumstances it is fair, just and reasonable to impose a duty of care on the defendant towards the claimant… Third is the incremental test, based on the observation of Brennan J in Sutherland Shire Council v Heyman (1985) 157 CLR 424, 481, approved by Lord Bridge of Harwich in Caparo Industries Plc v Dickman [1990] 2 AC 605, 618, that
"It is preferable, in my view, that the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable 'considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed'."
…I intend no discourtesy to counsel in declining to embark on yet another exegesis of these well-known texts. I content myself at this stage with five general observations. First, there are cases in which one party can accurately be said to have assumed responsibility for what is said or done to another, the paradigm situation being a relationship having all the indicia of contract save consideration. Hedley Byrne would, but for the express disclaimer, have been such a case. White v Jones and Henderson v Merrett, although the relationship was more remote, can be seen as analogous. Thus, like Colman J (whose methodology was commended by Paul Mitchell and Charles Mitchell, "Negligence Liability for Pure Economic Loss (2005) 121 LQR 194, 199), I think it is correct to regard an assumption of responsibility as a sufficient but not a necessary condition of liability, a first test which, if answered positively, may obviate the need for further enquiry. If answered negatively, further consideration is called for.
Secondly, however, it is clear that the assumption of responsibility test is to be applied objectively (Henderson v Merrett, p 181) and is not answered by consideration of what the defendant thought or intended…
The problem here is, as I see it, that the further this test is removed from the actions and intentions of the actual defendant, and the more notional the assumption of responsibility becomes, the less difference there is between this test and the threefold test.
Thirdly, the threefold test itself provides no straightforward answer to the vexed question whether or not, in a novel situation, a party owes a duty of care.
Fourthly, I incline to agree with the view expressed by the Messrs Mitchell in their article cited above, p 199, that the incremental test is of little value as a test in itself, and is only helpful when used in combination with a test or principle which identifies the legally significant features of a situation. The closer the facts of the case in issue to those of a case in which a duty of care has been held to exist, the readier a court will be, on the approach of Brennan J adopted in Caparo v Dickman, to find that there has been an assumption of responsibility or that the proximity and policy conditions of the threefold test are satisfied. The converse is also true.
Fifthly, it seems to me that the outcomes (or majority outcomes) of the leading cases cited above are in every or almost every instance sensible and just, irrespective of the test applied to achieve that outcome. This is not to disparage the value of and need for a test of liability in tortious negligence, which any law of tort must propound if it is not to become a morass of single instances. But it does in my opinion concentrate attention on the detailed circumstances of the particular case and the particular relationship between the parties in the context of their legal and factual situation as a whole.” (Pages 189G-192F)
B. Lord Hoffmann:
“There is a tendency, which has been remarked upon by many judges, for phrases like "proximate", "fair, just and reasonable" and "assumption of responsibility" to be used as slogans rather than practical guides to whether a duty should exist or not. These phrases are often illuminating but discrimination is needed to identify the factual situations in which they provide useful guidance. For example, in a case in which A provides information to C which he knows will be relied upon by D, it is useful to ask whether A assumed responsibility to D: Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465: Smith v Eric S Bush [1990] 1 AC 831. Likewise, in a case in which A provides information on behalf of B to C for the purpose of being relied upon by C, it is useful to ask whether A assumed responsibility to C for the information or was only discharging his duty to B: Williams v Natural Life Health Foods Ltd [1998] AC 830. Or in a case in which A provided information to B for the purpose of enabling him to make one kind of decision, it may be useful to ask whether he assumed responsibility for its use for a different kind of decision: Caparo Industries plc v Dickman [1990] 2 AC 605. In these cases in which the loss has been caused by the claimant's reliance on information provided by the defendant, it is critical to decide whether the defendant (rather than someone else) assumed responsibility for the accuracy of the information to the claimant (rather than to someone else) or for its use by the claimant for one purpose (rather than another). The answer does not depend upon what the defendant intended but, as in the case of contractual liability, upon what would reasonably be inferred from his conduct against the background of all the circumstances of the case. The purpose of the inquiry is to establish whether there was, in relation to the loss in question, the necessary relationship (or "proximity") between the parties and, as Lord Goff of Chieveley pointed out in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 181, the existence of that relationship and the foreseeability of economic loss will make it unnecessary to undertake any further inquiry into whether it would be fair, just and reasonable to impose liability. In truth, the case is one in which, but for the alleged absence of the necessary relationship, there would be no dispute that a duty to take care existed and the relationship is what makes it fair, just and reasonable to impose the duty.
It is equally true to say that a sufficient relationship will be held to exist when it is fair, just and reasonable to do so. Because the question of whether a defendant has assumed responsibility is a legal inference to be drawn from his conduct against the background of all the circumstances of the case, it is by no means a simple question of fact. Questions of fairness and policy will enter into the decision and it may be more useful to try to identify these questions than simply to bandy terms like "assumption of responsibility" and "fair, just and reasonable..." (Pages 198H-199F)
There is a useful dictum of Lord Hoffmann in South Australia Asset Management Corporation v York Montague Ltd [1997] 1 AC 191 which follows on from Caparo:
“A duty of care such as the valuer owes does not however exist in the abstract. A plaintiff who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered. Both of these requirements are illustrated by Caparo Industries Plc. v. Dickman http://www.bailii.org/uk/cases/UKHL/1990/2.html[1990] 2 A.C. 605. The auditors" failure to use reasonable care in auditing the company"s statutory accounts was a breach of their duty of care. But they were not liable to an outside take-over bidder because the duty was not owed to him. Nor were they liable to shareholders who had bought more shares in reliance on the accounts because, although they were owed a duty of care, it was in their capacity as members of the company and not in the capacity (which they shared with everyone else) of potential buyers of its shares. Accordingly, the duty which they were owed was not in respect of loss which they might suffer by buying its shares. As Lord Bridge of Harwich said, at p. 627:
"It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless."
In the present case, there is no dispute that the duty was owed to the lenders. The real question in this case is the kind of loss in respect of which the duty was owed.” (Pages 211G-212C)
There has also, properly, been reference to Henderson v Merrett [1995] 2 AC 145 to Lord Goff’s judgment:
“From these statements, and from their application in Hedley Byrne, we can derive some understanding of the breadth of the principle underlying the case. We can see that it rests upon a relationship between the parties, which may be general or specific to the particular transaction, and which may or may not be contractual in nature. All of their Lordships spoke in terms of one party having assumed or undertaken a responsibility towards the other .On this point. Lord Devlin spoke in particularly clear terms in both passages from his speech which I have quoted above. Further, Lord Morris spoke of that party being possessed of a "special skill" which he undertakes to "apply for the assistance of another who relies upon such skill". But the facts of Hedley Byrne itself, which was concerned with the liability of a banker to the recipient for negligence in the provision of a reference gratuitously supplied show that the concept of a "special skill" must be understood broadly, certainly broadly enough to include special knowledge. Again, though Hedley Byrne was concerned with the provision of information and advice, the example given by Lord Devlin of the relationship between solicitor and client, and his and Lord Morris' statements of principle, show that the principle extends beyond the provision of information and advice to include the performance of other services. It follows, of course, that although, in the case of the provision of information and advice, reliance upon it by the other party will be necessary to establish a cause of action (because otherwise the negligence will have no causative effect), nevertheless there may be other circumstances in which there will be the necessary reliance to give rise to the application of the principle. In particular, as cases concerned with solicitor and client demonstrate, where the plaintiff entrusts the defendant with the conduct of his affairs, in general or in particular, he may be held to have relied on the defendant to exercise due skill and care in such conduct.
In subsequent cases concerned with liability under the Hedley Byrne
principle in respect of negligent misstatements, the question has frequently
arisen whether the plaintiff falls within the category of persons to whom the maker of the statement owes a duty of care. In seeking to contain that
category of persons within reasonable bounds, there has been some tendency on the part of the courts to criticise the concept of "assumption of responsibility" as being "unlikely to be a helpful or realistic test in most
cases" (see Smith v. Eric S. Bush http://www.bailii.org/uk/cases/UKHL/1990/1.html[1990] 1 A.C. 831, 864-865, per Lord
Griffiths: and see also Caparo Industries Plc v. Dickman http://www.bailii.org/uk/cases/UKHL/1990/2.html[1990] 2 A.C. 605, 628. per Lord Roskill). However, at least in cases such as the present, in which the same problem does not arise, there seems to be no reason why recourse should not be had to the concept, which appears after all to have been adopted, in one form or another, by all of their Lordships in Hedley Byrne http://www.bailii.org/uk/cases/UKHL/1963/4.html[1964] A.C. 465 (see, e.g., Lord Reid at pp. 483, 486 and 487; Lord Morris (with whom Lord Hodson agreed) at p. 494; Lord Devlin at pp. 529 and 531; and Lord Pearce at p. 538). Furthermore, especially in a context concerned with a liability which may arise under a contractor in a situation "equivalent to contract", it must be expected that an objective test will be applied when asking the question whether, in a particular case, responsibility should be held to have been assumed by the defendant to the plaintiff: see Caparo Industries Plc v. Dickman http://www.bailii.org/uk/cases/UKHL/1990/2.html[1990] 2 A.C.605,637, perLordOliverof Aylmerton. In addition, the concept provides its own explanation why there is no problem in cases of this kind about liability for pure economic loss; for if a person assumes responsibility to an other in respect of certain services, there is no reason why he should not be liable in damages for that other in respect of economic loss which flows from the negligent performance of those services. It follows that, once the case is identified as falling within the Hedley Byrne principle, there should be no need to embark upon any further enquiry whether it is "fair, just and reasonable "to impose liability for economic loss-a point which is, I consider ,of some importance in the present case. The concept indicates too that in some circumstances, for example where the undertaking to furnish the relevant service is given on an informal occasion, there may be no assumption of responsibility; and likewise that an assumption of responsibility may be negatived by an appropriate disclaimer. I wish to add in parenthesis that, as Oliver J. recognised in Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979]Ch.384,416F-G. (a case concerned with concurrent liability of solicitors in tort and contract, to which I will have to refer in a moment) an assumption of responsibility by, for example, a professional man may give rise to liability in respect of negligent omissions as much as negligent acts of commission, as for example when a solicitor assumes responsibility for business on behalf of his client and omits to take a certain step, such as the service of a document, which falls within the responsibility so assumed by him. (Pages 180C-181F)But, for the present purposes more important, in the present case liability can, and in my opinion should, be founded squarely on the principle established in Hedley Byrne itself, from which it follows that an assumption of responsibility coupled with the concomitant reliance may give rise to a tortious duty of care irrespective of whether there is a contractual relationship between the parties, and in consequence, unless his contract precludes him from doing so, the plaintiff, who has available to him concurrent remedies in contract and tort, may choose that remedy which appears to him to be the most advantageous.(Page 194C-D)
I wish however to add that I strongly suspect that the situation which
arises in the present case is most unusual; and that in many cases in which
a contractual chain comparable to that in the present case is constructed it may well prove to be inconsistent with an assumption of responsibility which has the effect of, so to speak, short circuiting the contractual structure so put in place by the parties. It cannot therefore be inferred from the present case that other sub-agents will be held directly liable to the agent's principal in tort. Let me take the analogy of the common case of an ordinary building contract, under which main contractors contract with the building owner for the construction of the relevant building, and the main contractor sub-contracts with sub-contractors or suppliers (often nominated by the building owner) for the performance of work or the supply of materials in accordance with standards and subject to terms established in the sub-contract. I put to one side cases in which the sub-contractor causes physical damage to property of the building owner, where the claim does not depend on an assumption of responsibility by the sub-contractor to the building owner; though the sub-
contractor may be protected from liability by a contractual exemption clause authorised by the building owner. But if the sub-contracted work or materials do not in the result conform to the required standard, it will not ordinarily be open to the building owner to sue the sub-contractor or supplier direct under the Hedley Byrne principle, claiming damages from him on the basis that he has been negligent in relation to the performance of his functions. For there is generally no assumption of responsibility by the sub-contractor or supplier direct to the building owner, the parties having so structured their relationship that it is inconsistent with any such assumption of responsibility. This was the conclusion of the Court of Appeal in Simaan General Contracting Co. v Pilkington Glass Ltd. (No. 2) http://www.bailii.org/ew/cases/EWCA/Civ/1988/15.html[1988] Q.B.758. As Bingham L.J. put it, at p. 781:"I do not, however, see any basis on which the defendants [the
nominated suppliers] could be said to have assumed a direct
responsibility for the quality of the goods to the plaintiffs [the building owners); such a responsibility is, I think, inconsistent with the structure of the contract the parties have chosen to make."It is true that, in this connection, some difficulty has been created by the
decision of your Lordships' House in Junior Books Ltd. v. Veitchi Co. Ltd.
http://www.bailii.org/uk/cases/UKHL/1982/4.html[1983] 1 A.C. 520. In my opinion, however, it is unnecessary for your
Lordships to reconsider that decision for the purposes of the present appeal. Here however I can see no inconsistency between the assumption of responsibility by the managing agents to the indirect Names, and that which arises under the sub-agency agreement between the managing agents and the members' agents, whether viewed in isolation or as part of the contractual chain stretching back to and so including the indirect Names. For these reasons, I can see no reason why the indirect Names should not be free to pursue their remedy against the managing agents in tort under the Hedley Byrne principle.”(Pages 195C-196F)
In Pacific Associates Inc v Baxter and others, the Court of Appeal was concerned with whether a duty of care was owed by an engineer employed by the construction contract employer to the contractor also employed by the employer under the construction contract. The engineer was expected to supervise the construction and certify the interim value of the work for payment as the work proceeded. The contractor claimed against the engineer economic loss damages for negligence for the engineer’s alleged failure to certify and for their rejection of their claims under the construction contract. There are various dicta which impact on the current case:
“…from the policy point of view there may be a useful analogy, namely that where the parties have come together against a contractual structure which provides for compensation in the event of failure of one of the parties involved the court will be slow to superimpose an added duty of care beyond that which was in the contemplation of the parties at the time when they came together…However, I believe that in order to determine whether a duty arises in tort it is necessary to consider the circumstances in which the parties came together in the initial stages at which time it should be considered what obligations, if any, were assumed by the one in favour of the other and what reliance was placed by the other on the first. The obligations do not, however, remain fixed subject only to specific variations as in the case of contract. ( Purchas LJ page 1010F-1011A)
It is immediately apparent that there is no simple unqualified answer to the question: “Does the engineer owe a duty to the contractor in tort to exercise reasonable skill and care?” but that this question can only be answered in the context of the factual matrix including especially the contractual structure against which such duty is said to arise. (ibid page 1011E)
I have come to the conclusion…that no liability can be established in tort under which the engineer owed a direct duty to the contractor in the circumstances disclosed in this case. I emphasise, however, that in coming to this conclusion it does depend on the particular circumstances of the case not the least of which were the contractual provisions in the contract which afforded an avenue enabling the contractor to recover from the employer. I see no justification for superimposing on this contractual structure an additional liability in tort as between the engineer and the contractor. In coming to this conclusion I have taken into account: (i) that although there was a degree of proximity established in the obvious sense that the contractor under the terms of the contract relied on the engineer performing their duties in supervising the execution of the works, this is not the same quality of proximity required to establish a duty of care in the Hedley Byrne sense; (ii) that the duty on the engineer to perform in accordance with the contract arose out of some contractual relationship, unspecified, existing between the employer and the engineer, which gave rise to that duty; (iii) that there was no direct contractual relationship between the engineer and the contractor; (iv) that under the contract, the contractor could challenge in the fullest sense the performance of his duties by the engineer by claiming against the employer for sums due to the contractor including extra expenses and interest on outstanding sums due; (v) that the contractor, when tendering for the contract, was content to offer for the works on the terms set out in the invitation to tender which incorporated the full terms of the proposed contract.” (ibid Page 1023 A-D)
In Simaan General Contracting Co v Pilkington Glass Ltd (No 2) [1988] QB 758, the Court of Appeal was concerned with a case in which it was asserted that a sub-contractor’s supplier owed a duty of care to a main contractor in respect of economic loss suffered by it as result of the glass supplied being of the (allegedly) wrong colour. Bingham LJ as he then was said:
“I can, I think, state my conclusions fairly shortly:
(1) I accept without reservation that a claim may lie in negligence for recovery of economic loss alone. Were that not so Hedley Byrne could not have been decided as it was.
(2) I am quite sure that Pilkington owed Simaan a conventional Donoghue v. Stevenson duty of care to avoid physical injury or damage to person or property. Suppose (however improbably) that Pilkington manufactured the units so carelessly that they were liable to explode on exposure to strong sunlight and that one of the units did so explode, blinding a Simaan employee working in the building. I cannot conceive that such employee would fail in a personal injury action against Pilkington for failure to prove a duty of care.
(3) There is no meaningful sense in which Simaan can be said to have relied on Pilkington. No doubt Simaan hoped and expected that Pilkington would supply good quality goods conforming with the contract specification. But Simaan required Feal to buy these units from Pilkington for one reason only, namely, that they were contractually obliged to do so and had no choice in the matter. There was no technical discussion of the product between Simaan and Pilkington.
(4) Where a specialist subcontractor is vetted, selected and nominated by a building owner it may be possible to conclude (as in Junior Books) that the nominated subcontractor has assumed a direct responsibility to the building owner. On that reasoning it might be said that Pilkington owed a duty to the sheikh in tort as well as to Feal in contract. I do not, however, see any basis on which Pilkington could be said to have assumed a direct responsibility for the quality of the goods to Simaan: such a responsibility is, I think, inconsistent with the structure of the contract the parties have chosen to make.
(5) The Junior Books case has been interpreted as a case arising from physical damage. I doubt if that interpretation accords with Lord Roskill's intention, but it is binding upon us. There is in my view no physical damage in this case. The units are as good as ever they were and will not deteriorate. I bridle somewhat at the assumption of defects which we are asked to make because what we have here are not, in my view, defects but failures to comply with Sale of Goods Act conditions of correspondence with description or sample, merchantability or (perhaps) fitness for purpose. It would, I think, be an abuse of language to describe these units as damaged. The contrast with the floor in Junior Books is obvious.
(6) I do not accept that Hedley Byrne, and such authorities as Ross v. Caunters [1980] Ch. 297, establish a general rule that claims in negligence may succeed on proof of foreseeable economic loss caused by the defendant even where no damage to property and no proprietary or possessory interest are shown. If there were such a general rule, the plaintiffs in Candlewood and Aliakmon would not have failed on the ground they did and the causes of action in Pirelli and London Congregational Union would have been complete at an earlier date. However attractive it may theoretically be to postulate a single principle capable of embracing every kind of case, that is not how the law has developed. It would of course be unsatisfactory if (say) doctors and dentists owed their patients a different duty of care. I do not, however, think it unsatisfactory or surprising if, as I think, a banker's duty towards the recipient of a credit reference and an industrial glass manufacturer's duty towards a main contractor, in the absence of any contract between them, differ. Here, Simaan's real (and understandable) complaint is that Pilkington's failure to supply goods in conformity with the specification has rendered their main contract less profitable. This is a type of claim against which, if laid in tort, the law has consistently set its face.
(7) If, contrary to my view, these units can be regarded as damaged at all, the damage (or the defects) occurred at the time of manufacture when they were Pilkington's property. I therefore think that Simaan fail to show any interest in the goods at the time when damage occurred. I very much doubt if there was any time on site, whether in course of erection or after rejection, when Simaan had a proprietary or possessory interest in the units, but I do not think it useful to pursue this, since neither was the time at which, if at all, physical damage occurred.
(8) I do not think it just and reasonable to impose on Pilkington a duty of care towards Simaan of the scope contended for. (a) Just as equity remedied the inadequacies of the common law, so has the law of torts filled gaps left by other causes of action where the interests of justice so required. I see no such gap here, because there is no reason why claims beginning with the sheikh should not be pursued down the contractual chain, subject to any shortcut which may be agreed upon, ending up with a contractual claim against Pilkington. That is the usual procedure. It must be what the parties contemplated when they made their contracts. I see no reason for departing from it. (b) Although Pilkington did not sell subject to exempting conditions, I fully share the difficulty which others have anticipated where there were such conditions. Even as it is, Pilkington's sale may well have been subject to terms and conditions imported by the Sale of Goods Act 1979. Some of those are beneficial to the seller. If such terms are to circumscribe a duty which would be otherwise owed to a party not a party to the contract and unaware of its terms, then that could be unfair to him. But if the duty is unaffected by the conditions on which the seller supplied the goods, it is in my view unfair to him and makes a mockery of contractual negotiation.” (Pages 781C-783B)
Dillon LJ stated:
“(1) It is clear, as Lord Keith pointed out in Yuen Kun Yeu v. A.G. of Hong Kong [1987] 3 W.L.R. 776 at 783C-E by reference to the speech of Lord Wilberforce in McLoughlin v. O'Brian [1983] 1 A.C. 410 at 420H, that foreseeability of harm or loss does not of itself and automatically lead to a duty of care. Foreseeability of harm is a necessary ingredient of a relationship in which a duty of care will arise, but not the only ingredient. Foreseeability of harm does not become enough to make the harm recoverable by the plaintiff just because what was foreseeable was harm to the plaintiff as an individual rather than as a member of a general and unascertained class; otherwise Lord Fraser could not in Candlewood v. Mitsui have rejected the views which he cited at [1986] A.C. 22 from the judgments of Mr Justice Gibbs and Mr Justice Mason in Caltex Oil (Australia) Pty Ltd. v. Dredge "Willemstad" [1976] 136 C.L.R. 529.
If, however, foreseeability does not automatically lead to a duty of care, the duty in a Hedley Byrne type of case must depend on the voluntary assumption of responsibility towards a particular party giving rise to a special relationship, as Lord Keith held in Yuen Kun Yeu at 787G-H (and see also his statement at 784A that Hedley Byrne was concerned with the assumption of responsibility) and as Robert Goff L.J. had earlier held in Muirhead at 528A-B in a passage which would have been before Lord Keith in Yuen Kun Yeu.
But in the present case I can see nothing whatever to justify a finding that Pilkington had voluntarily assumed a direct responsibility to Simaan for the colour and quality of Pilkington's glass panels. On the contrary, all the indications are the other way and show that a chain of contractual relationships was deliberately arranged the way it was without any direct relationship between Simaan and Pilkington.
(2) The approach of the law to awarding damages for economic loss on the grounds of negligence where there has been no injury to the person or property has throughout been greatly affected by pragmatic considerations. See, for example, the opinion of Lord Fraser in Candlewood v. Mitsui 16C-D in relation to the judgment in Cattle v. Stockton Waterworks, his comments at page 21D-E on a passage in Lord Wilberforce's speech in Anns v. Merton London Borough Council [1978] A.C. 728 as "a useful reminder of the part played by policy in decisions as to how far the liability of a wrongdoer should extend" and his statement at page 25A-B that some limit or control mechanism has to be imposed upon the liability of a wrongdoer towards those who have suffered economic damage in consequence of his negligence.” ( Pages784E-785D)
Some reliance has been placed by MCL on the Court of Appeal decision in Riyad Bank and others v Ahli Bank (UK) Plc [2006] EWCA Civ 780. In this case, RBE (second claimant) was a wholly owned subsidiary of Riyad Bank (first claimant) which marketed products through Riyad Bank’s branches. RBE wanted to develop Sharia compliant investment products. UBK, the defendant, had established an income fund whose assets were invested in operating leases of equipment. RBE and UBK agreed to co-operate to set up a fund for similar purposes. The Fund was established through a third company (the third claimant) and RBE and UBK entered into an agreement (the “TSA”) which defined the services UBK were to render in connection with the operation of the Fund. The Fund suffered a substantial loss because the operating leases proved to be overvalued by some 20%. The Fund sued UBK in tort alleging it had given negligent advice as to the purchase of leases and their purchase price. There was much discussion about the contractual structure and about the fact that there was no contract between the Fund and UBK although there was opportunity to effect one. The following extracts from the judgments are of interest:
Buxton LJ
“32. Mr Howard then relied on building cases such as Simaan General Contracting Co v Pilkington Glass Ltd (No 2) [1988 QB 758 and Pacific Associate Inc v Baxter [1990] 1 QB 993 for the proposition that where there is a contractual chain, that chain should not be by-passed by a claim in tort. As Lord Goff said in Henderson v Merrett that is, indeed, the usual position. But neither of those authorities considered a case where discussions and representations were made directly to the party who, in the event, suffered loss. There cannot be a general proposition that, just because a chain exists, no responsibility for advice is ever assumed to a non-contractual party. It all depends on the facts. As the judge said in paragraph 67 of his judgment:-
". . . the manner in which much of that advice was expected to be and was given, namely by the attendance of Mr Weist at meetings of the Fund's board, reinforces the conclusion that it did, in fact, assume such a responsibility."
Neuberger LJ
“36. I have read, in draft, the judgments of Buxton and Longmore LJJ dealing with the question of whether the Fund was owed a duty of care by UBK, and I agree with their conclusions and their reasoning. Nonetheless, I would like to say something about this issue, partly because the point is, as Buxton LJ observes, apparently of some wider interest, and partly because of Mr Howard's principal argument. That argument was that it is inappropriate to permit the Fund to invoke the law of tort in order to sue UBK direct for negligent valuation advice, when the parties (i.e. the Fund, RBE and UBK) had structured their contractual relationship so that UBK's duty in respect of that advice was not owed to the Fund, but to RBE, who in turn owed a similar duty to the Fund.
37. There is, at any rate at first sight, attraction in the notion that, where, in a purely commercial context, parties have voluntarily and consciously arranged their affairs so that there is a contractual obligation on A to give advice to B, and on B to consider and pass on that advice, to the extent that it sees fit, to C, there should normally be no part for the law of tort to play. In other words, that
i) There should be no tortious duty in relation to the advice, either as between A and B or as between B and C, because those parties have identified the extent and ambit of the respective rights and duties between them in their respective contracts; and
ii) There should be no tortious duty in relation to the advice given by A, as between A and C, because the three parties have intentionally structured their relationships so that there is no direct duty between A and C, but separate duties between A and B, and between B and C.
38. The justifications for each of these two points might appear to be the converse of each other. Point (i) is based on the contention that the raising of a tortious duty is inappropriate because the parties have agreed a contractual duty. Point (ii) is based on the contention that the raising of a tortious duty is inappropriate because the parties have decided that there should be no contractual duty. However, as I see it, despite this apparent paradox, both points essentially rest on the same proposition, namely that a tortious duty should not be invoked between parties to commercial contracts at least where there is no "liability gap".
39. In relation to point (i), it would be surprising (save perhaps in unusual circumstances) if the law of tort imposed greater liability on A or B than they had agreed to accept, either expressly or impliedly, in their respective contracts, and it might appear pointless and confusing if there was a tortious liability which was simply co-extensive with the contractual liability. Of course, tortious liability is generally subject to less strict statutory limitation bars than contractual liability (as is demonstrated in the Henderson case at 174F to G), but that may seem a questionable reason, in terms of principle, for justifying a co-extensive tortious duty where there is a contractual duty.
40. So far as point (ii) is concerned, it may be thought to be questionable whether the law of tort should normally be capable of being invoked in order to found a duty of care in circumstances where the parties have intentionally set up a contractual structure which avoids such a contractual duty. Especially so when there is no "gap" which requires "filling"; in this case C, the Fund, could have sued B, RBE, who could in turn have sued A, UBK. The only reason that that course cannot now be taken is that, for commercial reasons, Riyad Bank was not prepared to sue (or let the Fund sue) RBE, and it is now too late for it to do so, because of a limitation bar.
41. Some apparent support for the view that a tortious duty of care normally has no part to play in the context of a commercial contractual relationship may be found in observations of the Privy Council in a judgment given by Lord Scarman in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 at 107, quoted by Lord Goff of Chieveley in the Henderson case at 186C to F. Further, in the Williams case at 837F, Lord Steyn said that, at least in the current state of English contract law, "the law of tort, as the general law, has to fill an essential gap-filling role".
43. On the other hand, there are strong countervailing arguments the other way, which appear to me, again, to apply equally to points (i) and (ii). If a duty of care would otherwise exist in tort, as part of the general law, it is not immediately easy to see why the mere fact that the adviser and the claimant have entered into a contract, or a series of contracts, should of itself be enough to dispense with that duty. If a claimant is better off relying on a tortious duty, it is not readily apparent why a claimant who receives gratuitous advice should be better off than a claimant who pays for the advice (and therefore would normally have the benefit of a contractual duty), unless, of course, the contract so provides. One might expect the question to be determined by reference to the contractual relationship on the normal basis, namely whether the nature terms and circumstances of the contract(s) expressly or impliedly lead to the conclusion that the parties have agreed that there will be no tortious duty.
43. These arguments have to be assessed in the light of the decision of the House of Lords and, in particular the analysis of Lord Goff, in the Henderson case. It seems clear from the closely reasoned passage in his speech at 184B to 194E that the issue has been resolved, at least in principle, in favour of the latter of the two views that I have summarised. In other words, "the common law is not antipathetic to concurrent liability". At 186C to F, Lord Goff considered and explained Lord Scarman's observation in the Tai Hing case. He went on to say that a claimant who is owed a contractual duty of care may also (or alternatively) be entitled to invoke a tortious duty of care, unless it would be "so inconsistent with the applicable contract that, in accordance with ordinary principle, the parties must be taken to have agreed that the tortious remedy is to be limited or excluded" – see at 193H and 194A to B.
44. Those observations are clearly appropriate to what I have called point (i), but, while it is not immediately clear that they apply to point (ii), in my view they do. As mentioned above, the principle upon which both points (i) and (ii) rest is essentially this, that the law of tort should not be invoked in a commercial context, at least where there are no gaps, where the parties have contractually provided for a duty, or a chain of duties. More importantly, Lord Goff's reasoning in relation to point (ii) appears to embody the same approach as that he applied to point (i).
45. At 193B to C, Lord Goff said "the law of tort is the general law out of which the parties can, if they wish, contract", and that the correct approach is to determine whether there would otherwise be a tortious liability arising out of an assumption of responsibility and concomitant reliance, and "then to inquire whether or not that liability is excluded by the contract because the latter is inconsistent with it". That is essentially the approach he adopted when he turned to consider the contention that "the indirect Names and the managing agents, as parties to the chain of contracts…must be taken to have thereby structured their relationship so as to exclude any duty of care owed directly by the managing agents to the indirect Names in tort" – 195A to B. He then said that he saw "no reason in principle" why an adviser could not owe, at the same time, a contractual duty of care to the next person in the chain and a tortious duty of care to another person further along the chain. He went on, in a passage more fully quoted by Longmore LJ, to observe at 195G that "in many cases in which a contractual chain comparable to that in the present case is constructed it may well prove to be inconsistent with an assumption of responsibility which has the effect of…short-circuiting the contractual structure put in place by the parties".
46. So far as "gap-filling" is concerned, Lord Steyn's observation in the Williams case cannot mean that a tortious duty can only arise where there is a "liability gap": that would be inconsistent with the whole basis of the reasoning and decision in the Henderson case. Lord Steyn's point in this connection was, I think, that there are cases involving contractual duties, where, if the law of tort cannot be invoked, as a matter of policy, there would be a "liability gap" which would be unacceptable (as in Smith v Eric S Bush [1990] 1 AC 831 and White v Jones [1995] 2 AC 207). That aspect of the law of tort has no bearing on the present case: the fact that the law of tort can be invoked where there is a "liability gap" in certain exceptional cases does not mean that it can never be invoked in a case where there is no "liability gap".
47. Thus, the question in a point (ii) case, as in a point (i) case, is whether, in relation to the advice he gave, the adviser assumed responsibility to the claimant, in the light of the contractual context, as well as all the other circumstances, in which the advice was given. The way in which Lord Goff expressed himself in more than one place in his speech in the Henderson case, including some of the brief passages I have quoted, suggests that it is for the adviser to establish that the contractual context negatives an assumption of responsibility, not for the claimant to show that the assumption survives notwithstanding that context.
48. Like Longmore LJ, I do not think that the answer can depend on whether one asks first whether, absent the contractual context, there would be an assumption of responsibility, and secondly whether the positive answer to that question is vitiated by the contractual context; or whether one asks the single question whether, in all the circumstances, including the contractual context, there was an assumption of responsibility. Whether or not one adopts the two-stage approach may depend on the facts of the particular case, or even on the way the case has been argued.”
I can draw all these eminent authorities together in the following summary in the context of this case:
There are in effect two types or manifestations of duties of care which may arise in relation to economic loss, firstly, out of a negligent misstatement or misrepresentation and, secondly, where there is a relationship akin to contract or the non-contractual provision of services. There is no simple formula or common denominator to determine whether a duty of care, in relation at least to economic loss cases, arises or not.
The Courts have traditionally observed some caution and conservatism in economic loss cases. Attempts to open the floodgates, such as in Anns v London Borough of Merton, have ultimately been rejected. An incremental approach is favoured.
It is always necessary to consider the circumstances and context, commercial, contractual and factual, including the contractual structure, in which the inter-relationship between the parties to and by whom tortious duties are said to be owed arises. Thus, it is not every careless misstatement which is actionable or gives rise to a duty of care. Foreseeability of loss is not enough.
It is necessary for the party seeking to establish a duty of care to establish that the duty relates to the kind of loss which it has suffered. One must determine the scope of any duty of care.
In considering the first type of duty of care, it is relevant to determine if the statement giver is being asked to give and is giving advice to the recipient. It is then necessary to establish that the statement giver is fully aware of the nature of the particular transaction which the recipient has in contemplation and that its statement would be relied upon by the recipient and, finally, that the recipient has to rely upon the statement in entering into the transaction in question.
In considering the second type of duty of care, it is material to consider whether the relationship between the parties is akin to contract or whether the party alleged to owe the duty was asked by the person to whom the duty is said to be owed to provide services to or for the benefit of that person. Reliance is important also in this type of negligence to link the damage suffered to the breach of duty.
Although the voluntary assumption of responsibility test is not mandatory, it is a useful guide in determining if a duty of care of either sort arises. It is an objective test. The threefold test (of reasonable foreseeability of the economic loss, proximity and fairness, justice and reasonableness) provides no simple answer where, in a new situation, a duty of care is said to arise. These tests are all helpful but are not always determinative.
So far as disclaimers are concerned, they are simply one factor, albeit possibly an important one, in determining whether a duty of care arises. One can not, usually, voluntarily undertake a responsibility when one tells all concerned that one is not accepting such responsibility.
The context of and the circumstances in which statements are made by one party to another need to be considered to determine not only if there is a duty but also the scope of any duty. The facts that a statement is made by A to B, that A knows that B will rely upon it and that B does rely upon it are not or at least not always enough to found a duty of care.
One needs to determine what responsibility, if any, judged objectively was assumed by MM towards MCL in this case. One can have regard, amongst other matters, to:
The contractual nexus or lack of contractual nexus between the party said to owe the duty of care and the party said to have been owed it;
What was said in writing and orally by MM to MCL and in what context it was said;
Any disclaimers issued by MM to MCL in relation to what was said;
What was said to MM or mutually understood by MCL and MM as to why information was sought; put another way, what was the express or necessarily implied purpose for the information being sought and supplied.
The Pile Bracing issue-History
I will not repeat those facts which I have set out under the General Chronology chapter of this judgment. It is of some interest that the different parties use the words “slab” or “floor slab” to mean somewhat different things: sometimes it means the whole of the floor construction (that is, steel and concrete) and on other occasions just the concrete element. Even the experts use the terms interchangeably from time to time.
Although MM and MCL had some contact in late 1998, it was from an early stage in 1999 that there was some direct contact between MCL and MM. At this stage, MCL’s rôle was, and was understood to be, that of advising on construction and “buildability” matters. It included also providing information to BA for the latter’s cost planning. Thus, on 25 January 1999, Mr Saunders faxed to Mr Dawson of MM the following message:
“Car park construction. I am keen to progress the decision as to the form of construction for the car park frame and slab. The following is the list of options that I understand are available, are there any that can/should be ruled out on engineering reasons?
Options
(1) Pre-cast concrete frame and slabs.
(2) Composite 1: steel frame and PC slabs.
(3) Composite 2: concrete columns (could be either in situ or PC) steel beams with PC slabs.
(4) In situ concrete frame with P.C slabs.”
Again, from an early stage, MCL was interested in what the proposed design would be in various respects. On 1 February 1999, Mr Saunders again faxed Mr Dawson with the following:
“RE PERIMETER RETAINING WALL
At Thursday meeting we were asked to prepare a method statement for the construction of the perimeter retaining wall.
Attached for your comment/information is the construction sequence that I currently envisage.
In order that we can talk to suppliers regarding the size/availability of props, can you please give me (order of) prop loads. [There was written in afterwards “350kN/m Service Load + 50%”]
The sketch dimensions are based [sic] the section of wall along Tricorn House.
If we can agree the various slopes/dimensions I will prepare a method statement before we meet on Weds. Martin requested that your section and our method statement are issued to Bucknalls so that they can issue the party wall notices on Friday 5th.
It may be that the piles are levelled and will need to be constructed before the upper props can be removed, but I would like the piles to be designed so that only Level 3 is required.”
Given that the piled retaining walls were to be constructed before excavation of the area within the piled retaining walls, it was going to be necessary for the piled retaining walls to be temporarily propped before the floors in the car park and the plaza floor could be constructed to provide permanent support to the retaining walls.
MCL was in touch with Wescol to obtain pricing information with regard to different possible options for the car park floors. Wescol provided MCL with some information about two alternative schemes involving concrete planks and topping and a metal deck floor and concrete solution. Those costings were passed on to MM on 8 February 1999 by Mr Saunders in a fax.
It is clear, and I find, that by about mid-February 1999, Messrs Dawson and Lee of MM had started to consider that, at least, the car park floors would act as permanent props to the perimeter retaining walls. This is confirmed by a handwritten note by Mr Lee on MM’s copy of the fax which it had received from MCL of 8 February 1999. This was understood by MCL, who sent to Mr Lee, also on 8 February, a method statement indicating how temporary supports were to be provided, ultimately to be replaced by the permanent floors in the car park involving permanent connections to the piled walls.
On 9 February 1999, Mr Lee of MM sent, by fax, to Mr Saunders information about the prop forces:
“Broadway Plaza – Basement Car-park.
Further to telephone conversation this morning, the prop forces in compression that the car-park slab must carry is as follows:
(i) At 151.750 level the force (unfactored service load) is 180kN/m run of wall.
(ii) At 148.750 level the force (unfactored service load) is 300kN/m run of wall.”
These service loads were, I was told by Mr Lee, and I accept, conservative assumptions on his part.
By mid-February 1999, Mr Saunders was noting that there was a need to discuss with the design team how the horizontal loads from the piled walls were to be carried. He noted that in his notebook on 12 February 1999. It should be pointed out that Mr Saunders was a Chartered Engineer and a member of the Institution of Structural Engineers and had a good working knowledge of matters structural. He and Mr Marsh had good working experience of substantial design and build projects.
By this time, Mr Saunders of MCL was assuming that the floors in the car park would take the prop forces and the “additional steel columns and diagonal bracing would be provided to take the horizontal forces down to the foundations” as noted in his “Proposals for the Car Park Frame” document of 17 February 1999, which was faxed to MM on 24 February 1999. At this stage, no assumptions were being made about whether or not the Plaza slab would act as a horizontal prop to the piled retaining walls.
On 26 February 1999, Mr Lee of MM mentioned to Mr Saunders at an un-minuted and informal meeting that the plaza deck would prop the piled walls. Mr Saunders’ notes of that meeting state:
“Plaza deck will prop pile wall – therefore no requirement for additional cols and bracing.”
By early March 1999, MM had begun to “firm up” on what they were planning so far as the plaza level floor slab was concerned. In a letter faxed to BA on 4 March 1999, MM confirmed that:
“(d) the plaza level cinema slabs are generally 225 thick composite slabs reinforced with 15kg per Metre Square of reinforcement …
(f) the internal areas of plaza slabs other than the cinema i.e. restaurants, retail, bowling alley etc are generally 225 thick composite slabs reinforced with a 10kg per Metre Square of reinforcements. The designs of these areas are not as progressed as the cinema areas at this stage and special provisions may be necessary over the service yard areas.”
The cinema tenant was regarded by MDL as having some priority. This explains why the area of the cinema plaza level slab was further advanced in design than the other areas.
By mid-March 1999 and probably for some four weeks before, MM was aware that the intention was that there would be a negotiated construction contract with MCL, as opposed to a competitively tendered contract. To that end, BA wrote to MM on 11 March 1999 in the following terms:
“With reference to the above project, it is our intention, as stated in the last project meeting, to complete a fully detailed costs plan by the end of March 1999. This will enable us to undertake cost checks against the base scheme and negotiate with Morrison Construction from a position of strength.
In order to complete this we will require by March 19th 1999 draft specifications and structural schemes for all areas of the development and any further design development undertaken on the cinema and car park …”
This was copied to Mr Lewis of MDL. It was not clear, at least for certain, that MCL would be employed on a “design and build” basis, although the probability was that it would be.
By letter dated 7 April 1999, MCL wrote to MM (copied to MDL) in the following terms:
“Please find attached an amended copy of our Project Strategy and Bid Programme together with an expanded Schedule of Tender Information.
We have indicated in more detail the form in which we wish to receive the information. We will be pleased to receive any steelwork quantities that you have already estimated or your estimates for minor steelwork not yet detailed. Rebar quantities can be expressed as Kgs/M³ with an indication of diameters required …”
Attached to this letter was an indication of what was required in terms of layout and the detailed drawings and specification. “Latest Date Issue of Information” was said to be 7 June 1999 for MM’s input. This is indicative of how and when it wanted to receive information largely for bidding purposes.
On 15 April 1999, MM issued its Specification for Structural Steelwork to Car-Parking in Plaza Floors. It contained on its front page what has been called at stages during this trial a disclaimer, which also appeared on other specifications produced by MM:
“This document has been prepared for the titled project or named part thereof and should not be relied upon or used for any other project without an independent check being carried out as to its suitability and prior written authority of Mott MacDonald being obtained. Mott MacDonald accepts no responsibility or liability for the consequences of this document being used for a purpose other than the purposes for which it was commissioned. Any person using or relying on the document for such other purpose agrees, and will by such use or reliance be taken to confirm this agreement, to indemnify Mott MacDonald for all loss or damage resulting therefrom. Mott MacDonald accepts no liability for this document to any person other than the person by whom it was commissioned.”
Relevant parts of this Specification were as follows:
“G10 Structural Steel Framing
To be read with Preliminaries/General Conditions and the latest edition of the National Structural Steelwork Specification for Building Construction.
GENERAL REQUIREMENTS/INFORMATION
111 DESIGN:
- The structural steelwork shown on the drawings and described in this specification has been designed to BS5950 where applicable, unless otherwise stated.
- Complete the design and detailing of member sizes and connections to BS5950 to satisfy loading requirements specified or otherwise calculable from the information given …
The following design parameters have been assumed:
- Car-park imposed load Qk = 2.5kN/m² (UDL) and Qk = 4.0kN Concentrated load
- Plaza imposed load:
- Qk = 10.0kN/m² (UDL) and Qk = 10.0kN Concentrated load.
- Floor slab to act as permanent props to embedded retaining walls.
- Floor slab to act as diaphragm for stability of structures above…
- Floor plates are folded and sloping, design means cranked as necessary …”
This steelwork specification was distributed to, amongst others, MCL.
This first draft appears to have been amended shortly thereafter by MM. The imposed loads were broken down into many more specific areas. After the last entry in Paragraph 111 which was “Steelwork to be protected for one hour fire resistance unless noted otherwise”, the following was added:
“ - The floor slab shall be designed to carry the prop forces from the retaining wall as indicated by the piling contractor. In no case shall these be less than:
- At 151.750 level 180kN/m run of wall (unfactored service load).
- At 148.750 level 300 kN/m run of wall (unfactored service load).”
These loads were the same as those notified in early February (see above).
In its Progress Report 1 to MDL of 10 May 1999, MM reported as follows:
“3. Foundations, Retaining Wall and Basement Slab …
- Progressing with the amendments of new columns layout below cinema.
4. Car-Parking.
- Preliminary design to car-parking structural steelwork for costing purposes completed.
- Currently working on detailed design and drawings of structural steelwork.
5. Cinema Structure.
- Preliminary design to cinema structural steelwork for costing purposes completed …”
At a meeting attended by, amongst others, MCL and MM on 17 May 1999 to discuss the piling tender, Mr Lee indicated that the Plaza deck would use friction along pile walls 4 and 5 to resist the thrust from the adjacent walls and that the deck would act as a diaphragm.
On 18 May 1999, MM wrote to Mr Saunders of MCL as follows:
“Further to yesterday’s meeting, please find list of queries for pile wall-contractors, before pre-contract meeting on 24 May 1999. They are as follows: …
(iii) Please provide indicative prop forces and prop stiffness assumed in the design for temporary and permanent conditions?…
(vi) Are the piles provided with the starter bars for connecting into the basement and car park slabs …”
It must have been clear to all concerned including MCL that, at this stage, the steelwork and the concrete floor slab design with regard to the Plaza floor was nowhere near completed. In May and June 1999, significant changes were made to the layout of the car park following advice received from independent consultants called Hill Cannon. The consequence was that a number of changes were made to the ramps between the car parking floors so that there was a system of shorter ramps than the floor whilst the structure of the floors at the lower car park levels (-1, -2) would be changed to replace the metal composite concrete flooring with pre-cast concrete with a structural topping. The car park exit ramp to Francis Road originally positioned alongside Wall 4 was relocated away from this wall.
At a meeting on 21 June 1999, attended by MDL, MCL, MM, DLG and BA, it was mentioned that the building contract would be in the “1998”Design and Build form, which was presumably a reference to the JCT standard form. It was probably the case that MM knew before this time that the contract would of the Design and Build type but I do not consider that Messrs Dawson or Lee had particularly focussed on that fact. It was understood by this stage that there would be a design freeze which would come into operation on 9 August 1999. By this, it was anticipated that the buildings and structures as designed up to that stage would be priced or costed on the design as it was at that stage and that any design development thereafter would have to be priced later.
Thus by the end of June 1999, it was obvious to all concerned that there would be a design and build contract between MPS and MCL and that the price would be one which was negotiated as opposed to one which was competitively tendered for.
Materially, MM’s Structures Progress Report No. 6 on 5 July 1999 stated as follows:
“1. Embedded Retaining Wall.
- Embedded Retaining Wall drawings amended to reflect the new car parking arrangements by Hill Cannon agreed with MCL. Drawings revised and issued 2nd July 1999.
2. Temporary Support Work to Embedded Retaining Wall and Excavation.
- Temporary Support Work to Embedded Retaining Wall preliminary design completed for the section along Tricorn House.
- Information to prop forces received from piling sub-contractor on 20th May 1999. Temporary support detail design could now be carried out. Temporary prop forces and length now reduced with a new car-parking layout, with a reduced excavated depth along Tricorn House …
4. Car-parking.
- Currently working on detailed design and drawings of structural steelwork.
- Sections under cinema and crescent nearly completely issued.
- Draft steelwork specification for car-parking issued.
- New car-parking plan due to changes to car-parking layout. Revised detailed design and drawings to commence week beginning 5th July 1999 …”
On 5 July 1999, MCL sent to the design team (including MM) a schedule showing the latest dates for release of information for MCL’s tender preparation. The structural steelwork “latest date” was 2 August 1999 so far as MM was concerned.
On 6 July 1999, MCL and MM representatives went to see the Birmingham City Council’s Building Control Section which was responsible for building regulations administration. During the course of the discussion, Mr Lee indicated that the pile walls would be propped by the completed structure, in particular by the floors at car park and plaza levels. Mr Lee drew a sketch to show how there was to be a diagonal transfer of the prop force loads from Walls 4 to 5 and 5 to 4.
A number of steelwork subcontractors had been contacted by MCL, who were invited to interviews on 14 July 1999. These included Rowen. Mr Emerson of Rowen attended this interview; he described it as a “beauty parade”. Mr Lee of MM and a representative from MCL attended. I am not satisfied on the balance of probabilities that anything of any great significance to this case was said or occurred at this meeting. The highest that it is put by MCL is that the MCL representative said something along the lines that the horizontal loads from the pile walls would be taken by the concrete slab as opposed to the steelwork and that Mr Lee of MM nodded. None of this was recorded or confirmed in writing and I am not satisfied that MCL’s case on the evidence is established.
What is certainly true is that, following this meeting, MCL agreed to use Rowen to provide “value engineering” advice with regard to the steelwork. “Value engineering” effectively involved Rowen advising MCL and, indeed, the design team and MDL, about possible savings which could be achieved financially by introducing changes or modifications to the design proposals which had been or would be prepared by MM.
At a meeting on 12 August 1999, attended by MDL, MCL and the design team, including MM, the following was recorded at minute 5.4 relating to Steelwork:
“Tender submissions had been received in respect of the first stage information.
It was confirmed that Rowans would be brought on board as initial partners on the basis of their offer to work up the design with Mott MacDonald for a six-week period until the end of September.
At this stage, Rowans were prepared to re-negotiate a tender figure or if we are unable to agree terms with them, time will allow to resubmit full tender submissions to the market.
This therefore gives us the benefit of the design sub-contract input at nil cost and the option to re-approach the market if it is felt appropriate.”
Mr Lee of MM believed that prior to mid-November 1999, Rowen was providing a design service to MCL. Although, contractually, this was not the case, Mr Lee’s belief was not an unreasonable one given minutes such as this and the fact that from August to November 1999 Rowen was providing advice about savings which could be made involving modifications to the designs which were being put forward by MM. Little however turns on this issue.
On 18 August 1999, MM issued its Specification for Structural Steelwork Revision 1. The document contained the same “disclaimer” as the earlier version (see above). So far as this case is concerned, it contained no material changes from the amended version set out above.
On 24 August 1999, MCL invited Rowen to tender for the structural steelwork and pre-cast concrete package by 20 September 1999. Although the schedule of attached documents to this invitation has been mislaid, I am satisfied that MM’s Specification for Structural Steelwork was not included in the package of documents sent to Rowen for tender purposes. This invitation eventually became (as amended) a subcontract document in the Rowen subcontract. By 26 August 1999, it was clear that insufficient information was available to enable Rowen to complete their tender. In a file note in MCL’s files the following is recorded under the Structural Steel and Pre-Cast Package:
“Preliminary info issued to Severfield-Rowen and tender process ongoing. All specifications outstanding and overdue and steel design for above plaza level (excluding cinema) also outstanding.”
On 31 August 1999, MM sent to Rowen (copied to BA and MCL) their “design loads for the steel structures”. It noted in its covering letter that “the imposed loads could also be found in our specification”. Attached handwritten sheets showed:
“In the car park there were to be 140mm slabs with steel decks. Meanwhile in the retail area and crescent the slabs were to be 175mm thick with steel decks. In the area of the cinema, floors were to be 255mm thick with concrete and steel decking.”
Rowen did not call for the “specification” referred to.
In September, October and November 1999, Gibb issued detailed design calculations for the various retaining walls, including Walls 4 and 5. These designs and calculations were submitted to MM who, ultimately, approved them. In this context, on 2 September 1999, Amec wrote to MCL with regard to the latest drawings that had been issued to them the day before and stated:
‘2. Wall 4
The pile cut-off level at the junction of Wall 4 and Wall 5 needs clarification. We are concerned that the upper slab in Wall 4 is still in abeyance. The design of the wall assumes that this slab props the wall in the long term.
11. Wall 5.
200mm longer. Slight increase in cut-off level. The long term support in the area of the “Fire Escape Stair Well” needs clarification ...’
This letter was passed on shortly thereafter to MM by MCL.
The meeting held on 15 September 1999 to discuss the “design information release and associated matters” was attended by Mr McMurdo of the Morrison Group, Mr Lewis of MDL, Mr Patterson of DLG, Mr Dawson of MM and Mr Marsh of MCL. This meeting attracted considerable attention during the trial. The relevant parts of the minutes are as follows:
‘1. JMcM outlined the principal purpose of the meeting; the project had been commenced by setting “week zero” as 21st June 1999 with a bid period up to the end of October. However, the Group requires an accurate costs estimate by the end of September. Based on the bid programme, MCL had indicated a 60% level of cost surety by this date, but with the current levels of bid information available this had been revised to 25-30%. The meeting was to establish why this shortfall had occurred, what mitigation could be offered and what the status would be at the end of the bid period.
2. TM confirmed that a package design relief schedule had been issued together with the bid programme and, due to slippage, a revised schedule had been issued at the beginning of September. Despite this, information levels were such that, although packages had gone out generally on time up to the beginning of September, the packages fell significantly short of the information necessary of the information to achieve cost certainty.
3. TD acknowledged that the information had not been released in its full format, but it expected details of missing information, TM responded that some of the information was fundamental i.e. the issue of the package specification; this was accepted by TD. AP confirmed that in the middle of the period to date there had been a significant shortfall in architectural information release; additional resource had been employed and the programme to the end of the bid period could be secured. TD also considered that by the end of October the structural information would be up to date.
4. TM responded that while it was vital that the information release be available to meet the original target, the time lost in the middle of the bid period could not be rescued as there was insufficient time left to issue the late information to tenderers, assimilate returns and review the costs plan by the end of September. This was agreed by JMcM and it was further agreed that the additional information would be issued to the lowest tenderer for pricing by the end of October.
5. JMcM advised the consultants that from this point onwards they were to respond to MCL’s requirements as priority. ML objected to this proposal, reminded JMcM that Developments were under extreme pressure to progress lettings and reiterated that both he and John Gray had acknowledged that their use of the share architectural and to a lesser structural, resource had impacted on the consultant’s ability to release the bid information to MCL. Notwithstanding this, ML required “first call” on the design team to enable MDL to complete the deliberations with at least Healthlands and Wessex and possibly other opportunities before they would be in a position to allow the design team handover to take place (see also 9 below).
6. Severfield-Rowen were briefly discussed and TD advised that he was concerned that it appeared that they were reducing their expectation of costs certainty although they still believed that costs savings will be made against the costs plan. TD is to visit SR following this meeting to review current status of progress. TD advised that all steelwork plans would be available this week which safeguards the alternative of going back out to the market with this package if SR fail to deliver…
8. ML reminded JMcM that MCL were not bidding the final scheme, TM confirmed that this was understood and that anything not covered by the design freeze information i.e. the Healthlands/Wessex requirements would be treated as a post-bid variation …
9. JMcM advised that at some appropriate time the design team would be novated to MCL and from that time forward all MDL requirements for design team input must come through MCL. It appears likely that this will now be at the end of next month i.e. after completion of the programmed bid period …
Post-meeting note: the consultants confirmed, in discussion with Neil Marshall, that all outstanding information would be made available by close of business Friday 24.09.99. This will be too late for the end of September, but should allow us to utilise the procedure suggested in 4 above to provide a more accurate contract sum at the end of the programmed bid period.’
This was the first notification in 1999 to MM that a novation was proposed. Thus it was clear to all concerned from this stage that, subject to agreement, a novation as between, amongst others, MCL and MM was hoped to be in place within several months. MM did not object to this course of action.
On 16 September 1999, there was a meeting attended by Messrs Harper and Emerson of Rowen, Mr Lee of MM and some seven representatives of MCL, including Mr Byrne. There was discussion at this meeting about the management strategy and the erection sequence as well as a number of technical matters. At Paragraph 5.1 of the circulated minutes, the following appears:
“[Mr Byrne] queried the design responsibilities of the team. PE explained that MM were producing the base design in close liaison with [Rowen] (to achieve best value engineering solution) and [Rowen] were detailing final connections.”
Earlier in the meeting there was a discussion about the floor construction:
“4.7 The different floor construction methods were discussed –
- in situ
- metal deck
- pre-cast.
PE noted that [Rowen] do not take on board the concrete flooring for the metal decking.”
By this, Mr Emerson was making clear that Rowen was not providing the concrete flooring to be cast in situ on the metal decking, albeit that it was clear that the pre-cast concrete planks were otherwise to be provided by Rowen.
In September 1999, MM issued a number of drawings at various times. Material details are as follows:
Drawing 42821/STR/-STL/154
Drawing 154 was issued on 17 September 1999 (“Tender Issue”) and revised on 24 September. This drawing like all the other relevant ones identified the Client as “Property Solutions Morrisons Developments”. It contained the following words as did all the pre-MCL/MPS Contract drawings from MM:
“This document should not be relied on or used in circumstances other than those for which it was originally prepared and for which Mott MacDonald Ltd was commissioned. Mott MacDonald accepts no responsibility for this document to any party other than the person by whom it was commissioned.”
Drawing 154 was a structural steel framing plan for the Plaza Level. It showed for the whole floor area some 1000 bays of steelwork specifying the steel members which were to be used in each bay.
Drawing 42821/STR/-STL/150
This was “Re-issued for tender” on 24 September 1999 and was entitled “Beam Schedule”. It spelt out the details for the 65 different types anticipated for use in the Plaza floor. It did not show any axial loads or prop forces to be taken into the steel work.
Drawing 42821/STR/-STL/173
Drawing 173, issued for tender on 24 September 1999, set out three options for composite flooring for the Plaza floor. Option 1 was a 175mm thick floor with corrugated metal decking under reinforced concrete. Option 2 was a pre-cast pre-stressed concrete floor while Option 3 was a reinforced concrete floor.
It is common ground that none of the drawings produced then or before the summer of 2000 specifically showed steelwork designed to withstand the prop forces or, put another way, prop forces going into the steelwork. It is also common ground that on their face a number of these drawings were incomplete.
At Design Meeting No. 3 on 23 September 1999, attended by MDL, MCL, DLG and BA (but not MM) the following was confirmed under minute 8 in respect of the steelwork:
“A meeting was to be held at MCL/[BA]/Mott/Rowans to review Rowan’s progress. It was confirmed that insufficient information was available from Mott MacDonald and it was confirmed that all outstanding information would be with Rowans by 24th September. Rowans agreed to consider and submit a price by 6th October. It was confirmed irrespective that a single tender action would be run with Rowans.”
A minute headed “Contracts Report” indicated that:
“Risk Assessments from Designers still outstanding. All to note that these are to be with Morrison Construction urgently.”
It was also acknowledged:
“That the Design Team would probably not be novated to MCL prior to the end of October but for all intents and purposes had been under Morrison Construction’s control for several weeks.”
Under the minute headed “Engineer”, it was reported that:
“Mott MacDonalds had fallen behind in respect of information required for Steelwork Tender. Mott MacDonalds were therefore not attending the meeting and Tim Dawson, Sonny Lee please note that this issue must be addressed urgently …”
These minutes were circulated to all attendees and MM.
There was considerable evidence at the trial relating to a meeting which took place on 6 October 1999 attended by MM, MCL and Rowen. Although there were no formal meeting minutes as such, there were a number of (largely) handwritten notes from various sources, particularly those of Mr Cooper of Rowen. It is clear, and I find, that a (and possibly the) primary purpose of this meeting was to enable Rowen to review with the Engineer, MM, and the potential main contractor, MCL, the steelwork design with a view to enabling Rowen to finalise their tender for the steelwork. There was an analysis of a number of the drawings which had been issued by MM in relation to steelwork, in particular in relation to those parts of the drawings which were obviously incomplete. There was no positive expression by Mr Lee of MM who attended the meeting that the steel work was required to accommodate the prop forces.
Mr Cooper, whose notes of the meeting are the more helpful, had prepared some written notes which raised various queries and points. On one of the sheets of questions prepared by Mr Cooper which were handed out at the meeting, under the heading “General”, following points raised about Drawings 154-159, the following point was raised:
“14. Any horizontal loads into steelwork from perimeter retaining wall.”
Mr Cooper in handwriting wrote during the meeting the following, which in the copy of his notes was on two lines:
“Sonny to advise (100kN/m …) planks X in situ √ Get load into col grids.”
Above the reference to 100kN was a little arrow with the following words attached:
“Conservative 50% or less in final.”
It is clear from this that, given that there was a reference to planks and in situ, Mr Lee’s answer related to the car park floor slabs and not as such to the Plaza floor slabs.
Also against a query about Drawing 154 (“All steps (differences in level) been accounted for ie grid W56/VB see drawing on elevation on dwg 167 (ie double support beams”)), Mr Cooper wrote “Sonny to give tonnage”.
Mr Cooper also had some other contemporaneous notes which were written down on sheets of paper but not against the written questions. It is also clear from those notes in their references to planks that the discussion was about the car park slabs and not the plaza slab. There is a note written, unlike the rest of his notes, in capital letters, which states:
“NOT APPLICABLE TO STEEL PRICE.”
I found Mr Cooper’s evidence at the trial on this note unsatisfactory and not credible. He said, in effect, that he was told by someone at the meeting that Rowen’s price was not to allow anything for horizontal loads having to be taken into the steelwork. I am not satisfied on the balance of probabilities that anything was said by anyone at the meeting about this, albeit I do accept that Rowen decided, based on what they had been told at the meeting, not to include in its later pricing, for any horizontal loads into the steelwork. One of the reasons that I am not convinced that anything was said, at least in MM’s hearing or otherwise, is that this issue relating to horizontal loads into the steelwork was raised later on about four or five occasions in late October, November and December of that year by Rowen. If it had been clear and clearly stated and agreed at this meeting that no allowance was to be made by Rowen for horizontal loads from the piled walls into the steelwork, there would have been no or, at the very least, less need for the matter to be so continually and consistently brought up again over the following two to three months.
What was certainly clear at the meeting was that MM’s steelwork design was incomplete. There was some discussion in the evidence as to how incomplete it was. Reference was made to the design being 90% complete. This emerged because on a number of drawings which had been issued by MM prior to the 6 October 1999 meeting a number of areas had been identified as specifically not yet designed.
On or before 6 October 1999, Rowen had submitted a bid or tender for the steelwork. That identified a weight of 4883.580 tonnes of steel with a value of £5,575,500.83.
Following the meeting of 6 October 1999, Rowen submitted what was said to be a “Compliant Bid 6 October 1999 Adjustments following 6 October meeting”. That adjusted bid added various sums against various MM drawings numbered 152-159, 165, 172 and several others. In a section of this adjusted bid headed “General”, Rowen identified that it allowed nothing in terms of value against an item “Horizontal loads into steelwork from retaining wall”.
On 6 October 1999, Rowen submitted what it called “Structural Steelwork Alternative Design Proposals”. Various possible savings were identified.
By fax dated 8 October 1999, Mr Cooper wrote to MM (Mr Lee) by way of follow up to the meeting of 6 October 1999 and asked as against Drawing 154 (item 2) for MM to confirm what additional tonnage should be allowed for. Item 2 was one of Mr Cooper’s written notes or questions at the meeting, which stated:
“All steps (difference in levels) been accounted for ie grid W56/VB see drawing on elevation on drawing DWG167 (ie double support beams).”
This question related to how the steps or changes in level in the plaza deck were to be accommodated so far as the steelwork was concerned.
By fax dated 8 October 1999, Mr Lee of MM wrote to MCL (copied to Rowen and BA) as follows:
“Structural Steelwork queries raised by Rowen …
4. Additional structural steelwork for split levels at plaza level. Allow 65 tonnes of universal beam and 10 tonnes of column sections extra over.”
By other letters of the same date, MM answered a number of other queries raised at the 6 October 1999 meeting.
There was much examination of various witnesses about what was meant or intended by this. Mr Lee’s evidence on this was somewhat confusing. I certainly take into account the fact that English is not his mother tongue and a number of the questions put to him about this, I sensed, were confusing, at least to him. I do not consider that Mr Lee in reality accepted that he had not made any allowance for propping or diagonal strutting at the points where there were split levels at the plaza level. He could not truly remember when asked. It is clear that the design was incomplete in these areas. It is my view, and I find, that Mr Lee simply made some unattributed allowances for additional steelwork to accommodate loads and stresses at the changes in level. Put another way, he made a stab at what he thought might be required in that area. It was certainly not an allowance which was calculated in any detail at all.
On 11 October 1999, MCL prepared a file note reviewing outstanding tender information. Under the heading “Structural Steel and Pre-Cast”, the following is noted:
“Despite previous assurances from MMcD at the meeting held on 06/10/99 Severfield-Rowen were only in possession of approx 85-90% of the info to allow a fixed bid to be submitted - as a result, they will now submit a GMP bid for the steel structure only on 12/10/99 – PCC figures to follow by 18/10/99.”
The reference to “GMP” is to “Gross Maximum Price”, which is a price which will not be exceeded; it is usually accompanied by some agreement (as there was eventually here as between MCL and Rowen) as to how the savings below it are to be distributed between the parties as proved to be the case here.
On 13 October 1999, Rowen submitted a financial proposal based on their quantified Schedule of Rates which had been in the sum of £5,575,500. After allowing some £740,000 for various savings to be made as a result of possible “value engineering”, Rowen then added what was said to be “allowances in respect of missing and unsized steelwork relating to Mott McDonald drawings”. This included for 75 tonnes in respect of “Steelwork at Plaza Level, Level Changes”. Various further omissions and additions were provided. This produced a revised price of £5,233,808. On 14 October 1999, Rowen wrote to MCL quoting prices, additionally, for galvanised metal decking and Pre-Cast Concrete Planking.
On 25 October 1999, Rowen sent to MCL, copied to Mr Lee of MM, a Request for Information in the following terms:
“Please supply accurate horizontal retaining wall loadings @ floor support locations.”
There was no answer from MM to this Request.
On 28 October 1999, Rowen and MCL representatives met to discuss, amongst other things, programme and sequence of works and Scope of Works. MM did not attend and was not circulated with the minutes..Both attendees marked up a set of drawings at the meeting showing an assessment in either percentage or tonnage for the areas which had not been fully designed; Rowen confirmed that these assessments had been taken on board in agreeing an all encompassing figure for the steel work package; those marked up drawings were not put before me. It was the case that at no time was MM involved as a matter of fact in any pricing or programming discussions or communications between MCL and Rowen.
In its Structures Progress Report No. 8 of 28 October 1999, MM reported that in relation to the Structural Steelwork Package “about 90% of steelwork design is done. The remaining 10% is based on tonnage”. It is clear that even at this stage the design was insufficiently advanced in relation to about 10% thereof with information other than tonnage remaining to be provided. That must have been obvious to all concerned. Indeed, no further work of any significance was done by MM on the steel work design after the second week in October 1999, as must have been known by MCL.
Also on 29 October 1999, MCL faxed a message to Mr Lee of MM raising some queries about the concrete floors, for instance:
“(4) Following discussions with AP [of DLG] I confirm that the thickness of concrete slabs to the 154.00/155 level of the cinema given on RCS/203 is incorrect. Pls confirm what we need.”
In its report dated 29 October 1999, Gibb on behalf of Amec, the piling subcontractors, provided details of the retaining wall design for Wall 5. This was passed to MM by MCL who by 4 November 1999 had reviewed it and was satisfied with it. Gibb had had to assume that various floor slabs at the minus 1 and minus 2 levels in the car park provided support to the retaining wall (Wall 5) in the permanent condition. The report had also said this at paragraph 5.5:
“The floor slab in the retail and residential units will act as a prop along the full length of the capping beam of Wall 5 … It is assumed that the slab will have a stiffness of at least 50,000kN/m² and be capable of carrying a horizontal load of 60kN/m run of wall. The Engineer must confirm that the superstructure can accommodate these design requirements.”
This relates to the floor slab at Plaza level.
On 12 November 1999, MM reported to MDL in relation to the Cinema Structures as follows:
“- Progressing detailed design and drawings for structural steelworks.
- Appraisal, checking and amending latest cinema column layout by DLG and P. …”
As indicated in the General Chronology chapter of this judgment above, by this time, MCL had resolved with the agreement of MDL that the design of the steelwork should, in effect, be taken out of the hands of MM and “given” to Rowen.
On 22 November 1999, MM wrote to DLG about changes relating to reduced headroom in the car park areas of the development. Thus, it was clear that consideration would have to be given to further alterations to the design in relation to steelwork and the floor slabs at least at car park levels.
On 22 November 1999, MCL presented its formal subcontract order to Rowen instructing the subcontractor to carry out and complete the Sub-contract works. The two parties met on that day and entered into a binding agreement. The Sub-contract works were described as:
“Design, Fabrication, Supply and Installation of Structural Steel Frame, Metal Deck and Pre-Cast Concrete Flooring and Pre-Cast Concrete Staircases and Auditoria Terracing”.
The Sub-contract Order Value was described as £7,600,000, being a “Guaranteed Maximum Price”. There was also a meeting between MCL and Rowen on that day with regard to sub-contractual matters. Within a few days at most, Rowen had retained Thorburn Colquhoun to assist it design the steelwork.
It was however only several days later that MM was formally informed that Rowen was now responsible for the design of the structural steelwork. That was partly hinted at in an agenda prepared for a Structural Steel Design Workshop dated 25 November 1999 sent to MM. There was also a meeting between Mr Dawson and Mr Byrne on 26 November 1999 at which this was probably mentioned. It was confirmed in Mr Byrne’s letter to Mr Dawson of 29 November 1999:
“With reference our discussion Friday last 26 November 1999 regarding design fees, client’s view of your design works to date is as follows:
- Areas of the project were not designed initially these were highlighted during our meeting on 6th October to review the steelwork design.
- As now proposed the detailed steel frame design will now be carried out by Severfield Rowen with your team’s input into co-ordination and checking rather than full design.”
Mr Dawson was aware therefore in the last week of November, or possibly shortly before, about Rowen’s assumption of the design responsibility in relation to the steelwork and that MM’s rôle was expected to be limited to co-ordination and checking rather than full design.
The agenda for the Structural Steel Design Workshop of 25 November 1999 stated:
“Object
To familiarise Severfield Rowen of all the issues that will affect the final detailed design of the steel frame.
Rowen has 13 weeks in which to design and fabricate the steelwork for the first area of work.
No minutes will be taken.”
Mr Lee amongst others was circulated with this agenda and was to be one of the attendees.
That meeting was indeed unminuted. It was attended by Mr Lee and representatives of Rowen amongst others. I found the evidence about this meeting somewhat unclear. There clearly was a wide-ranging (and indeed brain storming) discussion about different aspects of amongst other things the steel work. However, I am wholly satisfied on a balance of probabilities that no resolution was achieved in determining whether or not the prop forces or horizontal loads from the piled walls were to be taken into the steelwork or the concrete. Mr Cooper of Rowen expressly confirmed in oral evidence that all parties understood that this issue “had not been decided” and that everyone, MCL, MM and Rowen, understood that at the time it had not been decided whether the loads were in the steel work or the concrete. That is wholly consistent with Rowen’s fax of 27 November 1999 and their fax of 8 December 1999.
Thus I conclude that MM, and in particular Mr Lee, had not finally decided whether or not the horizontal forces from the piled walls were to be taken in whole or in part by the steelwork as opposed to the concrete part of the car park and plaza floor slabs. I am not satisfied on the balance of probabilities that Mr Lee simply said nothing at this meeting during the discussion about where the horizontal loads were to go. He certainly did not positively assert or represent that the loads were to go through only the concrete and not the steelwork; if he had done so, there would have been no need for Rowen to raise the queries which it did over the following fortnight. What most probably happened is that Mr Lee indicated or at least gave the impression that he had not finally made up his mind about the issue.
Following that meeting, Mr Harper of Rowen faxed on 27 November 1999 a note to MCL copied to Mr Lee which stated, materially, as follows:
“5. Prop force from pile wall onto floor plates to be advised, this must be realistic: required on 29/11 …
17. Written design philosophy for the development of the retaining wall force by MM.”
This is one of the notes, particularly from Rowen, which confirm in effect that in the period leading up to the entering of the sub-contract with MCL, Rowen still did not know whether the prop forces from the retaining walls needed to be taken in whole or in part in the steelwork which they were to design and construct. It confirms in effect my finding that, up to that stage, neither Rowen nor MCL knew what the answer to that question was and they were not relying upon what had been said by Mr Lee at an earlier stage.
Mr Saunders of MCL replied to Mr Harper’s fax (copied to Mr Lee) on 30 November 1999:
“Further to your fax of 27.11.99 response is as follows:-
Item 5. I will copy the full Amec/Gibb pile designs and forward to you 1/12/99 (Walls 6, 1, 2, 3, 4 and 5 first) MM will not provide any information …
Item 17. MM to provide by end 3/12/99.”
By a fax dated 1 December 1999, MM responded in part to Rowen’s fax of 27 November 1999. However, in relation to Item 17 of the fax, Mr Lee’s reply was:
“To be reply [sic] later.”
He only addressed Items 13, 16 and 18 otherwise.
At an Internal MM Structures Project Review, carried out on 2 December, 1999, a review was carried out on documents presented by MM’s Project Manager. The report of the meeting expressed itself satisfied that “the project requirements are adequately defined and that the work carried out…satisfies them”.
There was a meeting on 7 December 1999 attended by Mr Lee, Mr Patterson and Rowen representatives. A number of matters were discussed. So far as is material, Mr Harper identified in a fax dated 8 December 1999 what were the “Actions” required:
“6. Pile designer to schedule UDL loads onto steelwork [action Morrison by 13/12].
7. Design Philosophy (Item 17 RSC fax 27/11) outstanding holding up bracing design – very urgent [action MM].”
Mr Cooper said in evidence which I accept (it being corroborated by this letter) that Rowen did not know how MM was “proposing that the retaining wall forces be dealt with” (F/487). The very fact that these matters were being raised by Rowen to MCL’s knowledge demonstrates that MM through Mr Lee or otherwise had not definitively stated beforehand what MM’s design philosophy was.
On the same day, MCL wrote to Amec by fax:
“Could you please help me by giving a schedule of the forces to be carried on each floor for each of the different wall and height/support conditions. I want to be sure that our structure is being designed to carry the correct forces (I accept that the pile calcs contained this info but it is not easy to find). If it helps a list of where the correct info can be found, will at least task me to the right pages …”
By letter dated 10 December 1999, MM wrote to Rowen (by fax), copied to MCL and DLG, as follows:
“BROADWAY PLAZA – Structural Steelwork Horizontal forces from the embedded piled wall.
We refer to your fax of 8 December 1999, we confirm that the horizontal forces from the embedded piled walls will be transferred by the car-park slabs to the piled wall at both ends.
The car-park slabs will act as a diaphragm to transfer this force and the end piled walls will act as shear walls.
The forces from the pile wall will be transferred to the car-park slabs in direct bearing and dowels will be provided to transfer the shear forces from car-park slabs to the end pile walls.”
MM was referring here to the floor slabs at levels -1 and -2 in the car park and not to the Plaza Floor slab.
There was a discussion on 10 December 1999 between, amongst others, Mr Lee and Mr Cooper of Rowen, about which neither could remember much. However, Rowen (Mr Harper) wrote to MCL on 13 December 1999 in the following terms:
“As you are aware from telephone conversations of last week in connection with the above noted project, it is with some measure of concern that we are seeking to resolve three major information issues as noted below:
1. Updated construction service drawings.
2. Mott MacDonald’s design philosophy for the loads from the pile walls and their transmission to ground …
As you will appreciate, all of the above stated issues have a considerable effect with regard to progression of our works which I outline below: …
Item No. 2.:
Connection design at minus 1 and minus 2 levels cannot be started …
During Friday 10th December 1999, Mott MacDonald confirmed verbally that the wall loads would not have to be carried to ground through the brace systems, we await their written confirmation of this information …”
I conclude however that the conversation, such as it was, that took place on 10 December 1999 did not reach any finality, at least so far as the plaza floor slab is concerned.
Be that as it may, there was a design team meeting on 16 December 1999 which was attended by Mr Lee, Mr Saunders, Mr Patterson and Mr Harper (of Rowen). The relevant part of Mr Harper’s note says:
“17. Sonny Fax 10/12 – slab at Plaza/screed at -1, - 2.”
Mr Lee could not remember what he said at this meeting.
Mr Harper followed up this meeting with a fax to Mr Saunders, copied to MM of 21 December 1999. Materially, it stated as follows:
‘Further to meeting 10.12.99 [it was agreed that this should have been a reference to 16.12.99] at DLG’s offices, notes as follows: …
12. Mott MacDonald fax 10.12.99 re horizontal forces from piled walls – this was agreed with Sonny should read “The car park screeds at - 1 and - 2 and the slab plaza level will act …”’
I am satisfied that, although this fax was transmitted to MM, being received in the late afternoon of 21 December 1999, it was not seen by Mr Lee. It does appear that it was seen by Mr Dobson of MM who had, however, not been at the meeting.
I accept that on a balance of probabilities Mr Lee did agree at the meeting of 16 December 1999 that his letter of 10 December 1999 should read (as amended and underlined below):
“We refer to your fax of 8 December 1999, we confirm that the horizontal forces from the embedded piled walls will be transferred by the car-park slabs to the piled wall at both ends.
The car-park screeds at - 1 and - 2 and the slab at plaza level will act as a diaphragm to transfer this force and the end piled walls will act as shear walls.
The forces from the pile wall will be transferred to the car-park slabs in direct bearing, and dowels will be provided to transfer the shear forces from car-park slab to the end piled walls.”
I am not satisfied that anything more of relevance, relating to the issues in this case was said by Mr Lee at the meeting of 16 December 1999.
Thus, it will be seen that what Mr Lee was agreeing in relation to the first and third paragraphs of this (now amended) letter related to the car park slabs. What he was agreeing was, however, that the Plaza level slab would act as a diaphragm to transfer the prop forces with the end piled walls acting as shear walls. In context, that meant that the Plaza floor slab would act as a diaphragm to transfer the horizontal forces from the embedded piled walls as between Walls 4 and 5 with each acting as shear walls. He was not saying that steelwork would not be needed to some extent to accommodate the prop forces. I accept Mr Lee’s evidence that at this stage he was hoping to do more calculations to see what was required so that the slab could be made to carry the prop forces, but he felt that there was a lack of information. The sense of what he said was that his thought process as to precisely how the prop forces were to be accommodated was incomplete at this stage. This is corroborated by what he told Mr Gidwani after the latter took over (T10/99-101). This explains why what he is recorded as saying was relatively limited.
By Christmas 1999 and probably for some time before, Rowen had also employed (in addition to Thorburn Colquhoun) another firm of consulting structural engineers, P.A. Holloway & Partners, to carry out various elements of the design. Mr Middleton of P. A. Holloway wrote to Mr Cooper of Rowen on 23 December 1999 by fax with an “initial query list”, one of which was Item 17:
“Are the forces from the propped retaining wall to be taken out in steelwork bracing or do they disappear somehow?”
Mr Cooper or one of his assistants wrote in handwriting beside that query “in to screed”.
It seems clear, and I find, that Rowen proceeded to carry out the detailed design of the steelwork (either itself or through its two independent firms of structural engineers) on the basis that at Plaza level the horizontal forces would not be taken into the steelwork but would be accommodated by the concrete element of the composite floor. The formal answer to Holloway’s list of queries was on 13 January 2000:
“(17) The retaining wall propping forces will go directly into/out of the structural screed and we do not need to concern ourselves with this as it is to remain Mott’s problem.”
Later, in December 1999, Mr Dobson of MM did some calculations for the foundations. Apart from dead loads, the only horizontal loads allowed for to be taken down into the foundations were wind loads. No-one had suggested to him that the prop forces would have to be allowed for in the foundation loads. At that stage however, the steel work design responsibility had been taken over by Rowen and the steelwork design had not been submitted by Rowen for approval.
In January 2000 a number of technical queries and requests for information were generated by Rowen. In its TQ014 dated 11 January 2000 sent to MCL (and apparently not initially copied to MM), Rowen asked for advice generally on the need for any slab expansion joints. MCL’s answer by fax, copied to Mr Lee, was in the following terms:
“(2) I understand your thinking on the thermal break under the cavity but if this is a problem structurally as the slab needs to take horiz [ontal] forces from the pile wall then we will have to assess the likely effect.”
MM did respond directly to TQ014 on 17 January 2000:
“2. Joints not possible slab needs to transfer prop forces. (Permanent case).”
Thereafter towards the end of January 2000, MCL entered into the design and build contract with MPS. There had been no discussions between MM and MCL or request for information made by or confirmation sought by MCL to or from MM in the period leading up to the signing of that contract as to any elements, or even the generality, of pricing or programming in relation to that contract. MM had not been asked whether there were any elements of their design (in so far as it was still left to them to design) which were incomplete or in respect of which appropriate contingency allowances should be made.
Following a period of questioning of Mr Saunders about novation, I posed a series of questions to him:
“Judge: But during this period, really looking at the six months leading up to the signing of your contract which is late January 2000 --
A. Yes.
Judge: -- I think you said you were expecting MCL to novate direct with Mott?
A. Mott to novate to us, yes.
Judge: Yes, whichever way round.
A. Yes.
Judge: And did you actually in this period think about what would happen if Motts got things wrong? Were you thinking in terms: well, if things really go wrong here, we will always be able to sue Motts because we will be getting a novation? You may not have thought of it as bluntly as that.
A. No, no.
Judge: But in terms of responsibility we have a come back against Motts "because we will be getting a novation".
A. The normal contractual relationship, yes.
Judge: And so were you therefore really relying on your assumption that there would be a novation?
A. I was relying on that things would carry on as they normally do under other contracts, so yes, I think I have to say yes.”
As Mr Saunders was very much in charge on a day to day basis in the period leading up to MCL’s contract with MPS, and indeed thereafter, I find that MCL’s thought process was that it assumed that there would be a novation with MM and that it would be through that route that any responsibility would be resolved.
Following the involvement of Mr Gidwani, on 17 February 2000 he with Mr Lee attended a meeting with amongst others Mr Saunders, Mr Patterson and Mr Harper. Mr Saunders’ notes of the meeting are relatively extensive and do not obviously record any reference to a discussion about how horizontal forces from the piled walls were to be dealt with. Mr Gidwani’s, brief, notes say little about this also: with regard to the plaza level he notes:
“8. Check levels on plaza for strutting - Most important.”
Mr Harper’s note, which is relatively full, identifies no discussion about horizontal loads from the piled walls.
Mr Saunders and Mr Gidwani give somewhat conflicting evidence about this meeting. Mr Gidwani says that he asked Mr Harper to confirm that Rowen’s steelwork design took into account the prop forces both at car park levels and at plaza level; he said that he was astonished when Mr Harper told him that Rowen was taking no account of the prop forces on its steelwork. Either at that meeting or a later one, Mr Harper’s given reason was, he said, that Rowen had been told the prop forces were to be taken through the slab (namely the concrete), whereupon Mr Gidwani explained that the floors were composite structures and that some part of any forces entering one element of the structure would inevitably transfer to the others. Mr Harper’s reaction was that he was a contracts man and not an engineer. Mr Saunders said that Mr Lee did not say much at this meeting.
Mr Saunders’ evidence was that Mr Gidwani did ask Rowen how they were dealing with the horizontal forces coming from the piled walls. Mr Saunders said that he pointed out that “as directed by Sonny Lee” the concrete floor slabs were to provide the propping action without any significant effect on the steel frame. He said that Mr Lee did not contradict this statement and Mr Gidwani expressed mild surprise but did not say anything more at the meeting.
I am not convinced by the evidence of either witness that there was as much discussion about the prop forces. The various handwritten notes of those attending do not indicate that there was such an extensive discussion. There clearly was some preliminary discussion and Mr Gidwani was surprised to be told that the steelwork design was not taking into account the prop forces. If there had been as much discussion as both Mr Saunders and Mr Gidwani suggest, there would have been no or little need for Mr Gidwani to have raised TQ014 on 23 February 2000, which he did in the following terms:
“Subject: Lateral Loads to Plaza Slab
Please Supply/Clarify the Following:
The floor slabs in the car park and at plaza levels are generally used to prop the retaining walls, as specified in Clause G10/111 of the Specification of the Structural Steelwork. Could you please provide your calculations, in accordance with this clause, to demonstrate that the floor construction satisfies the loadings given?”
It would also not have been necessary if there had been such an emphatic discussion on 17 February 2000, to have raised it again at the meeting which took place on 22 February 2000. That meeting was attended by Messrs Saunders, Byrne and Marsh for MCL, Mr Lewis for MDL and Mr Lee and Mr Gidwani (amongst others) for MM. Complaints were made, particularly by Mr Marsh, against MM that inadequate resources had been provided by MM and that there had been a £500,000 loss on the foundations package due to the amount of reinforcement and concrete roughly doubling since tender. Mr Saunders and Mr Marsh provide no or no material notes about this meeting. Mr Byrne provides the fullest handwritten note of the meeting in relation to the prop forces. He records this:
“Responsibilities: Rowen’s (stick Motts)
- start r/wall Motts:
- Rowen’s: MG/AC – horizontal load transfer to r/wall thro floor plate whose [sic] is responsible. Have Rowen’s taken it thro steel frame at plaza level:
Rowen’s spec passed to Motts: … - Load onto steel is not been [sic] discussed as Rowen’s responsibility: deck – Motts overseeing the steel-floor plates Motts overseeing calcs:
- Motts discuss internal RTRS [Mr Saunders] needs a view tomorrow steel/floor plate load transfer – discuss with Rowen’s tomorrow:
- way order was placed?”
Whilst Mr Gidwani deals with this meeting in some detail in his witness statement (first), Mr Saunders does not deal with it at all in his first statement (other than referring to a telephone conversation on 22 February 2000 with Mr Gidwani) or in his second or third statements. Mr Marsh does not deal with it at all in his first statement or in his later statements. Mr Byrne does not address the meeting, other than in passing.
It seems clear, and I find, that Mr Gidwani’s recollection of this meeting is broadly accurate. Thus he did raise the issue as to whether Rowen had taken into account the pile wall forces in designing the steelwork; that encountered some relatively firm objection and response from MCL representatives (probably Mr Marsh). There was also raised the contractual issue of whether Rowen was responsible.
It was at one stage hinted or suggested by MCL through its Counsel that MM’s personnel might have been engaged upon a possibly dishonest or disingenuous approach at this time which was in some sense to cover up a failing of which they were aware. Thus it was hinted broadly that MM, particularly Mr Gidwani, believed that Mr Lee and Mr Dawson knew that they had acted negligently with regard to their input in relation to the prop forces and in which elements of the structure they were to be taken and that what followed in February 2000 was an attempt consciously and deliberately to shift the blame away from MM and on to Rowen. This was not really or obviously pressed at all in cross-examination and I have no hesitation in rejecting on a balance of probabilities the proposition that MM was behaving dishonestly or disingenuously. I find that Mr Gidwani, having reviewed the papers after becoming involved and having had some discussions with Mr Lee and Mr Dawson, was genuinely of the belief that the horizontal loads should be taken in whole or in part in the steelwork. The queries raised at the meetings of February and in the TQ of 23 February 2000 were genuine queries and stemmed from a genuine belief that Rowen was responsible for the need to address horizontal forces in their steelwork design.
Mr Saunders’ response to TQ014 on 23 February 2000 was as follows:
“Responsibility for the design of the floor plates to transfer the horizontal forces from the piled retaining walls has not been removed from Mott MacDonald. Sonny Lee has previously confirmed that the p.c. floor and structural screed/in situ slab at Plaza level can transfer the forces.”
Rowen’s response to TQ014 was (on 25 February 2000):
“It was always clearly understood and was confirmed in the attached fax from Sonny that all loads from the pile walls would be transferred by the screed or slab (at Plaza) as RSC (Rowen) are not contracted to supply the screed or in situ concrete design of the screed must fall with others.”
The two attached faxes were MM’s of 10 December 1999 and Rowen’s of 21 December 1999 (see above).
MCL wrote by fax to Mr Gidwani on 23 February 2000 with regard to TQ014:
“I am disappointed that in spite of the discussions that took place yesterday you felt it necessary to ignore all that was said by both myself and Sonny Lee and issue TQ014.
When the Steelwork Spec was issued, Mott MacDonald had full design responsibility for the steel frame and floors. The steelworks subcontractor was to be responsible for the design of connection.
In order to achieve cost savings it was agreed, including with Mott MacDonald, that Rowen’s design would be enlarged to include the design of steel members. Responsibility for the design criterion and the transfer of the horizontal forces for the piled wall remains with Mott MacDonald.
Clause G10/111 of the Tender Specification should not be taken out of context “complete the design …” was at the time limited to connections and a review of the RHS columns.”
On 24 February 2000, at a meeting, Mr Gidwani agreed with Mr Saunders that he would “review the action of the Plaza deck” (as noted by Mr Saunders).
What followed in March, April and going into May 2000 were discussions about appropriate remedial solutions to the problem associated with where the horizontal loads were to go. As pleaded by MCL itself, MM through Mr Gidwani expressed the view on a number of occasions that the horizontal forces from the piled wall should be taken into the steel frame and that it was Rowen’s responsibility to design the steel frame to accommodate these forces. MCL and Rowen took the position that it was not Rowen’s responsibility, under its subcontract, to have to accommodate these forces. A number of solutions were discussed and raised, including a solution which involved additional steelwork bracing to carry the horizontal loads, as well as the remedial scheme which was finally adopted, which was an independently designed and constructed set of structures to carry the horizontal loads from the piled wall directly down to the foundations, bypassing the basic steelwork being designed and installed by Rowen.
There was a meeting between Mr Saunders of MCL, Mr Harper of Rowen and Mr Gidwani of MM (amongst others) on 2 March 2000. There clearly was discussion about the solution to the prop force problem. Mr Gidwani’s note simply records, somewhat obliquely:
“7. Check propping/permanent to retaining walls.”
Mr Harper’s notes do not assist in recording what was said about these loads, nor do Mr Saunders’.
Mr Gidwani says that he confirmed at this meeting that the plaza floor slab was capable of carrying the prop forces but that, if they were to be carried across the corner of Walls 4 and 5, it would be necessary for Rowen to design its steelwork to support the floor at the point of each significant change in level. He suggested that one simple way of doing this was to inserting raking steel struts to transfer the forces at these changes in level and he says that he drew a simple sketch to show Mr Saunders and Mr Harper what was intended. Neither Mr Harper nor Mr Saunders remembers this suggestion being made or a sketch being provided. I however accept Mr Gidwani’s evidence about this. It is supported by the sketches in his notebook which immediately follow his brief notes of the meeting itself. That said, I consider that it is likely that this was simply one of the matters discussed and that the raking steel strut solution was not put forward as the only solution. Mr Gidwani in oral evidence said that he argued for a solution that involved Rowen simply combining the “prop forces with the wind forces and beef up their bracing that they had” (T/10/147-8); he accepted that with hindsight this additional bracing solution would not have been the cheapest. Certainly the advice given by Mr Gidwani was not emphatic.
Rowen’s position throughout March was that its subcontract did not require it to address the horizontal loads from the pile walls within the steelwork which it was contracted to provide. For instance, in its letter dated 11 March 2000 to MCL, Rowen wrote:
“Further to our previous discussion, Mott MacDonald still have not resolved their diaphragm problem, we are still continuing in line with the original brief.”
There was a design team meeting attended by MCL and MM (amongst others) on 16 March 2000. Mr Saunders records that MM was still considering the Plaza deck horizontal forces:
“6. Plaza deck horizontal forces MM meeting 17-3-00. MG [Mr Gidwani] to give the results of this meeting by 22nd.”
Mr Harper records something similar in his handwritten notes at note 24.
Mr Gidwani’s note of this meeting is somewhat oblique. He records against note 23:
‘“Framing + bracing” with action by Rowen.’
This, he thought, reflected a reference to wind bracing. In any event, overall I am satisfied that little of importance so far as this case is concerned was stated at that meeting. Certainly no unqualified advice was given by MM.
There was a meeting internally at MM at a relatively senior level shortly thereafter at which there was a review of the prop forces issue and how the forces should be dealt with or potentially dealt with. There were no minutes or notes and I draw no conclusions or inferences about this meeting.
At an internal Morrison review meeting No. 7 on 22 March 2000, Mr Saunders reported (in minute 4.3):
“In order to accommodate the horizontal thrust at Plaza deck level, either additional steelworks 50-60 tonnes would be required or a revised concrete design, the area effected by cinema area.
The responsibility for the works is debatable i.e. Rowens believe Mott MacDonald took on responsibility in thro concrete structure and Mott MacDonalds believe Rowen should have designed.”
In broad terms, this reflected the general advice which had been received from MM and reflected Rowen and MM’s position as to responsibility.
There was a design team meeting on 23 March 2000 attended by, amongst others, Mr Gidwani, Mr Harper and Mr Saunders. Mr Harper’s and Mr Saunders’ notes of the meetings do not materially assist. However, Mr Gidwani noted the following as stated:
“13. Plaza level Rowen to look at diagonal steelwork grillage for balance horizontal forces.”
Action was identified as being for MM and Rowen.
Mr Gidwani says in his evidence that there was a discussion about providing this grillage of steelwork to balance the horizontal forces. This was to run in effect at an angle of some 45 degrees from Wall 4 to Wall 5. He says that he proposed this scheme during the meeting because Mr Saunders had rejected the raking strut or bracing options so that the steel work could also carry the prop forces.
Mr Harper says that at this meeting Mr Gidwani conceded that the original design philosophy of MM at the plaza level was not going to work and that therefore there had to be a solution involving steelwork. He accepts that Rowen was asked to look at the possibility of diagonal steelwork bracing to cope with the horizontal forces. Mr Saunders gives evidence supportive of what Mr Harper says. He says that Mr Gidwani reported categorically for the first time its belief that the plaza slab definitely could not provide the required prop to the top of pile Walls 4 and 5.
I am not convinced that each and every thing that each of these witnesses said is established on a balance of probabilities. I consider that what happened at this meeting was that there was another discussion about how the prop forces could be accommodated either in the steel or in the concrete. It is likely that Mr Gidwani gave the clear impression that he accepted that a steelwork solution to the horizontal forces was likely to be required as opposed to accommodating the prop forces in the concrete alone. I do not accept that he reported or advised categorically that the Plaza (concrete) slab could not accommodate the required prop forces. I am satisfied that MCL was anxious to find a way forward and that the diagonal grillage arrangement was one which was to be considered, at least as a partial solution. Mr Saunders did not reject Mr Gidwani’s bracing or raking suggestions.
By letter dated 24 March 2000, MM wrote to Rowen (copied to Mr Saunders) as follows:
“Further to our discussions, we enclose approximate estimated loadings for Walls 4 and 5 acting on the proposed steel supports at the 153.5 approx level.
These loadings ideally need to be confirmed by Amec Piling/Gibb Ltd who also need to confirm that the walls were cantilever as discussed and we presume Roger Saunders will be asking them to do this shortly.”
Rowen was asked to design this additional steel grillage. This is recorded in an MCL Design Report for the week commencing 27 March 2000:
“4. MCL Decisions Made
Horizontal forces from the piled walls 4 and 5, this will result in extra steel and likely extra cost.”
On 27 March 2000, Mr Saunders faxed a message to Mr Gidwani:
“Re Propping of Pile Walls
Further to our discussions on Thursday regarding the propping of the piled wall at the junction of walls 4 and 5, I confirm accepting the need for an additional area of steel to brace the corner at 153.5 level. Also as discussed, I believe that the propping forces from the length of wall 4 from VL to VF need to be taken through the Plaza deck slab in order to keep to a minimum the extent of the additional 153.5 seal.”
Rowen’s reaction to the steel grillage approach was contained in its letter dated 28 March 2000 to MCL:
“Further to the meeting on 23rd March 2000, with regard to ourselves undertaking the design of additional steelwork to transfer the loads from retaining wall 4 to retaining wall 5 at approximately plaza level. We view this as an addition to our scope of work. At all times until the arrival of Maurice Gidwani, Mott MacDonald confirmed in writing that the plaza level slab took the retaining wall load. We also referenced the contract steelwork specification, which states “The floor slab shall be designed to carry the prop forces from the retaining walls”.
We are at present only looking at the area VL–WX + on grid W56 + and W46-W56 + on grid WX + as requested by Roger Saunders.
We are prepared to undertake this work on the basis it will be valued in accordance with the contract rates, as soon as the design has reached a suitable point.
We need your assurance by return of the above.”
On 30 March 2000, there was another design team meeting attended by Messrs Saunders, Cooper and Harper, and Mr Gidwani. Mr Gidwani’s note of the meeting, materially, states:
“3. RS has instructed Rowen only to buttress the corner of Francis Road. He is looking for further justification of diaphragm action on remainder. RS wants this demonstrated.”
Action was to be by MM.
On the following day, Mr Gidwani faxed Rowen to ask them to provide a sketch showing the actual member layout which Rowen was proposing in relation to the diagonal grillage between Walls 4 and 5. The same day, Rowen responded with a simple sketch and stating that what was proposed, some six lengths of steel covering the corner area between Walls 4 and 5, was “the limit of what is realistically practical/economical, with reasonably predictable load paths”. This diagonal grillage would not and could not in itself wholly resolve the problem and more would be required to accommodate the prop forces.
There was yet another design team meeting on 6 April 2000 attended by, amongst others, Mr Gidwani, Mr Harper and Mr Saunders. On the agenda was an issue “Plaza deck bracing”. There was discussion about this issue, which is summarised in Mr Saunders’ notes of the meeting:
“10. Plaza Deck Forces
Option 1 – additional steelworks to fill in between
Option 2 – stiffen pile wall
Option 3 – redesign steelwork to take forces.”
Mr Gidwani’s note is in similar vein:
“14. Plaza level bracing
Three choices
(a) Steel bracing to firm Plaza deck
(b) Try to cantilever the wall
(c) Take the force in the brace.
Asked to look at framing bracing too.”
The very fact that the parties were still considering these three options supports the view which I have come to that MCL had not rejected any solution.
At this meeting, Mr Harper, probably in relation to the horizontal forces issue, is recorded by Mr Gidwani as saying:
“Alex Harper made it clear he thought there were major problems and issues which were going to come home to roost. He said it was “fucking millions”.’
Whilst I accept that Mr Harper said something along these lines, it was clearly a general concern that he thought that any viable remedial solution would cost a substantial amount of money. It was not, and was not taken to be, considered advice. Mr Harper had been asked by MCL at some time in March or April 2000 for some general indication as to what it might cost to redesign the Rowen steel work; he had said informally that it would take four months and cost about £60,000 per week. I do not consider on the evidence that this was careless advice to give on an informal and rough basis. The design work had taken the best part of four months already and a substantial redesign and re-ordering of steel work could well have taken up to about four months.
Thus it is clear, and I find, that the three options were discussed and considered by all concerned to be the only realistic possible choices. As it turned out, Option 2 was on any account not a viable option.
By this stage, Rowen’s steelwork design was approaching completion. A very large part of the steel required had been ordered. It would have been very disruptive and costly to alter that design by incorporating a solution which involved accommodating the prop forces into it.
On 12 April 2000, there was an important meeting between Messrs Woodward and Gidwani of MM and Messrs Marsh, Saunders and Byrne of MCL. Mr Byrne’s notes from that meeting indicate that it was a somewhat difficult meeting with Mr Marsh being critical of MM. What is clear is that Mr Gidwani tabled a steelwork scheme “to overcome the problems of transferring the piled wall loads walls 4 and 5” (minute 7.0). That scheme reflected the first option, which had been discussed at the previous meeting and involved a direct transfer of the horizontal loads from Walls 4 and 5 down through separate steelwork to the foundations, that is, separate from the basic steelwork which Rowen was putting forward. All three options put forward recognised the fact that something more needed to be done to accommodate the prop forces.
Mr Gidwani said at this meeting, as his own notes confirm that he made it clear that this option was in his view the “right solution”. There was, I find, no qualification to that advice. There was a problem as he accepted in that unless something significant was done the Plaza floor as a whole would not safely or effectively accommodate the prop forces.
There was a design team meeting the following day on 13 April 2000 at which it was resolved that MM should proceed with the design of this independent support solution which had been discussed the previous day.
It has been asserted, by Mr Gidwani and MM, that the eventually adopted solution was only put forward because all other solutions had been rejected out of hand by MCL. I do not consider that on the evidence MCL had as such rejected other solutions. If at any stage up to mid-April MM had put forward any other workable solution on a reasoned basis, MCL would in all probability have accepted it. The advice given at 12 April 2000 was unequivocal and led to MCL believing that it was the right solution, just as Mr Gidwani had advised.
By letter dated 17 April 2000, Mr Marsh wrote to Mr Woodward in the following terms:
“As you are aware, following last Thursday’s design team meeting, the decision was taken to pursue a steelwork solution to accommodate the prop forces at Plaza deck level; this after Maurice Gidwani had confirmed that he was unable to design the floor slabs to comply with your specification.
I would reiterate my extreme concern and disappointment that I am presented with this fait accompli at a relatively late stage in the design development process and would confirm that Morrison Construction now face significant costs from Rowen, Parkstone and programme implications which will in all probability delay a number, if not all, of the handover dates.
On Thursday I requested that Mott MacDonald carry out the basic design of the steelwork noted in the opening paragraph, with the agreed design novated to Rowen thereafter for warranty purposes: please be advised that I require the Scope of this design to be extended to include the prop, currently being addressed by Rowens, that transfers the wall 4 loads between VL and VF to ensure a sympathetic and homogenous design of all below – plaza steelwork required to replace the slab properties …”
It is perhaps of interest that, at a time that Rowen was seeking extra payment from MCL in 2001, it put forward to MCL a claim from Thorburn Colquhoun relating to redesign:
“One of the first tasks undertaken by TC was to determine all levels at the Plaza level. It was this exercise that identified that no diaphragm action would be possible for lateral load transfer. This resulted in a complete re-design by…MM”
It is of interest because this firm of engineers was involved by late November 1999.
It is unnecessary for me to go into the remainder of the history. MM did implement the independent bracing solution design over the following months, which was itself implemented, substantially, by Rowen. There is no suggestion in this litigation that the quality of this design or construction work was in any way faulty.
The Pile Bracing issue-Decision
There is no doubt that this is an economic loss case. In addition to establishing professional carelessness, MCL must establish that a duty or duties of care arose out of either one or more representations or out of the relationship and course of conduct between MCL and MM and that the scope of any duty extends to that which it complains about in these proceedings. Essentially, also MCL must establish on a balance of probabilities that it relied upon the advice which it either did receive or the advice which it asserts it should have received. It is common ground that the negligence, if any, arose in the period leading up to and including 27 January 2000 when MCL entered into its contract with MPS. It must establish that any tortious duties owed by MM to MCL relate to the type of losses which it has suffered.
Although it is common for engineers and architects to liaise orally and in writing during the tender stage and indeed beforehand with actual or potential tendering contractors, there is no case, and certainly none was referred to me, in which the issue as to whether a duty of care arises as between contractor and consultant in relation to information, and principally tendering information, passed by the consultant to contractor at tender stage has been considered. Of course, as in this case, in the simplest sense information is prepared by the consultant, usually in drawings and specifications, to be provided to and be relied on by the contractor to tender upon; the contractor may rely upon it to its detriment. The tortious situation is however novel.
In the ordinary course of events, I have no doubt that an architect or engineer engaged by a developer would not owe any duty of care (at least in relation to economic loss) to tendering contractors even though the latter had been supplied by the architect or engineer with tender information, drawings and specification upon which to base their tenders. The successful tenderer would be considered to have taken the risk in respect of that information. In many contracts, minutes of meetings and correspondence passing between the professional team and the contractor during the tender process are incorporated. It is very common for there to be oral and written pre-contract exchanges between the consultants and the contractor in connection with the tender. Architects and engineers would, I suspect, be surprised and not a little concerned, if it was established that they owe duties of care in effect in the context of preventing contractors under-pricing building jobs, except possibly in exceptional circumstances. I have to consider whether or not that possible surprise or concern is misplaced or whether such exceptional or the necessary circumstances arise in this case.
A key factor in determining whether a duty of care was owed by MM to MCL in general or by reference to particular representations or statements made by MM must be the commercial, factual and contractual context in which the interchange and exchanges between them took place.
It is worthy of note in the context of reliance that the bulk of the alleged misstatements or misrepresentations said to have been made by MM and relied upon by MCL were oral and made or given at relatively informal meetings or during relatively informal conversations.
I take in to account, principally, the following facts
MM was employed contractually by MOL and required to work under the direction of Mr Lewis of MDL. Mr Lee said, and I accept, that at all times MM was acting under instructions from Mr Lewis of MDL. MCL knew that MM was employed by MOL and is likely to have known the terms of that engagement from some time no later than about mid-1999. As Mr Marsh said in his first statement, MCL liaised on a day to day basis with MDL and Mr Lewis of MDL was responsible for project management.
Although, by about mid-September 1999, there was a mutual anticipation that there would be a novation, by about October 1999 the discussions between MDL, MCL and MM were on the basis that the agreement would not be a simple novation (that is, a simple substitution of MCL for MOL) but a renegotiated contract with additional services and progress obligations possibly incorporated.
There was at no material stage an effective transfer of control of MM by MOL or MDL to MCL. Although MM was providing what was in effect tender information direct to MCL, that was being done with the knowledge and consent of MDL and MOL. Even internally as late as 19 November 1999, MCL and MDL were privately acknowledging that there had been no “handover” of amongst others MM at that stage. MCL knew that MM was acting as engineer employed by MOL and knew even the terms under which MM was employed.
In providing drawings, specifications and other information directly or indirectly (formally and informally) to MCL or its likely sub-contractor, Rowen, MM was doing what it was employed by MOL to do with regard to the production of tender information. The fact that it was provided directly to MCL or Rowen rather than through DLG or MDL or MOL or provided orally is immaterial. The fact that, as accepted in evidence by Messrs Lee and Dawson, they knew that the information provided by them would probably be relied upon by MCL in preparing their bid does not detract from the finding that all that MM was doing was what it had been employed by MOL to do, namely the provision of information for the purposes of tendering.
In the period leading up to MCL’s contract with MPS, and indeed thereafter, MCL’s thought process was that it assumed that there would be a novation with MM and that it would be through that route that any responsibility of MM would be resolved.
MCL did not involve MM in any aspect of their contract pricing or programming, specifically or even generally. Thus, MCL did not ask MM whether its designs were overall complete, whether there would be a need for design development or whether any contingency should be allowed for any part of the designs which were not completed or finalised.
There was no novation achieved. The so-called novation being discussed in late 1999 and into 2000 was not the simple type by which one employer is substituted by another; there were to be additional services to be performed for MCL which were not part of the original MM/MOL contract and there was to be a defined programme to follow. There was no agreement in principle between MM and MCL about the novation, with the areas of disagreement being the additional services, the fees and the programme for the provision of information.
At all times, MCL in general and Messrs Saunders and Mr Marsh in particular were experienced in structural engineering construction and design projects of the type being addressed here.
It has not been established that a design of Rowen’s steel work could not have been developed to accommodate the prop forces; the onus is on MCL in this context; its own expert accepted that a scheme along the lines of Mr Wasilewski’s propping solution (see below under Quantum) was a solution which “was always possible to achieve [albeit requiring] much more steel [and] much more analysis” (T13/167).
I am not satisfied on a balance of probabilities that MM’s design concept was negligent. The basic concept or philosophy, which was repeated on a number of occasions to MCL and others in 1999, and as late as December 1999, was that the Plaza floor slab would act as a diaphragm to resist the prop forces. In principle, that could have worked in practice, albeit, depending on the steel work design, some more steel work may well have been required to accommodate and transfer the prop forces within that floor slab.
I am not satisfied on the available evidence that MM failed to exercise reasonable care and skill in its more limited role, which it was asked to assume, of checking and co-ordinating Rowen’s design. The complaint, which is not specifically pleaded by MCL in its Particulars of Claim in any event, can only be one of the timing of any alleged failing in this regard because the more limited role was only notified to MM in the latter part of November 1999 and the problem with the prop forces was identified by MM by about mid-February 2000. I am not satisfied on a balance of probabilities that the relaying by MCL to MM of the information that:
“With respect of the steel frame design, this design will be completed by our sub-contractor Rowen Structures Limited, therefore the related section of the Scope of Design and Services will be amended to read ‘Steel frame check and co-ordinate’ only” (letter dated 22 November 1999)
gave rise to any assumption of responsibility by MM to MCL. What was envisaged in terms was that the novation would contain this revised requirement and the novation was then not and later never agreed. This arrangement must have been sanctioned by MOL or at least Mr Lewis. I am not satisfied on a balance of probabilities that there was any breach of any responsibility if assumed at all; it was not negligent to await details of the designs which would be put forward by Rowen, given that it had taken over responsibility for the steel work design; those designs had begun to come in in earnest at a time when the problem with prop forces arose in mid- February 2000.
The removal from MM of the design responsibility for the steel work left MM with no continuing responsibility other than co-ordination and checking. Primarily those services would come into operation only when there was a detailed design from Rowen to co-ordinate and check. Because Rowen was to be responsible for the design of the steel work, it was not necessarily negligent for MM to await the steelwork designs of Rowen to perform these more limited functions.
It is suggested by MCL that, because MM did put forward a list of possible steel work sub-contractors in about April 1999 and attend in July 1999 a “beauty parade” of all or some of them, MM assumed a tortious responsibility. I am not satisfied that it did but even if it did, there was no breach of any such duty in doing what it was asked to do: there is no evidence that Rowen was an unsuitable choice of steel work contractor to put forward or even accept. It is similarly suggested by MCL that because MM provided some suggestions or even design work for the provision of temporary propping to or for MCL in 1999 or early 2000, MM assumed a tortious responsibility. Again, I am not satisfied that in this area, which was not fully explored in this case, MM did assume a tortious responsibility; even if it did, there was no established breach: there is no evidence that the temporary propping of the piled walls during excavation was inadequate in design or execution.
I am not satisfied that there was any or any material reliance by MCL upon MM in the period leading up to the signing of their contract with MPS:
MCL was clearly dissatisfied in the period leading up to its contract with MPS with what it saw as MM’s poor performance in particular with regard to the supply of information. In this regard, this was the or one of the main reasons MCL went down the route of employing Rowen to carry out and take over responsibility for the steelwork design in place of MM. It is difficult to be confident that on a balance of probabilities MCL was relying on the quality or completeness of MM’s designs at least in relation to the Plaza deck level. Up to the time when design responsibility was passed to Rowen, MCL had been talking in terms of a high level of contingency for those areas of work amongst others.
The pricing which went into the final contract sum as between MCL and MPS is and remains unclear. There has been no satisfactory let alone credible explanation or evidence as to how that sum was reached. It is clear that, as late as November 1999, there was some £5m difference between what MCL wanted and what MPS and MDL were prepared to agree. The Contract Sum Analysis (contained in the “Contractor’s Proposals”), although it allows against steelwork the Rowen Sub-Contract Sum plus a small amount, in total represents an overall Contract Sum which was in effect imposed upon MCL by the Morrison Group, the sum ultimately being some £2m-3m less than MCL had finally bid. There may have been good commercial reasons for this; funding apparently could not have so readily been secured if the Contract Sum was higher than it was; it may well be that the Morrison Group stood to gain substantially from its equity in the development. It is doubtful whether in these circumstances MCL ever allowed a sensible contingency for design development or risk; I am certainly not satisfied that it did. I would have expected MCL to have adduced evidence how the overall pricing was achieved, how it dealt with contingency and how the impact of the £2-3m reduction in its bid at the 11th hour impacted on its ability to address the type of problems which arose after January 2000. It was incumbent on MCL to adduce sufficient evidence on this point and it failed to do so.
There are indications that very little contingency was allowed in MCL’s Contract Price. The Contract Sum Analysis only allowed £400,000 by way of “General Contingency” and it seems that there was no specific contingency allowed for the steel work package. The absence of any significant contingency is surprising given at least the concerns about the adequacy and completeness of MM’s input expressed by MCL internally as late as November 1999. This suggests a conscious taking of risk by MCL, albeit with the agreement and at the instigation of MDL.
MCL did not tell MM what the basis of its tender or bid would be or ask them whether all MM’s designs were complete or whether any contingency should be allowed for any elements which were incomplete. It did not ask MM to consider the “Contractor’s Proposals” proposed to be to be incorporated in its contract with MCL. Whilst MM knew that the MCL/MPS contract would be based upon a standard JCT Design and Build form, it did not know and was not told whether it was to be a fixed price lump sum (which it turned out to be) or a re-measurement basis, albeit that the standard form envisages a lump sum. If for instance it had been on a re-measurement basis, it may not have mattered as much to MCL if extra steel was required to accommodate the prop forces.
The fact that MCL did not pass on to Rowen prior to entering into a sub-contract with it or incorporate into that sub-contract the Structural Steelwork Specification prepared by MM again suggests that MCL was not relying upon MM for matters to do with steelwork design after about mid-November 1999.
It is clear, and I have found, that Rowen did not know and had not been told prior to its sub-contract with MCL whether the prop forces would have to be accommodated in whole or in part within the steelwork at least at Plaza level. I assume and infer that, if MCL thought about it at all, their knowledge was the same as Rowen’s. That view is supported by the occasions after 22 November 1999 on which Rowen raised the issue of the horizontal forces without any complaint or even comment from MCL. The fact that Rowen chose to price with MCL’s knowledge on the basis of there being no prop forces to be accommodated in the steel work in these circumstances demonstrates that consciously or subconsciously MCL was prepared to take the risk in relation to this.
The evidence of reliance from MCL’s witnesses is “thin”. Mr Saunders says (at Paragraph 26 of his first statement) that he “relied on Mott to produce an adequate structural scheme”; that is very general. Similarly, Mr Marsh says at Paragraph 38 of his first statement that the design team knew that MCL would be relying upon their design information. I will return to this topic below when addressing the nine “representations” relied upon by MCL’s Counsel in closing. However what is missing is how in practice MCL relied upon what MM may or may not have told them, for instance in the respects set out in (a) above. The fact that MCL did incorporate Rowen’s Sub-contract sum in their Main Contract Sum does not in my judgment coupled with all the matters set out in this paragraph establish reliance upon MM.
The fact that the MCL/MPS contract did not incorporate any or much of MM’s design work to date either in the Employer’s Requirements or Contractor’s Proposals suggests limited reliance upon MM.
The fact that MCL agreed that Rowen should take over the design of the steelwork suggests that MCL was relying after mid-November 1999 on Rowen to design the steelwork and not on MM’s incomplete design of the steelwork. The fact that MM was left with a checking and co-ordination role does not take the matter very much further: there is no evidence that MM failed to check what came in from Rowen with care; much of it came in after MCL’s contract with MPS was entered into. As for co-ordination, that would in logic come into effect when there was a sufficient quantity of drawings and details from Rowen, now the steel work designer, against which co-ordination could be carried out.
The fact that MCL entered into its contract with MPS accepting in Clause 19:
“… full responsibility for the work and performance of the services of the members of the Design Team and for any negligence, omission or default on the part of the Design Team or any of them (whether before or after the date of Novation or the date of execution of this Contract) and for the accuracy and adequacy of any design and/or services undertaken and provided by them irrespective of when such design and services are or were carried out by them.”
in circumstances in which MCL knew that it had not reached agreement with MM about the novation again points strongly to there being no effective reliance.
The only reliance in the period leading up the MCL/MPS contract was MCL’s assumption that there would be a novation with MM and that it would be through that route that any responsibility of MM would be resolved.
At Paragraph 222 of its written Closing Submissions, MCL asserts 4 areas of pre-contract reliance:
“MCL acted in reliance upon Mott’s advice:
(1) In tendering for the design and build contract on the basis of Mott’s design concept for dealing with the horizontal loads at Plaza level;
(2) In inviting tenders for the piling and steelwork subcontracts on the basis of Mott’s design concept for dealing with the horizontal loads at Plaza level;
(3) By assuming responsibility under the Design and Build Contract on the basis of that Mott’s design concept was feasible and its advice and statements were correct;
(4) By not including any cost or programme allowance for the steelwork to take the horizontal loads from the retaining walls”.
It will follow from what I have said that I do not accept that MCL has established its case on a balance of probabilities.
Both Mr Dawson and Mr Lee at various stages of their cross-examination did accept that they knew that their drawings, letters, specifications and statements would be relied upon by MCL to obtain steel work prices and otherwise to compile its bid. Whilst I can and do accept that evidence, that does not ultimately impact upon the findings in the preceding paragraphs. In MM’s capacity as the engineer employed by MOL, of which role MCL was fully cognisant through much of 1999, MM was simply doing what it was employed by its client to do, that is to provide information to the bidding contractor so that it would or could bid. There was in fact no true reliance by MCL on what was said or done (or not said or not done) by MM or at the very least I am not satisfied upon a balance of probabilities that there was.
I address specifically each alleged misstatement below.
I have formed the view that at no time prior to February 2000 was there a relationship akin to contract as between MCL and MM, at the very least in relation to the provision of services in relation to the prop forces or indeed the Hospital Façade in the permanent condition. MM was working as the engineer employed by MOL under the direction broadly of Mr Lewis of MDL, as MCL knew and must have known. MM was doing what it was contractually required to do during 1999 and going into 2000, namely design and the production of information for the procurement of tenders for the project. The fact that MM was asked to and did liaise relatively extensively with MCL during this period was not unusual for the performance of its contractual duties owed to MOL. I do not consider that MCL asked MM to advise MCL as such or to provide other services for MCL and I do not consider that MM believed that at this stage it was working for MCL. Clearly, MCL during this period was acting with the knowledge and consent of MDL in general and Mr Lewis in particular. MDL and MOL did not believe that it had relinquished control of MM before February 2000.
I am not satisfied on a balance of probabilities that MM carried out any services for MCL in a relationship akin to contract at least prior to the problems arising on the prop forces in February 2000. It matters not if after this time MM did undertake services to or for MCL. Even if MM at any time did undertake services to and for the benefit of MCL for instance relating to temporary propping of the piled walls or designing concrete pad foundations, that does not mean that an overall duty arises in relation to everything which MM did. One needs to consider what the scope of the duty is. The scope did not include the design of the Plaza deck or slab or indeed the Hospital Façade. It is of interest to record that MCL was unwilling to and did not pay for any such design services.
It is argued by MCL (in their post draft judgment submissions) that “MM was inputting two workstreams: MM’s input in relation to design issues in connection with anchor tenants, and secondly, MM’s input in providing information for MCL’s tender”. I am not satisfied on the evidence that this is right. MM was producing designs, drawings and specifications mainly, which were to be used for tender purposes as is common and as MM was required to do under its contract with MOL. It was also doing design work for the areas which the proposed tenants were to occupy which related to and overlapped with their basic design work. I do not consider that there was any conscious awareness of two separate “workstreams” or any requirement by MDL, MOL or MCL that MM had to proceed on a separate “workstreams” basis. There was no contemporaneous suggestion voiced or put into effect that MM was working for MCL on one “workstream” and for MOL/MDL on another.
The question arises as to whether the possibility of novation and the relative closeness to an agreement to which the parties got in late November 1999 gives rise to an inference that there was a relationship akin to contract by that stage. Although the parties got close at that time to agreeing the novation in one sense, namely that much was agreed except the price, the non-agreement on price was related to whether additional services were to be provided. Thus, the additional services were only “agreed” provided that there was agreement on price. It is wrong in fact to describe, as MCL have done, that there was agreement in principle and given that it is accepted that no binding agreement was reached that expression means little. Fairly shortly after this limited accord was achieved, the parties moved further apart in December 1999.
One of the additional services which MCL envisaged MM would provide under the novation was not in the original MOL/MM contract, namely in Clause 11A of the First Schedule to the proposed novation agreement (see Paragraph 83 above):
“A. Main and Subcontractor cost limits. Advise Morrison Construction that any design development is likely to affect the costs of the works compared with the design contained within the contractor’s proposals.”
This was a service which unsurprisingly was not in MM’s original agreement because it would have been tantamount to advising a tenderer that its price was insufficient: that would or could have been contrary to MPS’, MDL’s or MOL’s interests in any event. It is also the case that MCL never asked MM to provide this service; furthermore, MCL never showed MM what its “contractor’s proposals” were or were intended to be. Yet, the effect of finding a duty of care which encompasses a duty to advise of the cost effect of design development would be to impose on MM in effect a duty which the parties ultimately did not agree upon and which, given that MM was never “kept in the loop” as to what design was contained in the contractor’s proposals, MM could not reasonably be expected to perform.
In my view, the very fact that the parties were trying to agree terms points more to there being no duty of care than there being one. The parties were seeking to legislate for their relationship by way of a proposed contract; it would be odd if, the contractual route having failed or not being achieved, MCL could procure for free an enforceable duty or warranty on the part of MM to exercise reasonable care together effectively with duties to perform services for MCL. The position might have been different if, during the period of negotiation, there was an agreement subject to contract or to a letter of intent type arrangement whereby MM was to provide services to MCL for the time being: that would or at least could well bring the relationship as being one akin to contract.
The disclaimers are again “pointers” towards there being no duty of care. As was observed in Hedley Byrne by Lord Devlin: “A man cannot be said voluntarily to be undertaking a responsibility if at the very moment when he is said to be accepting it he declares that in fact he is not”. The essential parts of the disclaimers are:
“Mott MacDonald accepts no responsibility or liability for the consequences of this document being used for a purpose other than the purposes for which it was commissioned. Any person using or relying on the document for such other purpose agrees, and will by such use or reliance be taken to confirm this agreement, to indemnify Mott MacDonald for all loss or damage resulting therefrom.”
and
“Mott MacDonald accepts no liability for this document to any person other than the person by whom it was commissioned.”
It must have been very clear that at the time the relevant specifications and drawings were produced by whom they had been “commissioned”; it was MOL, MPS or MDL and it was certainly not MCL. The Drawings identified who the client was: MDL and MPS. These documents had been contractually commissioned by MOL from MM as MCL would and should have appreciated if it had thought about it at all. As Pritchard J said in the New Zealand case of Plix Products Ltd v Frank M Winstone (Merchants) [1986] NZLR 63, 86:
“Commissioning means ordering. In this context it means more than requesting or encouraging. It connotes an obligation to pay.”
This was quoted with approval by the Court of Appeal here in Ultraframe (UK) Ltd v Fielding [2003] EWCA 1805 Civ. On the facts, it can not be said that, in that (and the correct) sense, MCL commissioned the drawings and specifications. It is said that no distinction should be drawn between MCL, MDL, MOL and MPS to determine who commissioned the documents which had disclaimers attached. In my judgment that is wrong; the documents themselves show by who they were commissioned and that is corroborated by the fact that they were produced pursuant to a contract between MCL and MM. waiver is relied upon also by MCL although not (or least not expressly) pleaded. The documents on their face contained the disclaimers and identified by whom they had been commissioned: waiver does not obviously or at all apply.
The disclaimers are pointers because they specifically attach to the drawings and the specifications and not to letters or oral observations. They acted as a kind of warning to MCL not to rely upon material produced by MM either on the drawings or specifications themselves or to any change to or amplification of them. The fact that MCL may not have paid any attention to them is immaterial; that was its risk.
There was considerable debate about whether the disclaimers acted as some kind of exclusion or limitation clause under the Unfair Contract Terms Act 1977 (“UCTA”). Lord Pearce said in Hedley Byrne:
“They are part of the material from which one deduces whether a duty of care and a liability for negligence was assumed. If both parties say expressly (in a case where neither is deliberately taking advantage of the other) that there shall be no liability, I do not find it possible to say that a liability was assumed.”
Other law lords said similar things in that case. They are not exclusion or limitation clauses as such. They are simply aspects of the factual background form which the Court determines whether a duty of care arises. If a duty of care arises, then the disclaimer would not exclude; the reverse of this applies also: if there is no duty of care at all, there is nothing upon which UCTA can bite.
I do not accept that UCTA applies at all. The most relevant section of UCTA is Section 2(2):
“In the case of other loss and damage [other than death and personal injury], a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.”
These disclaimers are simply relevant as one of a number of factors to determine whether a duty of care exists at all. They are simply a reminder to MCL in this case not to rely upon what it itself has not commissioned. I have very much in mind Hobhouse LJ’s dictum in McCullough v Lane Fox & Partners (1995) 49 Con LR 124 at page 155 to the effect that one does not need to construe the so-called exclusion clause; one just looks at it “as one of the facts relevant to answering the question whether there has been an assumption of responsibility by the defendants of the relevant statement”.
If it was necessary for me to decide whether the disclaimers were fair and reasonable, I would have no hesitation in finding that they were, taking into account the following:
Both parties were large sophisticated commercial organisations, with access to in-house legal expertise; each was on an equal footing.
Disclaimers such as these are relatively common amongst consulting engineers as was accepted by Mr Saunders. Mr Blois-Brooke did not consider them unusual. Gibb used a similar one.
The wording of them is clear and there is no good reason why MCL should not have known of them. Compliance with the disclaimers was not impracticable; MCL had, for instance in Mr Saunders, access to experienced people both in structural engineering matters and design and build contracts. MCL simply did not apply its mind to the disclaimers.
Although it can not be said that MCL would have had a purely contractual claim against MPS for the absence of information relating to where the prop forces were to go, it would have been possible, if there had been a material innocent or negligent misrepresentation by MM to MCL during the tender period, for MCL to pursue MPS for damages for misrepresentation. One can understand that such a claim could have been commercially embarrassing for MCL to make against a company half owned by the Group to which it belonged. However, MCL would not have been without a remedy in the event of such a misrepresentation.
I now turn to the nine representations relied upon, in closing, by MCL as giving rise to Hedley Byrne liabilities:
Representation 1
This is described in MCL’s Counsels’ Closing Submissions at Paragraph 31(6), quoting from Mr Saunders’ evidence:
“On 26 February 1999 …….. [Mr Lee] explained that the [Mott] design philosophy was that the car park floors were to be used to act as horizontal props to the pile wall, with the Plaza level slab acting as the upper prop and the middle and lower car park floors propping the middle points of the piles. This was to be achieved by allowing the horizontal force from one pile wall to counteract and balance the horizontal force from the opposite pile wall (and vice versa) which concept was described as “diaphragm action”…………. My note of that discussion specifically records that, "Plaza deck will prop pile wall [therefore] no requirement for additional [columns] and bracing".”
I have made findings above (at Paragraph 200) about this meeting:
“On 26 February 1999, Mr Lee of MM mentioned to Mr Saunders at an un-minuted and informal meeting that the plaza deck would prop the piled walls”.
I do not see that this was or amounted to advice being given to MCL at this early stage when it was not absolutely clear to MM what role MCL was performing at that stage and whether it was other than being one part of the design team. It was an informal discussion. MM simply told MCL what its thought process at that stage was. The advice was not negligent in any event. There was nothing wrong in principle in the Plaza deck propping the piled retaining walls; at that stage, there was no indication that the prop forces would be taken in the concrete as opposed to the steel.
There was no reliance or continuing reliance as a matter of fact by MCL on this informal discussion.
Representation 2
This relates to the contents of MM’s Steelwork Specification produced in April and revised, immaterially so far as this case is concerned, in August 1999.
I do not consider that this was relied upon by MCL. It was not given to Rowen. That may have been an oversight or deliberate on the part of MCL; if deliberate, that is proof positive that it was not being relied upon by MCL. If it was an oversight, that demonstrates a “couldn’t care less” attitude and a lack of reliance. The history up to 21 December 1999 demonstrates that there was no continuing reliance.
Whilst Mr Lee accepted in evidence that the Specification demonstrates a design philosophy which is that the prop forces were to be taken by or within the concrete part of the deck, the designer at that stage (MM) was recognising that the floors were or were likely to be a composite structure with the steel part of the flooring acting compositely or together with the concrete part of the floor; put another way, if the concrete moved under the prop forces, the steelwork would also move with it. The fact that Mr Lee believed that “slab” meant the concrete part of the floor is not necessarily determinative as to what it means as a matter of interpretation; it is probably unnecessary to determine what it does mean because MCL did not pass it on to Rowen at least before it entered in to its sub-contract with Rowen.
I am not satisfied on a balance of probabilities that the Specification was negligently drawn up. It was prepared before the drawings referred to in it were drawn up-the drawings were to arrive in September and October 1999. It did not specify that the steelwork would, should or could not be designed to take into account the prop forces where necessary. Indeed, Clause 111 states that the steelwork sub-contractor should:
“Complete the design and detailing of member sizes and connections to BS5950 to satisfy loading requirements specified or otherwise calculable from the information given …”
Although only the loading requirements for the car park floors were given in the Specification, the obligation to be imposed on the sub-contractor does require it to take into account prop forces which will sooner or later be calculable. If and to the extent that it was unavoidable that prop forces could not be taken solely by the concrete part of the slab, the steel work would have to be designed to take them. The reality was that at this stage up to August 1999 MM had not worked out precisely how the prop forces were to be accommodated in the Plaza deck and that is why the prop forces specified related only to the two lower floors.
Representation 3
This is summarised in MCL’s Closing Submissions at Paragraph 52:
“A meeting attended by, inter alios, MCL and Mott was held on 17th May 1999 to discuss the piling tenders. Lee of Mott explained how the plaza floor was also to act as a prop. As Saunders recorded in his diary (C3/277) and accepted by Lee (T9/92):
“Plaza deck will use friction along pile wall 4 and 5 to resist thrust from adjacent wall - deck to act as diaphragm.””
Again, this was an informal meeting. I do not accept that there was any reliance by MCL upon what was said by Mr Lee. Matters were still at an early stage; it was well before the time when any bid was due in from MCL. Mr Lee was not advising MCL but simply informing MCL what MM current thought process was. The history up to 21 December 1999 demonstrates that there was no continuing reliance.
I do not consider that what was said was negligent as such. There was nothing wrong for the Plaza deck to use friction along pile walls 4 and 5 to resist thrust from the adjacent wall or for it to act as diaphragm. Mr Lee was not saying that the steelwork, as yet largely not designed by MM, would not have to be used to accommodate these forces.
Representation 4
This is set out in paragraph 61 of the Closing Submissions:
“On 6th July MCL and Mott went to Birmingham City Council’s Building Control Section. This was the body chosen to check the design for compliance with Building Regulations. The submission, at that stage, was limited to the piling design. Richard Culliford of Building Control wanted to understand how the pile walls would be propped. Lee said that the piles would be permanently propped by the completed structure and drew a sketch of the plaza level to show how the frictional forces were transferred from wall 4 to 5 and vice versa without the need for steel bracing. (F [26]/ paragraphs 97 and 98 and admitted by Lee at T9/94) A reproduction of that sketch is to be found at F/312B. (Confirmed by Lee to be accurate T9/95)”.
Mr Saunders’ handwritten notes of the meeting (E1/375-6) do not even mention Mr Lee being present and do not record the advice which it is said was relied upon by MCL. This was an informal meeting. Mr Lee was cross-examined by Mr Furst QC for MCL on this on Day 9:
“Q. As part of those discussions you had with Richard Culliford, who was the gentleman from building control, you said that the piles will be permanently propped by the completed structure and you drew a sketch of the plaza level to show how the frictional forces would ensure that the force from wall 4 was transferred diagonally to wall 5 and vice versa, without the requirement for steel bracing; is that correct?
A. Yeah, at this meeting, the purpose of the meeting which I attended with Mr Saunders and Alastair -- sorry, Mr Patterson, the sole purpose is for Mr Patterson to discuss the height of the building and also for Mr Saunders to discuss the idea of -- I believe it's to use the long wall 4, which is the wall along Francis Road, and yes, there is a very brief discussion of the permanent props of the wall, yes.
Q. And I think you've got attached to your statement at page 312B, a little diagram?
A. That's right.
Q. Which, just to be clear, I don't think is the diagram from the meeting itself,
A. No.
Q. It's a diagram I think you produced, is that right?
A. No.
Q. Sorry, Mr Saunders has produced --
A. That's correct.
Q. -- as to what he says you provided at that meeting?
A. Yes.
Q. And of course the question I want to ask you: Is it
accurate, as far as you can recall?
A. Yes”
I accept what Mr Lee says. There was a brief un-minuted discussion which was simply to explain in simple terms for the benefit of Building Control how the prop forces were to work in the walls 4 and 5 area. I do not consider that there was any reliance upon it by Mr Saunders at or after the meeting. The history up to 21 December 1999 demonstrates that there was no continuing reliance.
What Mr Lee said was not negligent as such. All he did was indicate what his thought process was which was to have diaphragm action between Walls 4 and 5 through the floor. I do not find that the conversation went into whether there would or would not be steel bracing needed for the prop forces. This is an example of Mr Saunders descending into an after the event reconstruction. The sketch produced is not obviously intended to show the absence of steel bracing. As a broad description of how the prop forces would work through a diaphragm, it was right; the experts in this case have used similar descriptions.
Representation 5
This is said to relate to the Drawings produced by MM in September 1999, particularly Drawings 150 and 154. It is said that they amounted to a representation that no prop forces would be required to be accommodated by the steel work.
These drawings came with a disclaimer on them that they should not be relied upon by any party by whom they were not commissioned. That is not however a point which determines reliance completely. It is true that Mr Lee was aware that the Drawings were to be relied upon for tendering purposes by Rowen (by this stage). However, he never said and was never asked whether the drawings showed all steel which would be required. Indeed, a number of the steel work drawings produced by MM had clearly marked on them areas which expressly demonstrated that they were not complete. There was criticism, at least internally within MCL, about MM’s failure to produce completed designs. The meeting of 6 October 1999 arose because Rowen did not feel there was enough information to tender on. One of the things raised by Rowen in early October 1999 was the question of the prop forces from the perimeter walls and how, if at all, the steps and changes in levels at the Plaza level were to be accommodated within the steelwork.
The drawings on their face were incomplete and the very fact that the meeting of 6 October 1999 was arranged to discuss the possible ramifications of the incompleteness including what had to be done with regard to the prop forces and the changes in level on the Plaza Deck.
All this leads me to the very firm view that the Drawings were not as such relied upon by MCL or Rowen in September or indeed later at least so far as the prop forces or the Plaza level changes were concerned, and that is what I am primarily concerned with in this part of the case. The history up to 21 December 1999 demonstrates that there was no continuing reliance.
Representation 6
This relates to what was said at the meeting of 6 October 1999. It is characterised by MCL’s Counsel in Paragraph 98 of their Closing Submissions as follows:
“Accordingly Lee’s failure to even refer to the need for the loads to go into the steelwork constituted, in the all the circumstances, a further representation that the steelwork was not required to perform that function, although it remained open to Lee to correct that representation by answering the queries raised”.
If there is no overriding duty of care of the “akin to contract” or services requested and provided type, this sort of plea is much more difficult to maintain, as a complaint of omission to advise pre-supposes a duty to advise positively which does not exist in this case. It is of course possible to make a Hedley Byrne type statement which is negligent and wrong because it is not in any way qualified.
I refer to my findings at Paragraphs 229-233 above. Nothing was said by Mr Lee at that meeting about the Plaza deck in the context of how prop forces were to be accommodated or the steps or changes in level were to be addressed. What was said by him related to the lower car park floors and was not negligent. It seems to be accepted by all experts (and it is not suggested otherwise) that the design of the lower floors so far as prop forces and otherwise was unexceptionable.
I am satisfied that there was no material or indeed any reliance upon what was said by Mr Lee at this meeting in relation to prop forces specifically in the context of the Plaza deck. The very fact that Rowen on its own account and through MCL needed to ask the questions which they did in late November and December 1999 about the horizontal forces proves to my satisfaction that nothing was said or done by MM in October 1999 which was relied upon in that context by them.
Representation 7
This is said to arise out of the letter dated 8 October 1999 from MM to MCL relating to tonnages allowances for the step areas of the Plaza deck. My findings at Paragraph 239 above are:
“I do not consider that Mr Lee in reality accepted that he had not made any allowance for propping or diagonal strutting at the points where there were split levels at the plaza level. It is clear that the design was incomplete in these areas. It is my view, and I find, that Mr Lee simply made some unattributed allowances for additional steelwork to accommodate loads and stresses at the changes in level. Put another way, he made a stab at what he thought might be required in that area. It was certainly not an allowance which was calculated in any detail at all.”
This “representation” was the subject matter of a very late amendment application by MCL after in effect its Counsels’ final speeches. I allowed the amendment offering MM the opportunity to recall any witness they wished; the offer was not taken up.
For similar reasons given above in relation to Representation 6, I do not consider that there was any real reliance upon this. It was simply a tonnage allowance for the areas in question, given because, as everyone knew, MM’s design was incomplete in those areas.
I am not satisfied that it was in any event a negligent allowance for the steelwork in those areas. It may have been an under-estimate but I do not find that if it was such an under-estimate it was negligent.
In any event, there was no effective reliance by Rowen or MCL on it because Rowen had not had an answer to General query 14 as raised at the 6 October meeting in relation to the Plaza deck level. This is corroborated by Rowen’s need to ask the questions which it did in November and December 1999.
Representation 8
Representation 8 is said to have been made at the un-minuted design workshop meeting of 25 November 1999. It is put in these terms by MCL’s Counsel in closing at Paragraph126:
“This meeting gives rise to Representation (8) in essence for the same reasons as arise in relation to the 6th October meeting. In short Lee’s failure to even refer to the need for the loads to go into the steelwork constituted, in the all the circumstances, a further representation that the steelwork was not required to perform that function, although it remained open to Lee to correct that representation by answering the queries raised.”
There was no positive representation and there was no reliance; that is confirmed by the queries raised about prop forces by Rowen over the following 3-4 weeks.
Again, it is difficult to blame MM for failing to advise someone who was not their client if there was no tortious duty of the “akin to contract” or “services supplied” type. I consider that it was clear to all at the meeting that MM was unable to or did not address the issue as to how loads were to be accommodated in the steelwork, if at all. As Mr Harper said, the issue remained to be decided. In those circumstances, it is impossible to say on a balance of probabilities that MCL relied upon MM’s silence at this meeting as meaning that the steelwork was not required to perform the function of accommodating the prop forces.
Representation 9
This is, in my view, the strongest of the assertions made by MCL as to a Hedley Byrne statement. It is summarised at Paragraph 150 of MCL’s Counsels’ Closing Submissions:
“Accordingly the conversation on 10th December (as passed to MCL in Mott’s fax of 10th December, C6/482) and the further conversation on 16th December (as confirmed in Rowen’s fax of 21st December, C7/50) constituted Representation (9) to the effect that (a) the horizontal loads from the retaining wall would be taken in diaphragm action at plaza level and (b) by necessary inference, would not need to be taken in the steelwork.”
I address this part of the history at Paragraphs 257-264 above. It is necessary to read what Mr Lee orally agreed to, as confirmed in the fax of 21 December 1999, which in essence was:
“The car-park screeds at - 1 and - 2 and the slab at plaza level will act as a diaphragm to transfer this force and the end piled walls will act as shear walls.”
It is this which was noted and recorded as having been said or confirmed by Mr Lee. This was in the context that, as MCL and Rowen knew, the steelwork design obligation had been given to Rowen and taken from MM and that beforehand MM had not completed its design for the steps or changes in level on the Plaza deck.
Thus, all that Mr Lee was saying was, as had indeed been the case for some considerable time, that MM’s design philosophy was for the Plaza slab to act as a diaphragm.
What Mr Lee was not asked to apply his mind to was the question as to whether the prop forces would or might have to be accommodated at least in part or in places within the steelwork. Whilst Mr Cooper of Rowen in evidence (T13/13) said that Mr Lee never said that the loads would “go into the steel”, there is no evidence that he said that they would not.
At worst, what Mr Lee is recorded as saying in the fax of 21 December 1999 is ambiguous, although I consider that it was not so much ambiguous as (arguably) incomplete. This was confirmed by Mr Blois-Brooke in his first report at Paragraph 7.21:
“[The fax] simply described the plaza slab acting as a diaphragm to transfer the prop force from the piled walls at plaza deck level, but did not confirm that the steelwork would not be required to resist any part of these forces”
He was also referring to MM’s letter of 10 December 1999 as contributing to this ambiguity. In evidence however, he was asked in chief about it:
“Q. We'll come back to that. At 7.21, you say:
"Mott's fax of 10th December 1999 ... (reading to the
words)... resist any part of these forces."
Since you wrote that, of course, you've heard and read much more evidence. When you use the word "ambiguous", were you referring to the wording of the faxes themselves or what were you referring to?
A. I mean the conclusions that were drawn or that could have been drawn from it. If I could explain and take that in sections --Mott's fax is 10th December. That didn't mention the plaza deck, so it didn't help with the design philosophy for the structure as a whole, or particularly the plaza deck.
Judge: It's not ambiguous; it's incomplete.
A. It's incomplete ...
A. And the second document, the Rowen fax of 21st December, which, as I understand the position, amended Mott's fax of 10th December, and referred to the slab at plaza deck level acting as a diaphragm. I think an engineer would understand what that meant, but also would look at the plaza deck itself and wonder to himself how on earth does that work. It might be helpful to refer to a drawing that I produced, in fact the drawing that you had just handed to you recently.
Mr Furst: Do you have the large version of it?
A. I have the large version of it. What I mean by that is the idea that this slab will act as a diaphragm, transferring the forces from here to here. The principle of a diaphragm is that it's in plane, it has to be in plane. And yet you have this substantial step here. So somehow the forces have got to go from here in the concrete, let's ignore that step for a moment, past here and somehow get into the steel, because there's no concrete there, jump up and then get transferred to the other wall in the concrete. I think an engineer looking at that will think: how is that going to work? And that, I'm sure, would have prompted a lot of discussion.
Mr Furst: Would have or should have?
A. Should have.”
He confirmed in this context (T14/53) that Rowen should have been aware of the “obvious detail” that at Plaza deck level there were steps or changes in level, that the steelwork at those points would have to take some of the prop forces and that this had to be overcome unless it was told that it did not have to deal with it. At T14/56, he said:
“Q. And any specialist subcontractor assuming responsibility for the design of the steelwork would have realised that, because of the step, prop forces could not be taken just into concrete it would also go into the steelwork?
A. That's correct, unless they'd been informed to the contrary.
Q. Then you go on and say:
"Rowen sought and obtained further information
... during December 1999."
Here I assume you're referring to that exchange of faxes?
A. Yes.
Q. "... which led them to conclude ...(reading to the words)... by Mott MacDonald at this level."
That's an inference which you have not drawn from those faxes?
A. It led them to conclude that, but the faxes I don't believe say that with a sufficient clarity.
Q. Would you agree with me that if Rowen reached that conclusion they were in error?
A. They certainly were in error.”
There was some apparent qualification of this view by Mr Blois-Brooke following extensive cross-examination by Mr Sutherland for Rowen (which I had felt was skirting around what was a key point so far as any liability of Rowen was concerned). So I asked him at T15/45:
“I mean, a lot of your [Counsel’s] questions are, possibly like this slab, a bit composite and it's a bit difficult to see -- let me put that question, Mr Blois-Brooke, to you. If it be the case I find that Rowen believed that they were being told in these faxes and conversations by Mott that the horizontal forces from the embedded piled walls were going to be transferred only into the concrete, was that an unreasonable assumption for them to make?
A. Because they were the steelwork designer and not the designer with overall responsibility, I don't think it was unreasonable.”
I think that in context Mr Blois-Brooke was being asked questions which went to whether Rowen culpably or negligently had misunderstood what it had been told.
These answers leave me in such doubt about the matter that I am not satisfied on a balance of probabilities that either Mr Lee’s oral statement (confirmed in the fax of 21 December 1999) was negligent at all or that it was reasonable or unreasonable for Rowen to rely upon that statement.
I am therefore not satisfied that there was any material reliance upon this oral statement.
What could have given rise to a Hedley Byrne type statement in this context would have been more along the lines of the following sort of conversation:
MCL: We are about to finalise our pricing and programme for the job overall. Therefore, we need to know from you [MM] whether you have finalized your design so far as the prop forces for the Plaza deck are concerned, particularly in the changes of level areas: are they only going through the concrete part of the composite floor and not through the steel work or should we make some contingency allowance for extra steel?
MM. Yes, we have finalized the design-it is only going through the concrete and you do not need to make any contingency allowance for extra steel.
That, it seems to me, would have been clear advice being given by MM to MCL with a view to it being relied upon for pricing and programming purposes. It is not advice which was required under MM’s contract with MOL (and indeed might have involved a conflict of interest with MOL). I do not consider that what happened in the period leading up to Mr Lee’s oral statement in December 1999 came anywhere near a Hedley Byrne type statement.
One needs to consider whether the nine representations taken cumulatively based upon the facts that have been found give rise to a duty of care or establish the requisite reliance. I do not consider that they do in the light of my findings on them.
I do have to say that some aspects of MM’s performance on this project were unimpressive. Whilst Mr Lee and his team were seriously overworked throughout most of 1999, there was hardly a note from Mr Lee or indeed Mr Dawson about meetings or discussions; there are numerous examples of them not replying to or acknowledging communications from others. As Mr Gidwani described in his letter of 22 February 2000 (see Paragraph 128 above), there had been and was under-resourcing and his perception that there was a mess was not wholly unjustified. It is unnecessary for me to have to decide whether MM was in breach of its contract with MOL and it is probably undesirable to do so as I have heard no argument directly on this topic.
From the above, I conclude that no duties of care arose here of any sort in relation to economic loss. It will follow that MCL’s claim against MM with regard to the pile bracing issue fails.
The Liability of Rowen
As I am dismissing the claim made against MM by MCL, it must follow that, as MM is not liable to Rowen, MM’s Part 20 claim against must fail and be dismissed.
It is difficult to predicate what my findings against Rowen, if any, would have been if I had found MM was liable to MCL with regard to the Pile Bracing Issue, because that would depend on what the liability findings would have been.
I can however determine the following:
Rowen assumed an unqualified responsibility for the design of the steelwork. It did not as such warrant that MM’s steelwork design was satisfactory but it did undertake to “design” the steel work. Clause 4.5 of Numbered Document 4 is illuminating: the “Changes To The Specification And Or Design…Proposed By The Sub-Contractor” were said to be:
“Original bid based on Engineer’s Design – Final scheme to be Sub-Contract Design.”
This points very strongly to the conclusion that, although historically Rowen’s tender had been based largely (albeit not wholly) on MM’s design, Rowen was to be responsible for the whole of the final design to the extent that either it incorporated elements of MM’s design or it contained wholly new design work effected by Rowen or their advisers.
There was no obligation on Rowen to adopt MM’s design in its design. This is clear from the absence of restrictive language in the Sub-Contract to that effect as well as the contractual exhortations to implement value engineering to produce savings. However, if Rowen had adopted MM’s design and it, when constructed, had failed, Rowen would have laid itself open to a breach of contract claim.
However, Rowen’s Sub-Contract price and the GMP were, to a large extent, based upon MM’s design as produced up to November 1999. The rates and prices were deemed to have been based upon the information provided at tender stage to Rowen (Clause 21.2 of Numbered Document 4-see Paragraph 169 above). A material background fact for the Rowen Sub-Contract was that both parties to it knew or believed that no allowance had been made for prop forces in the tender rates and prices. Absent negligence by Rowen, it is my view that, if Rowen had been called upon to provide for the prop forces in their steel work, it would have been entitled to a variation and payment. Put another way, the GMP related to the works as priced.
None of the expert evidence has established to my satisfaction on a balance of probabilities that Rowen was negligent by the standards of a reasonably competent design and build steel work contractor. The evidence of Mr Blois-Brooke set out above shows the difficulty of establishing negligence. I am not saying however that the evidence has positively established on a balance of probabilities that it was not negligent.
Three of the complaints pleaded against Rowen are in effect that Rowen failed to design the steelwork to take account of all the prop forces and failed to remedy these “defects in the steel work design” (Paragraphs 16.1-16.3 of the Amended Part 20 Particulars of Claim). I do not see how it can be said that Rowen was in breach by the time that the problem with where the prop forces were to go arose in February or March 2000. True it is that Rowen had produced large quantities of design drawings for approval which did not take into account these forces but those were capable of being amended if necessary before any steel was erected.
I am not satisfied that Rowen was in breach of contract by the time in April 2000 when the decision was taken and accepted by MM and MCL to go down the route of an independent bracing structure. Whilst Rowen was clearly reluctant to alter its designs produced to date by that stage, it had not refused to do so; it had not refused to comply with any direction or instruction from MCL to do so. If it had gone down the route of resolving the prop forces problem, it would have been entitled to payment in any event for all such extra work.
I reject the allegation that Rowen was negligent or in breach of contract in its informal advice to MCL that the steel work could be delayed by some four months and the extra cost of redesign would be some £60,000 per week. I am not satisfied that this advice was wrong or careless.
Thus, even if MM had been liable to MCL, this was not a case in which Rowen would have been liable to MCL at all and there was and would have been no right to contribution. If I had found that there was a concurrent liability for the same damage on the part for both MM and Rowen, the level of contribution from Rowen would have been a low one, at no greater level than 15%.
Hospital Façade issue-History
The approach of the clients as to what was to be done in connection with the Hospital Façade went through various permutations. In July 1997, it was originally thought that the whole of the central and end blocks of the listed hospital building would remain standing with a view to being refurbished and indeed there was to be car parking provided under the existing building (as recorded in MM's Preliminary Structural Assessment at that time).
It was always envisaged that significant parts of the hospital site would be demolished. However, the planning permission eventually granted in about January 1999 required the Hospital Facade to be retained and incorporated into the new development.
As indicated above in the chapter of this judgment dealing with MM's contract, MM and its contractual client agreed that MM would have no contractual responsibility for investigating the existing building. It would doubtless have been possible for MOL and MM to agree that MM should carry out any extra work. However, I am satisfied that no such change was agreed; indeed no such variation has either been pleaded or attested to by any witness.
MM was retained to and did provide services in connection with the demolition of those parts of the hospital building which were not to be retained. The Demolition Works Specification was produced by MM in December 1998 identified that not only the Hospital Facade was to be retained but also a room's width and a corridor behind it. Section 6.4 states:
"Building 01 (01,01b and 01c fronting Ladywood Middleway) has a listed facade, under this contract the Contractor is to include for soft stripping all internal fixtures and fittings…
Building 01(0Ia) is to be severed from Building 01c at a point 7.5m south of building 01c (and 1.2 m from the external wall return adjacent to the stepped entrance ... )
The Contractor is to allow for undertaking all temporary works to ensure a clean cut line and for temporary weather proofing of all exposed rooms, basements, roof spaces and voids.
The Contractor is also to undertake structural investigations to confirm the presence of downstand reinforced concrete beams, reinforced concrete floors and load bearing masonry walls. In order to preserve the integrity of the rear wall of the front building, at least in the short term it is recommended that the 'cut line' does not interfere with the staircase. A straight cut line across the building, which terminates at and retains the stiffening of one or more substantial piers and also lifts shaft is preferred.”
This last paragraph is not inconsistent with what MM was employed or rather was not employed to do. 'The demolition contractor was to be employed to undertake these structural investigations and not MM.
Various MM employees did carry out some survey works in November 1998 but that was in connection with the demolition contract.
For reasons which are immaterial, MDL employed the demolition contractor, ABC Demolition (UK) Ltd in about February 1999 and the work was largely done between then and July 1999.
On 18 January 1999, Mr Marsh of MCL wrote to Mr Lewis of MDL suggesting that various investigations were done including to check if:
"the facade retention to the retained structure is adequate and takes due account of its incorporation into the main building contract",
Mr. Lewis responded on 21 January 1999 to this point:
“Facade retention - No demolition is being carried out in the vicinity of the facade",
It is alleged (Paragraph 30 of the Re-Re-Re-Amended Particulars of Claim) that at a regular Cost Plan review meeting "in about March/April 1999" Mr Dawson of MM suggested that a provision of £250,000 in the then current Cost Plan (or estimated cost for the works) for a temporary hospital façade retention scheme could be omitted if the part of the existing structure immediately behind the facade was sufficiently robust to be used as a support. It is suggested that this inferred that this retained part would be sufficiently robust to be incorporated in the permanent work. Mr Saunders in evidence suggested the meeting was an "MDL" meeting.
There are no minutes or indeed notes of any such meeting. Mr Saunders’ evidence, I considered, was vague whilst Mr Dawson rejects the MCL assertions about such a meeting. I seriously doubt that Mr Dawson made any such suggestion. Mr Saunders, who relatively assiduously kept note books, noted neither any such meeting nor any such conversation. Although his notebooks refer to various cost and Cost Plan discussions in March and April 1999, there is no hint or suggestion that Mr Dawson ever said what is pleaded. The only possible note which is possibly relevant is on or about 1 April 1999 when he notes:
"Tim Dawson: existing building visit + Ian Weardon [of MM] 9.30"
I would have expected Mr Saunders to have noted anything which was important or upon which he was relying. The fact that he did not suggests that nothing such as is alleged was said by Mr Dawson.
The next relevant event was the "walkabout" meeting in early April 1999 attended by Messrs. Dawson and Lee of MM, Mr Lewis of MDL, Mr Weaver of BA and Messrs. Saunders and Marsh of MCL. Unfortunately not one note was kept or retained in relation to this walkabout, although it is said that, as a result of it and in reliance upon what was said to be advice from MM, MCL reduced their costings for the job by £200,000 or £250,000. I find it very surprising that nothing was recorded even informally about this and it certainly makes me doubt seriously that any material advice was given by MM to MCL on this occasion.
I would have expected there to have been workings going to support MCL‘s Cost Plan which showed what was being done or some note somewhere that advice which was considered to be sufficiently important as to achieve a saving of this sort had been given.
Mr Saunders' written evidence was predicated upon the basis that Mr Dawson had made the earlier suggestion in March 1999. He said in evidence that Mr Dawson advised him specifically that, provided that the line of rooms immediately behind the façade was retained, the façade would remain stable, the line of rooms would be suitable to be incorporated into the permanent work and there would be no need for a temporary facade retention support in those circumstances. Mr Marsh gave similar evidence.
Mr Dawson's evidence is materially different: he says that Mr Lewis of MOL wanted to know how much of the existing building needed to be retained to provide the façade with support whilst demolition, piling and foundation works were carried out; Mr Lewis had not made up his mind as to whether the retained part behind the facade would be permanently retained. Mr Dawson said that he advised Mr Lewis that, provided that the bay of rooms was left standing, the facade would be stable without a façade retention scheme and he disagreed with the evidence of Messrs Saunders and Marsh. Mr Lewis gave evidence but did not corroborate (albeit did not contradict) what Messrs Saunders and Marsh said. In oral evidence (T7/135-6), Mr Dawson was questioned as follows:
"Q. Never mind for the moment what your brief was. Mr Dawson, you were being asked by both MDL and MCL at this walkabout to advise whether the facade would remain stable if propped by retaining part of the existing structure?
A. Yes, that is correct.
Q. And you gave that advice?
For the existing structure, as it would be cut back at that stage, yes, not with any additional development.”
There was no evidence which satisfied me upon a balance of probabilities that any of the MCL or MDL personnel explained why they were seeking such advice. MCL was not at this stage actually bidding for the work albeit it was in the process of preparing a cost plan of its own. I prefer Mr Dawson’s evidence on this walkabout meeting and I find that he only said what he accepted in evidence that he said.
Shortly after this “walkabout” meeting, on 9 April 1999 Mr Dawson wrote to Mr Lewis (not copied to MCL) in the following terms:
“The attached is our first thoughts on the refurb of the hospital. In principle most cross walls can be removed with fairly nominal extra structure. The chimney walls could also be removed. However we need to give some additional stiffness to the building.
The two central corridor walls are load bearing. Therefore any major openings will need support lintels. If significant length is to be removed then new columns would have to be installed …”
Four floor plan sketches were attached with some handwritten notes on them. There has been no or no reliable evidence that as “first thoughts” this was negligent on the part of MM. Mr Dawson stated in evidence that it would have been obvious to anyone including engineers and experienced contractors at that stage that testing of the structure would have been required before final plans were drawn up.
On 14 April 1999, BA sent to MDL (copied to MM) its Cost Plan No 4. In its notes to the Costs Plan at paragraph 5.5, it indicated that that section of the work comprising the leisure complex (which was to be located within the hospital façade) comprised “work to retain the façade of the existing hospital and provision of retail at plaza level, restaurants and fitness centre at first floor, fitness with swimming at second floor level”. At page 27 of the Costs Plan, for the “Leisure” area, a sum of £250,000 was the “allowance for works to retain existing façade”; and an additional £121,710 was allowed for work to floors and elevations. A contingency of £102,100 was allowed “to cover unforeseen items” in the “Leisure” section of this Costs Plan.
MCL produced its own Cost Plan on 22 April 1999. So far as I can ascertain this was not sent to MM. This was the first Cost Plan which MCL, as such, produced. This Cost Plan produced a total sum of £4 million more than BA’s Cost Plan 4. There is no reference in MCL’s Costs Plan of 22 April 1999 which evidences any advice from MM about the hospital façade. Material notes in MCL’s Cost Plan are:
“3.1 Site Clearance and Demolition
… We have allowed a provisional sum of £50,000 for temporary works to support the existing Hospital building. The stability and condition of existing structure will need to be established to fully ascertain the costs associated with temporary support work. The costs to carry out such investigative surveys are included in the provisional sum.
4.2 Work to Retain Hospital. Cost Allowances
4.2.1 £50K net for any work associated with the retention of the existing façade or structural work to the existing load-bearing walls to allow the existing floors to be retained whilst the existing rooms can be opened up/connected.
4.2.2 £170K net for all work associated with the cleaning, restoration of the existing façade and windows, alterations to the existing façade and the revision of the glazed screens, any alteration to the stairs, the modifications to the structure for the two new lifts, the lowering of the existing ground floor, the removal of the existing roof coverings/chimney stacks and all modification to the existing roof top tank room.”
It is not clear where in the Cost Plan cost calculations the “provisional sum” referred to in Paragraph 3.1 was.
There is no contemporaneous documentation or notes to indicate that MCL relied upon any advice which it might have received on the “walkabout” meeting or otherwise from MM with regard to the provision of a temporary façade retention scheme.
At a meeting on 29 April 1999 attended by BA and MCL (including Mr Saunders), but not attended by MM, there clearly was a detailed analysis of MCL’s Cost Plan. There appears to have been no discussion or mention of any advice given by MM or of any specific marking down of the Cost Plan to reflect the absence of any temporary façade retention scheme. All that was noted in the minutes at paragraph 11 was:
“MW [BA] confirmed that the extent of the temporary works and permanent works to the existing hospital building was still not finalised by the designers and that the provisional allowances made in both respective costs plans were of similar magnitude. It was agreed that the allowance should remain unchanged until more detailed information was available.”
This points fairly strongly to there being a mutual appreciation by MCL and BA that, as was the case, neither temporary nor permanent works to the existing hospital building had been finalised by the designers. It seems somewhat unlikely therefore that there had been any reliance by MCL on what, on any counts, had or may have been advised by Mr Dawson some three weeks earlier on the “walkabout”.
By July 1999, the demolition contractor, ABC, had agreed to demolish a further bay’s width from that part of the old Victorian building comprising the façade which had been left standing following the basic demolition works. This had become necessary to provide working space to enable the piled retaining wall parallel to the existing façade to be installed. I have seen or heard little or no evidence that MM was materially involved in this decision albeit that it appears that MM wrote (on 16 June 1999) to ABC to ask for a price for its demolition and removal and later confirmed (on 2 July 1999) MDL’s oral acceptance of that price.
Through most of 1999, the developers were negotiating with Healthlands plc which was to become the tenant for the fitness centre which was to be located in the area behind the façade. It is clear that MDL and the architects, DLG, had not completed their detailed negotiation with Healthlands as to precisely what Healthlands required. Thus by 10 August 1999, DLG reported that “the Healthlands scheme is being developed, but the scheme as it was will be used for the MCL bid.” By 11 August 1999, MM was reporting in relation to the “Existing Children Hospital Building”:
“-detail design is on going with DLG+P and client’s tenant”
On 10 September 1999, MCL (Mr Saunders) wrote by fax to MM (Mr Lee) in the following terms:
“We have reconsidered the timing of the demolition of the rear portion of the existing building. We now plan to carry out the demolition following the piling work but before the excavation.
(1) I trust that nothing has changed since we agreed that the retained portion of the building will remain stable without further support/propping.
(2) Do we still plan to remove the existing structure up to the Ladywood Middleway side of the corridor as:-
[ there is then a section through the Hospital Building}
(3) If we do 1 and 2 as above can we cut the 2 new large openings in the main façade?”
That fax was neither replied to nor followed up.
By mid-September 1999, it remained the position that the Healthlands’ requirements for their part of the building were not finalised.
Mr Saunders faxed Mr Lee again on 27 September 1999 in the following terms:
“I still need your thoughts on the need for any support to the existing Hospital building before/after the removal of the rear section.”
Again, there was no response to this from Mr Lee, at least in writing, or indeed at all.
By early October 1999, it was the case that MM were at least beginning to work on a steelwork and concrete design for the area of new works between the back of the retained portion of the Victorian building and the remainder of the new works. This was discussed at a meeting on 6 October 1999 attended by Mr Lee, Rowen (Mr Cooper) and Mr Saunders which is more particularly addressed in the Chapters dealing with the pile bracing.
By letter dated 12 October 1999, DLG wrote to MM asking them to suggest how structurally what was called the Fitness Proposal could be effected. This was confirmed in DLG’s Architects’ Report of 21 October 1999 in the following terms:
“5.1 The Healthlands scheme has been finally agreed and signed up. But the main General Arrangement drawings are being altered to incorporate the agreed scheme so that they can be issued and included as part of the bid. Mott Macdonald are looking at possible structural solutions to achieve the agreed arrangements.”
This confirmed that there had been final resolution on what the Healthlands area of the work should comprise. However, it is equally clear that MM’s rôle in negotiating and agreeing, let alone designing, the plans agreed with Healthlands was minimal if anything at all. So far as I can ascertain, MM’s work in this regard resulted in the production of Drawing 230 (see below).
MM did probably check the lateral stability of the façade for wind loadings. Mr Lee confirmed that in oral evidence under cross-examination when asked to identify what the expression “stability of existing hospital checked” meant in an MM report dated 28 October 1999. This was confirmed in their Structures Progress Report of 12 November 1999. By that time what was described as the “preliminary design of Health and Fitness Centre” had been completed. MM were awaiting the architect’s construction drawings in order to progress detailed design and themselves produce construction drawings.
The only material detailed design produced by MM was their drawing referenced 42821/STR/HP/RCS/230 dated 30 November 1999. The drawing was marked “PRELIMINARY” and “THIS DRAWING IS FOR TENDER PURPOSES ONLY”. The title was “Broadway Plaza, Birmingham, Health and Fitness Centre, First and Mezzanine Floor Levels, Concrete Slab Details”. The “Client” was described as “Property Solutions Morrisons Developments”. The drawing was in fact produced by Mr Dobson of MM albeit checked by Mr Lee and approved by Mr Dawson. It provided details about the new concrete slabs at those two floor levels identifying beams reinforcement and columns but only in respect of the area behind the retained portion of the façade and line of rooms immediately behind. It showed no details of the floors or indeed any other matters of detail relating to the part of the hospital which had at that point been retained. It did not show any floor details for the ground floor or the floors above the first and mezzanine floors. It showed no details for instance in relation to the roof. Mr Dobson was aware of the Healthlands specification requirements for floor loadings which were similar to modern office loadings.
However, Drawing 230 shows in plan (rather faintly) a floor plan between the demolition line and the façade. Mr Dobson explained that that information had been taken from a template on a drawing from DLG. Mr Blois-Brooke, MCL’s structural engineering expert, sought to demonstrate from a better copy of Drawing 230 (his diagram A.4608) that the DLG drawing which had been copied on to Drawing 230 in this particular area showed most of the cross walling removed and many of the walls which ran at right-angles back from the façade also removed.
I am wholly satisfied that MM in producing Drawing 230 produced exactly what it had been asked, probably by MDL or MOL or possibly DLG on their behalf, to produce. That is, it was asked to provide a detailed design drawing of the concrete floor slabs in the areas on the two floors in question immediately behind the demolition line. MM had not been asked or expected to produce detailed designs for the area between the demolition line and the façade, that is in that part of the old hospital frontage which up to that point had been retained. The very fact that no one either on the part of MOL or MDL or even MCL is recorded as calling for detailed drawings for this area from MM other than Drawing 230 suggests that nobody expected MM to do anything more. Mr Lee said in evidence, and it had the ring of truth, that the architectural design in the area was not complete. It is true to say that Drawing 230 shows simple connections between the new concrete slabs and the existing floors. For the lower floor the new slab simply underlies the existing slab at the demolition line whilst on the upper floor the new slab supports the existing slab with a medium density block walling arrangement. No details are shown about the existing slab other than it was thought to be 150mm (“approx”). I am also satisfied that MM had never been asked to carry out a structural investigation of the area between the demolition line and the Façade let alone to produce or endorse any let alone a structural design for that area.
Thereafter, MCL raised a “Pre Contract Change Order” (“PCCO”) No VO21, dated 1 December 1999. By this, it sought to price for ‘structural alterations to Unit 2 “to lower the floor slab by 0.5m and change the form of construction to Unit 17, lower and upper levels, from steel columns, beams and composite concrete deck to steel columns within situ concrete ‘flat slab’ deck as attached drawing … 230 and drawings issued with PCCO No VO20’”. This was priced with their PCCO VO20 which priced, simply, DLG drawings. A total for both PCCOs was £430,029.00 which was submitted by MCL to MPS. There is no evidence that MM was in any way asked to advise on any aspect or even the generality of the pricing or programming implications of these respective PCCO works although MM was aware that Drawing 230 was to be priced by MCL as a change.
By letter dated 11 January 2000, MM examined various demolition drawings that had been provided by DLG and made the following comments:
“1. The hospital structure to the site side of the demolition line may be demolished. All hospital structure behind the demolition line shall remain untouched, without alteration.
2. Propping will be required to the remaining hospital structure at the location indicated overleaf.
3. The remaining façade walls to the East and West require propping (MCL temporary works) at each floor.
4. Alterations to the remaining hospital structure shall be permitted once the hospital is tied to the full strength new structure.”
By letter dated 25 January 2000, Mr Lewis of MDL wrote to Mr Dawson of MM about a conversation which Mr Byrne had had with Mr Wearden relating to structural works of the existing building. He wrote:
“I am most concerned, as reported to myself, that there is an inference that the original fee did not cover works required to the existing building and façade to Ladywood Middleway. The scope of the works was always known and included for these works. At the time we agreed the fee therefore there could have been no misunderstanding on the nature or extent of your duties and I trust the report I have received is no more than a misunderstanding between the scope of works agreed and the engineer actually carrying out the works.”
This concern was not allayed by the time when two days later when MCL entered into its main contract.
Thereafter MCL entered into its contract with MPS. There is no doubt that the price agreed included an allowance for the works covered by PCCO 21.
Little of any significance happened with regard to the structural design relating to what remained of the hospital building until MM wrote to Mr Saunders in the following terms on 4 April 2000:
“One of the areas where we need to progress work is the existing hospital building. There are two main areas which need to be addressed. We need to make an assessment of the capacity of the existing, retained R.C. slabs, to determine their allowable loading capacities. Secondly, we need to assess the effects of the internal wall demolition, proposed by DLG. Some of the walls which it is proposed to remove are undoubtedly load bearing, and will require the introduction of new supporting structure.
In order to make these assessments, we need to know three things. These are the strength of the concrete, the size, strength and arrangement of the reinforcement, and the conditions at the supports. Some intrusive testing is required. Samples of concrete (ideally cores), and reinforcement should be taken and tested. Concrete would have to be broken out locally, in a number of places to expose the reinforcement, in order to measure bar size. A cover meter survey is also recommended. Some breaking out at supports would be required to determine support conditions. Testing of brick samples would be useful, too.
Before this work can commence, the structure must be made safe. Any areas where support has been removed must be temporarily propped until the assessment is complete. Safe access must be provided to all areas of the slab, at all levels.
We would recommend that a specialist testing house is brought in to carry out the sampling and testing work. We would provide a specification/brief and an Engineer would attend during the site works...
Bearing in mind the programme, you will appreciate that this work needs to be started as soon as possible …”
This letter and its contents seem to have provoked no great surprise or complaint from MCL, or indeed anyone else. I can not find in the bundles before the Court that MCL in any way complained to MM about their pre-February 2000 advice or conduct in 2000. In June 2000, MCL recorded, but only internally, somewhat mildly in relation to MM: “Existing building-late advice in respect of floor loadings: still under review”.
Thereafter, MM (primarily Mr Smeltzer) undertook investigations into the existing slabs. That revealed that the existing slabs had insufficient capacity without considerable strengthening measures or replacement.
By mid-July 2000, MM at MCL’s request had prepared the structural scheme which incorporated a proposal to remove all existing floors behind the retained hospital façade and to extend the new structural slabs up to the rear side of the façade. If that was to be done, as turned out to be the case, there then needed to be a temporary façade retention scheme introduced, which it was. Indeed Morrison asked that question of MM by letter dated 1 August 2000 and MM responded on 10 August 2000 as follows:
“Your letter of 1 August 2000 asks for our initial views on the need to provide a retention scheme if the decision is made to refurbish the existing retained area of the hospital. As we discussed at our meeting on 26 July, assuming that the refurbishment is taken from the top down after foundation strengthening has been installed, the removal of the roof takes away the support to the front wall. It is very possible that the façade at the upper level will need restraining until the new roof structure is in place …”
As the proposals developed, it became clear that a full façade retention scheme was required.
Thereafter MCL proceeded to provide a full height temporary support system for the whole of the façade, to demolish (apart from the façade) the remainder of the existing building and returns at the north and south elevations and thereafter to build the new structure as finally designed by MM. MCL assert that very substantial additional costs and delay (largely concurrent with delay caused by the prop forces problem) resulted.
The Hospital Façade Issue-Decision
Based upon the above history and on the evidence, written, documentary and oral, I make the following principle findings of fact:
MM was not asked by its contractual client or MCL to and did not, at any time prior to February or indeed April 2000 investigate the stability of the Hospital Façade or even, to any material degree, design any scheme for the area between the demolition line (as amended or otherwise) and the façade itself.
MM by its Mr Dawson did not make the suggestion in about March 1999 pleaded in Paragraph 30 of the Re-Re-Re-Amended Particulars of Claim that £250,000 or any provision could be saved in connection with a Hospital Façade retention scheme.
MM by Mr Dawson at the walkabout meeting in early April 1999 did tell, and indeed advise, Mr Lewis of MDL and the MCL representatives that, if the bay of rooms behind the façade was left in place, the façade would be stable without the need for a façade retention scheme. He did not advise anyone at the meeting that the area between the demolition line and the façade could in any way, easily or otherwise, be incorporated into the new structure. This was an informal meeting.
That advice was actually right as proved to be the case. The façade did remain stable with the line of rooms left behind it without a facade retention scheme. It was not careless advice, judged by the ordinary standards of consulting engineers in MM’s position. None of the experts said that this advice was careless.
There was no reliance by MCL let alone anyone else upon what was said at the April walkabout meeting. At most, and I do not find this proved, what may have happened is that MCL may have thought, based upon what Mr Dawson said, that at that stage they might get away without a facade retention scheme; however, even MCL, more than probably, knew that, whatever assumption they chose to make about the facade or the incorporation of the retained portion of hospital, it would have to be revisited when detailed drawings were produced for that area. MCL’s cost plan of April 1999 and the minute of the meeting of 29 April 1999 confirms that. It appears that MCL simply overlooked the need to revisit this part of the scheme before entering in to its contract with MPS.
Mr Dawson’s evidence about what happened at the walkabout meeting I found much more convincing than that of MCL’s witnesses. I did not find Mr Saunders’ and Mr Marsh’s evidence credible; by that I do not mean that they deliberately lied but I believe that they, unwittingly but wrongly, reconstructed what happened at this meeting. The absence of any contemporaneous document supporting their evidence, the contents of MCL’s first Cost Plan, the minute of the 29 May meeting and the absence of complaint to MM in 2000 after the need to investigate and reconstruct the area behind the façade and provide a façade retention scheme in my mind corroborates the view which I have formed about whose evidence is credible or not.
Although it would have been possible for MM to do or be asked to do a structural investigation of the retained part of the old Hospital building, MOL and MDL knew at all times-up to April 2000 that neither MM nor anyone else had done any structural investigation of the façade or the area immediately behind it. MCL also knew and must have known that MM had not done any such investigation and, if I am wrong, in any event, at best did not know whether MM had done any such investigation. If its relevant personnel had not known beforehand that such an investigation had not been done but believed that it should have been done, they would have complained vociferously in about April 2000 or indeed within months thereafter when told by MM that such an investigation was called for; it did not complain in 2000.
The Healthlands scheme was not agreed with the tenant by MDL or DLG until about late October 1999. MM was not materially involved in this process although it did at the request of MDL (and not MCL) provide some limited assistance to DLG. It must be borne in mind that the Healthlands area was only on two floors of five in and behind the Hospital Façade. There has been no evidence as to the state of the design by DLG with regard to the other three floors.
Although MM was asked to and did design the floors for the area on the first and mezzanine floors behind the demolition line and MOL, MDL and MCL received the product of that, Drawing 230, no-one did believe or could reasonably have believed that it either showed MM's design, or MM's endorsement of someone else's design, for the area between the demolition line and the Hospital Façade.
MM was not asked before February 2000 by anyone to, and did not, design or endorse the design of the area between the facade and the new work shown on Drawing 230. For instance, MM’s comments in its letter of 11 January 2000 do not advise that the existing floors and walls could be sued or safely incorporated in DLG’s design for that part of the site; it is concerned with the stability of the existing structure after further possible demolition.
There was nothing wrong or culpably wrong with Drawing 230 in itself. This is accepted by all parties. The fact that it was marked “Preliminary” would and should have sent a message that it was just that and that some design development might be required at a later stage.
No-one from MCL in any way relied upon MM so far as the design for, or the structural integrity or any structural investigation of, the area between the facade and the demolition line or the facade itself. There has been no real or reliable evidence of any such reliance. I am not satisfied upon a balance of probabilities that any relevant person at MCL went through any mental process relating to what MM may or may not have advised or said or not said with regard to the Hospital Façade and the area immediately behind it. MCL may or may not have priced and programmed upon the basis that no facade retention scheme and no structural works would have been required in the area behind the facade (it has not established its case on this on a balance of probabilities); however, even if it did so price and programme, it was not as the result of anything said or done or not said or not done by MM.
The facts that MCL noted in its Cost Plan of 22 April 1999 that “the stability and condition of the existing structure will need to be established” and never followed that up to satisfy themselves that MM or someone else had done that work suggests strongly that MCL did not rely upon what MM did or said or omitted to do or say.
MM did not provide any services let alone design services to or at the request of MCL in respect of the Healthlands area of work. There is no evidence, and certainly no reliable evidence, that MM did any work in relation to that area other than at the request of MOL or DLG on its behalf.
The contents of Paragraphs 313 to 334 above are apposite.
So far as MM’s Contract is concerned, there is nothing in the definition of the Services, as relied upon by MCL or otherwise, which suggests that investigation of the old structures was covered by the contract. Indeed, the fact that the Appendix to the contract in its un-amended form shows “investigation of the nature and strength of existing structures “as an additional service…not included in normal services” supports the view that the normal services did not cover it. The fact that this was deleted by agreement supports the proposition that it was not intended even to be a contemplated additional service.
Even if there was a duty of care owed by MM to MCL, and I do not consider that there was, at least in relation to the Hospital Façade, and a breach of that duty, there was no reliance by MCL upon anything said or done or not said or not done by MM in the period up to April 2000. There has been no proper or reliable evidence that MCL fixed their contract price with MPS or their contractual programme upon anything said or done or not said or not done by MM. I am not satisfied that there was a breach of any duty in circumstances where, as here, MM was never asked by anyone to consider or investigate the structure of the Hospital façade or the area behind it. There is thus no breach and no damage for the purposes of the tort. Although it matters not, if there had been a liability only arising out of the walkabout meeting, the quantum recoverable would have related to the amount by which (if ultimately at all) MCL’s accepted Contract Sum was less than it would have been if no such advice had been given, because that is the type of loss to which that alleged representation related.
So far as the Hospital Façade is concerned, the reasons why no duty of care arises are:
There never was any assumption of responsibility by MM towards MCL with regard to the Façade or the area immediately behind it. No advice was given to or sought by MCL by or from MM in this regard. Any assistance given by MM to DLG prior to November 1999 about the Healthlands scheme was given at the direction of MDL and not MCL. Any such assistance was relatively minimal and was limited to the production of Drawing 230.
If the advice pleaded by MCL was not given by Mr Dawson at the April
1999 walkabout meeting, then the remaining assertion of a duty of care relies upon a failure to advise or warn that DLG's designs for the two floors to be occupied by Healthlands could only be verified by a structural investigation. The "sin" is one of omission rather than actual negligent advice.
There was no, and no material, intended reliance by MCL upon anything said or done or not said or not done by MM.
MCL either overlooked or ignored the fact that there had been no structural
investigation of or structural designs for the retained area behind the Hospital Façade. MCL had seen or heard nothing which suggested that MM had done a structural investigation or prepared such designs or endorsed DLG’s designs as
feasible prior to April 2000.
There were no services requested by MCL from MM or provided by MM to MCL in relation to the Hospital Façade. There was no relationship akin to contract between MM and MCL in relation to the Hospital Façade
Given my findings of fact about the March and April 1999 meeting and walkabout, there was no Hedley Byrne type statement upon which MCL can or indeed do rely.
It follows from the above that MCL’s case in respect of the Hospital Façade fails. In their Closing Submissions, MCL’s Counsel put MCL’s case by reference to the alleged advice at the walkabout meeting in April 1999 and the provision of “design services to MCL in respect of changes to the Healthlands area” (Paragraph 359). Given my findings of fact, that more limited case fails.
Contributory Negligence
In the light of my findings on liability, it is not strictly necessary to address the issue of whether MCL was contributorily negligent. It is difficult to address the issue even in theory. If a duty of care was owed by MM to MCL, if it was breached and if there was “damage” for the purposes of the tort suffered by MCL, that would be predicated upon the basis that MCL relied upon and was in effect entitled to rely upon the advice given by MM or the absence of appropriate warnings from MM. On that basis, it is difficult to see how there could be any contributory negligence by MCL.
I can summarise MM’s allegations of contributory negligence as pleaded against MCL as follows:
Approving Rowen’s drawings without considering the need for support of the piled walls and to take account of the prop forces referred to in the Steelwork Specification;
Failing to pass those drawing to MM promptly for checking;
Alternatively if MCL did not approve Rowen’s drawings then failing to ensure that Rowen’s designs were submitted for approval before any subcontractor design work was carried out;
Failing to exercise its contractual right as against Rowen and insisting that Rowen redesign the steel frame so as to take the prop forces into the steel frame at Rowen’s cost;
Failing to manage the sequence and method of construction of the piled wall, car park and plaza and failing to plan, manage or control the design of the development.
MCL did process Rowen’s drawings and passed them to MM for approval. MCL had no contractual right to insist that Rowen re-design the steelwork at no cost to MCL whether or not the Steelwork Specification was incorporated into the sub-contract.
Further, and in any event, Rowen’s works did not extend to the design or provision of the reinforced concrete to be cast to form the floor slabs. MM never suggested prior to February 2000 that Rowen ought to have been designing any part of their works to accommodate horizontal loads from the piled walls.
As regards the management of the works, MCL contend that they acted at all times as a competent design and construction contractor. Mr Wasilewski asserted that MCL did not take control of the design process and “did not seize on the sequence and method of construction of the piled wall and its supports, and the corresponding design that it would need…” No such criticism was put to any MCL witness and, notwithstanding that Mr Wasilewski gave evidence about this, it is still unclear in what respects MCL is to be criticised. In relation to the piled wall, this was constructed to a design produced by Gibb in accordance with MM’s Specification. MM and MCL both played a part in the temporary works associated with the construction of the retained wall and in the work itself.
MCL in any event did exercise control. It consistently sought and obtained advice from MM on the prop forces issue after February 2000. So far as the advice is concerned, the only firm and unequivocal advice received from MM was to adopt what Mr Gidwani called the “right solution”, which MCL did follow.
The only criticism that ultimately was pursued with any great vigour was based upon Mr Wasilewksi’s evidence that, once appointed as the design and build contractor, MCL ought to have carried out a full review of the design to that date. I prefer the evidence of Mr Blois-Brooke on this aspect. In summary, where a contractor reasonably anticipates that the project engineer will be novated to it on its appointment as the design and build contractor, it is reasonable to rely on that engineer and not employ an independent engineer to review the design. This accords not only with common sense but with what happens in practice. It is consistent with the expectations of both MM and MCL and what happened in this case. MCL would have reasonably relied upon MM; there would be no need to review MM’s design: MM is and was a well known engineer of great standing in the UK and internationally which had been involved in the project for over three years before MCL’s contract with MPS.
Thus, if I had found MM liable, I would have rejected the pleas of contributory negligence made by MM against MCL.
Quantum Issues
Although it is unnecessary for me to address quantum matters given my findings on liability, there are two areas of dispute which I should address.
The first relates to whether it was reasonable or at least not unreasonable for MCL to have opted for the remedial route which it did, namely the independent bracing solution. MCL says that it was, whilst MM says that MCL should have adopted a solution (which I will call the “step strengthening solution”) which involved strengthening Rowen underlying steel design to take the additional (prop) forces. I have no hesitation in finding in favour of MCL on this issue upon which much time and effort was expended during the trial. My reasons are as follows:
At no time did MM give clear and unequivocal advice that the step strengthening solution was the right or proper solution. To the contrary, at a key time in April 2000 when decisions had to be made, Mr Gidwani, wholly properly, advised that the right solution was the independent bracing solution. It can not be said in those circumstances MCL did anything other than act reasonably in following that advice.
The suggestion that the “right” solution was only put forward because, unreasonably, MCL had rejected beforehand any form of strengthening solution is unjustified on the evidence. Whilst it is true that, relatively informally, MM did put forward the suggestions that there might be strengthening of the steelwork by additional bracing or by additional step strengthening at the changes in level on the Plaza deck level, those were merely discussed with MCL; MCL did not reject them as such. That finding is consistent with the evidence that as late as 6 April 2000, only six days before Mr Gidwani came up with the “right” solution, the parties were discussing three options including a scheme for strengthening Rowen’s steel work.
There was a legitimately perceived advantage in the independent bracing solution because it avoided the need to amend Rowen’s design which was substantially completed by April and thus the need to alter steel already ordered and fabricated. At least, there would have been very substantial delay and extra cost of and occasioned by MCL going down the route of substantially amending Rowen’s design.
The overwhelming impression which I have is that, in April 2000 when the decision was made to proceed with the independent bracing solution, no-one had any real idea that it would take as long, cause such delays or cost as much as is now said by MCL to have done, that is nearly a year’s overall delay and some £8m’s worth of loss. A decision had to be made and one should judge issues of mitigation and indeed reasonableness by the circumstances in which the claimant found itself in at the time.
Some reliance is placed upon what I said in the case of AXA Insurance UK Plc v Cunningham Lindsay United Kingdom [2007] EWHC 3023 (TCC) to the effect that the duty to mitigate is separate from a claimant’s right to recover only such damages as are reasonable. I said:
“259. Reasonableness as a separate element is to be distinguished from the "duty" to mitigate. That is described in the well-known speech of Viscount Haldane LC in British Westinghouse Co v Underground Railway [1912] AC 673, 689:
"The fundamental basis is thus compensation for pecuniary loss naturally claimed from the breach; but this first principle is qualified by a second, which imposes on a claimant the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps."
The onus of establishing a failure to mitigate is upon the defendant. It is clear from numerous authorities that the duty to mitigate does not impose a heavy onus on a claimant. In almost every case, provided that the claimant can be shown not to have acted unreasonably in all the circumstances, to that extent it will not have failed to mitigate its loss.
260. The duty to mitigate is, generally, not a contractual or statutory duty. For instance Pearson LJ in Darbishire v Warran [1963] 1 WLR 1067 properly said:
"It is important to appreciate the true nature of the so-called 'duty to mitigate the loss' or 'duty to minimise the damage'. The claimant is not under any contractual obligation to adopt the cheaper method: if he wishes to adopt the more expensive method, he is at liberty to do so and by doing so he commits no wrong against the defendant or anyone else. The true meaning is that the claimant is not entitled to charge the defendant by way of damages with any greater sum than that which he reasonably needs to expend for the purpose of making good the loss. In short, he is fully entitled to be as extravagant as he pleases but not at the expense of the defendant."
That dictum has some particular relevance here where, on any count, as it effectively accepts, AXA spent considerably more in resolving the problems at Orchard Farm than was necessary.
261.The costs of and occasioned by reinstatement in a construction context are often, albeit not invariably, the proper measure of damages where there has been defective or negligence performance, particularly where the defaults have caused defects or deficiencies in building (East Ham Corpn v Bernard Sunley & Sons [1966] AC 406). However "where reinstatement is the appropriate basis for the assessment of damages, it must be both reasonable to reinstate and the amount awarded must be objectively fair as between the claimants and the defendants" (per Clarke LJ in the Maersk Colombo [2001] 2 Lloyd's Rep 275, 281).
262. In considering reasonableness, both in the context of mitigation and reasonableness as a basis for establishing damages, the court will not be unsympathetic to the predicament in which an innocent claimant is put by the breaches of contract of the defendant. As Lord MacMillan said in Banco De Portugal v Waterlow & Sons Ltd [1932] AC 452 at page 506:
"Where the sufferer from a breach of contact finds himself in consequence of that breach placed in the position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the costs of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken." "
That I consider is a proper statement of the law. I find that it was reasonable for MCL to follow the advice positively given by MM about what was the right solution.
There was considerable expert evidence given by the engineering experts as to the viability of a step strengthening solution put forward by Mr Wasilewski. Whilst I understood the logic of a propping or step strengthening solution and can accept the possibility that such a solution could and could be made to work, I found unfortunately that Mr Wasilewski’s evidence on this was insufficiently developed to form a view that it necessarily would have worked. In this context I find myself in sympathy with Mr Blois Brooke, MCL’s engineering expert. The propping solution involved the provision of diagonal struts around and under the changes in level to transfer the horizontal forces through the changes in level. Mr Wasilewski altered his draft schematic designs for this at least twice including in a belated report. He relied upon calculations which he did not append to his reports. He had had many months to prepare his expert reports in this case and I was surprised at the “thinness” of the detail provided by him.
The problem for MM with the step strengthening solution is that at most it was an idea which Mr Gidwani mentioned at one meeting in March 2000; a similar problem for MM is that the alternative bracing of the existing steel solution was mentioned in the same way. I would have expected MM, if it really thought that the independent bracing solution was excessive or unnecessary, whatever alternative was available, to spell out clearly and unequivocally the disadvantages of the independent bracing solution and the advantages of any alternative solution. It did not do so. Mr Gidwani wholly honestly accepted on several occasions that at least with hindsight it would have been better to have done so in writing. I do not consider however that it was professionally negligent of MM not to put forward such advice as the alternative solutions would have to have been worked up to a greater degree than Mr Wasilewski has done before one could determine whether they were viable; as it has not been established on the evidence that any alternative would have worked, it has not been proved that there is a breach of any duty on the part of MCL to mitigate.
Given my findings on this, it is unnecessary to decide an alternative case advanced by MCL, in Paragraph 26 of the Re-Re-Re-Amended Particulars of Claim, that MM was negligent in not putting forward a remedial scheme which would have been cheaper and simpler than that which was adopted.
The other issue which arose was a discreet issue relating to the liquidated damages (“LADs”) claimed which MCL says it owes MPS (its name having now changed) for the delays which it says were caused by the negligence of MM. There is no dispute between the parties that pursuant to the Building Contract, MCL was liable to MPS for liquidated damages in the event of culpable delay to the completion of each of the various sections of the development. There can therefore likewise be no dispute that, in so far as critical delay to any or all of the sections was occasioned by Mott’s negligence, this necessarily caused MCL to incur an actual legal liability to MPS for LADs corresponding to the length of the critical delay so occasioned.
There is, of course, a dispute between the experts as to the length of such critical delay but, even on the assessment by MM’s programming expert, it was at least 4.6 weeks. MM, however, argue that MCL is not entitled to recover anything from MM in respect of their liability for LADs on the basis that the LADs have not to date been paid by MCL and in fact never will be, with the result that the liability is purely theoretical.
Whilst all other questions of delay and quantum have been adjourned for determination at a future date, I directed, with the parties’ agreement, that this point of principle could and would be resolved at this stage.
As to the relevant facts, it is undoubtedly true that the position has been complicated by the sale of MCL (twice) since the date of the Building Contract and the various arrangements that have been made over the years regarding the payment of liquidated damages. The position is explained in more detail in the unchallenged witness statement of Mr. O’Dell and is only summarised here.
The name changes of MCL were:
1 April 2003 – to AWG Construction Services Ltd
13 October 2004 - to Morrisons Construction Services Ltd
6 June 2006-back to MCL
11 July 2007-Galliford Try Infrastructure Ltd
MPS changed its name to Broadway Plaza (Birmingham Children’s Hospital) Ltd in November 2004. AWG (Anglian Water Group) acquired the Morrison group of companies in September 2000 but sold MCL to the Galliford Try Group in March 2006.
Following the sale of the Morrison Group of companies to AWG in 2000, AWG saw the payment of liquidated damages as something which did not affect the group’s financial position overall. Nonetheless, it was considered important to retain MCL’s liability for the purposes of making a recovery against MM. Accordingly, when AWG sought further finance in 2002, the position was regularised by a Minute of Agreement dated 15 July 2002 pursuant to which:
MCL’s liability to pay liquidated damages and interest was expressly preserved in accordance with the sectional completion dates under the Building Contract (quantified as £3.7 million as at the date of the Minute);
Interest was to run from 1 January 2002;
Actual payment of the liquidated damages was deferred against MCL’s undertaking to pay on the earliest of three trigger events (principally the sale of the completed Development).
MCL has never paid or had deducted against it any liquidated damages. This was, initially at least, because AWG saw payment of LADs as merely “an internal transfer of monies that did not affect that Group’s financial position over all”, as Mr O’ Dell said in his unchallenged witness statement.
This arrangement was subsequently amended by a further Minute of Agreement dated 12 April 2005 entered into when the development finally came to be sold by AWG. Under the previous agreement, sale would have had the effect of triggering immediate payment of the liquidated damages. Instead, however, the parties agreed to defer payment further on the following basis:
MCL’s liability to MPS was crystallised in the sum of £6.814 million (including both principal and interest);
Payment was to take place on a date after the sale of the Development to be fixed by AWG Group Ltd in their absolute discretion.
In March 2006, however, MCL was sold by AWG to their current owners, Galliford Try. Since MPS was to remain in the ownership of the AWG group, the payment of liquidated damages was no longer a purely internal matter but became a possible issue. Notwithstanding the possibility of making a full recovery from MM, it clearly would not have been attractive to the purchaser of its new acquisition to have to pay over £6 million back to the vendor’s group at a date which lay in the discretion of the vendor.
Accordingly, arrangements were made in the Sale contract (Clause 9.13.4(v)) whereby AWG Group Ltd agreed not to fix a date for the payment of liquidated damages except as directed by Galliford Try. The trigger for payment was thus controlled by the purchaser. There is no suggestion that the series of agreements described above and below were not entered into in good faith for apparently sensible commercial reasons.
It is MCL’s case that its liability to pay liquidated damages has not disappeared or been written off. On the contrary, it has been expressly preserved but on terms which allow Galliford Try to control the date when payment has to be made. There is therefore a subsisting liability on the part of MCL to pay liquidated damages, the amount of which is properly recoverable from Mott.
MM, by contrast, argues that the LADs have only notionally been preserved for the purposes of trying to recover them from MM and that the effect of the various agreements is to defer payment indefinitely with the result that they will never be paid and are entirely theoretical in nature. Thus, say MM, MCL has no claim in respect of this liability since it has not suffered and will never suffer any loss. Alternatively, it says that MCL has failed reasonably to mitigate its loss by participating in arrangements to preserve their liability rather than actively trying to avoid or reduce it.
It is axiomatic that an award of damages should put the innocent claimant in the position it would have been if there had been no breach of duty. A claimant is entitled to compensation for losses, to which it is entitled in principle, which it has incurred or which the Court is satisfied upon a balance of probabilities it will incur. Thus, in the case of defects, a claimant who has no intention of putting right the defects can not usually recover the cost of remedial works (see for instance Ruxley Electronics and Construction Ltd v Forsyth and Radford v de Froberville [1977] 1 WLR 1262) although other types of loss such as capital diminution may be recoverable.
It is necessary to consider the various agreements in some more detail. By clause 3.2 of the Minute of Agreement dated 15 July 2002, MCL undertook to MPS
“… to pay to [MPS] the Initial Payment on the Initial Payment Date in so far as the Initial Payment is (i) not paid to the Employer prior to the Initial Payment Date and/or (ii) not deducted by the Employer from monies due to the Contractor under the Building Contract prior to the Initial Payment Date.”
The “Initial Payment” meant the sum which reflected LADs due plus interest. The “Initial Payment Date” meant:
“The earlier of (a) the date of disposal by the Employer (whether by its sale or transfer) of the whole (or the last remaining part) of its interest in the Commercial Development, (b) the date on which the First Employer Insolvency Event occurs and (c) the date at which any adjudication or court proceedings are first commenced pursuant to Article 5 of Article 6B of the Building Contract (as the case maybe).”
Clause 3.3 of the Minute stated:
“Without prejudice to any present or future obligation or liability of the Contractor to pay or allow liquidated and ascertained damages under the Building Contract and subject to the Contractor complying with its obligations under this Agreement, in the period from the date of this Agreement until the Initial Payment Date the Employer agrees not to take steps to recover and/or deduct any of the liquidated and ascertained damages that are or become payable or allowable under the Building Contract.”
This Minute of Agreement was amended by the Amendment to Minute of Agreement dated 12 April 2005 but was made between MPS, MCL and AWG. Group Limited. The definition of “Initial Payment” was changed so that it meant:
“…the sum of £6,814,000 being the aggregate of (a) £3,700,000 being the liquidated and ascertained damages set out in Clause 2.1.2 of this Agreement, (b) £2,200,000 being the liquidated and ascertained damages in respect of the period from 16 July 2002 to 16 May 2003 and (c) £914,000 being interest at the Lending Rate on the aforementioned sums of £3,700,000 and £2,200,000 in the period from 1 January 2002 until the [Date of Disposal].”
The definition of “Initial Payment Date” was also amended to mean:
‘The date occurring after the date of disposal (“Date of Disposal”) by the Employer (whether by sale or transfer) of the whole (or the last remaining part) of its interest in the Commercial Development, which date occurring after the Date of Disposal, shall be fixed solely by Group in its absolute discretion subject to at least three months’ prior written notice being given of the date to the Contractor.’
Clause 4 made it clear that Clause 2.2 was conditional upon the occurrence of the Date of Disposal and its terms would only come into effect in that event.
By a “Share and Business Purchase Agreement”, AWG sold its interest in MCL to Galliford Try Construction Ltd (“GTC”). Much of the copy of this agreement has been redacted, but it is clear from the un-redacted parts that amongst other things this Agreement was to impinge upon the Minute of Agreement of 15 July 2002. Clause 9.13.4 relates to AWG’s interest in the Broadway Plaza development.
Clause 9.13.4 stated as follows:
“(i) [AWG] … [MPS] and [MCL] have entered into, or the Seller shall procure that they will enter into within 10 days of this agreement, a final agreement, in the Agreed Terms in respect of the Broadway Plaza development settling all claims between them arising out of or in connection with the Broadway Plaza development, save for those recorded in the Final Agreement of the Broadway Plaza Minute of Agreement.
(ii) AWG shall procure that MCL shall use all reasonable endeavours prior to Closing to settle the outstanding professional indemnity claim and the outstanding claims by and against Mott MacDonald Limited such that any such settlement results in an aggregate neutral or positive financial position for [MCL] in relation to such claims and any amounts which are due to [MCL] should be accounted for in the accounts for [MCL] in 2005/2006.
(iii) To the extent that such claims are not settled prior to Closing, the Purchaser shall procure that [MCL] shall use all reasonable endeavours to settle the claims, provided that it will be a term of any such settlement that [MM] shall not pursue any claim arising out of or in connection with the Broadway Plaza development against a company in [the AWG group] …
(iv) If the outstanding claims by and against [MM] in connection with the Broadway Plaza development are settled, whether prior to or subsequent to Closing, [AWG] shall procure that [MPS] and [AWG] enter into an agreement with [MCL] pursuant to which the rights available to [AWG, MPS] and any other member of [the AWG Group] under the Broadway Plaza Minute of Agreement, including the fixing of an Initial Payment Date and/or seeking payment of the Initial Payment, as defined in the Broadway Plaza Minute of Agreement, are extinguished, and any rights the aforementioned have to pursue claims against [MCL] in respect of the delay to the completion of the Broadway Plaza development, whether under the Broadway Plaza Minute of Agreement or otherwise, are waived.
(v) In any event, notwithstanding any other provision of this agreement, for so long as [MCL] is a member of the [Galliford Try Group], [AWG] hereby agrees that it shall not (and shall procure that all members of [the AWG Group] shall not), save to the extent expressly directed in writing by [GTC] or any member of the [Galliford Try Group] which at that time is the direct holding company of MCL, exercise any rights available to it (or them) pursuant to the Broadway Plaza Minute of Agreement, including the fixing of an Initial Payment Date and/or seeking payment of the Initial Payment, as defined in the Broadway Plaza Minute of Agreement, or pursue claims against [MCL] in respect of the delay to the completion of the Broadway Plaza development, whether under the Broadway Plaza Minute of Agreement or otherwise.
(vi) Notwithstanding any other provisions of this Agreement, if [GTC] or any other member of [Galliford Try Group] sells [MCL] to a third party, then the benefit of this clause … shall be assigned by [GTC] to the company which is the direct holding company of [MCL] such that the benefit of this clause …is always held by the direct holding company of [MCL].”
It is, I believe, common ground between MCL and MM that the effect of the Minute of Agreement as it has been amended and the Share and Business Purchase Agreement is that, unless GTC (the 100% owner of MCL) issues a written direction to MPS requiring MPS to exercise its rights to payment of the LADs, LADs will never be paid or payable. If I am wrong in believing that this is common ground, then it is my view that upon a proper construction of these documents that is the result and consequence of them.
Essentially, MCL argues that it has and retains a liability as such to MPS to pay liquidated damages for delay and that a substantial part of the delay was caused by matters for which they claimed that MM was liable. It matters not, it argues, that any sum received from MM by way of damages in relation to liquidated damages may never be passed on to MPS. MM argues that at most the liability is a future contingent liability which will only ever be triggered by something which is extremely unlikely to happen, namely GTC’s giving of a written notice or direction to MPS requiring MPS to exercise its rights to liquidated damages. Alternatively, MM argues that there would be a failure to mitigate if any such direction was given.
Reference has been made to a number of cases. The first, Harlow & Jones Ltd v Panex (International) Ltd [1967] 2 Lloyd’s LR 509, involved a claim under a sale contract by sellers against buyers who had refused to accept goods. By reason of the buyer’s non-acceptance of the goods, the sellers had incurred storage charges to their own suppliers with whom they had entered into an agreement which effectively made recovery of the storage charges contingent upon recovery of the storage charges from the buyers. Roskill J at page 531 said:
‘Next there are the storage charges … [Counsel] correctly summarised the final position by saying that the bargain was that the Russian sellers would only claim against the plaintiffs if the plaintiffs could recover those charges from the defendants in this action. [Counsel] argued that an arrangement of that kind barred the plaintiffs recovering in this action. For my part I am unable to see why. The plaintiffs have – and this was not contested – apart from any agreement with the Russian sellers, a perfectly good claim for these storage charges. Why the plaintiffs should not make an arrangement for their own sellers, “we will claim these and hand the proceeds over to you if we recover provided you let us off if we do not”, I am unable to see. Nor do I see why the existence of such an arrangement should afford the defendants a defence which they would not otherwise possess. It seems to me an eminently sensible commercial arrangement …’
This current case, however, is not comparable to the Harlow & Jones case where the arrangement is not that “MCL will hand over to MPS any liquidated damages recovered from MM”. If that arrangement was applicable, MM would have little or no argument.
The next case relied on is Giles v Thompson [1994] 1 AC 142. That was a case in which the plaintiffs sustained injuries and damage to their motor cars in accidents for which the defendants were to blame. They entered into agreements with car hire companies for the hire of substitute vehicles while their own were being repaired. These hire agreements provided that the hire companies should have the right to pursue actions against the defendants in the plaintiffs’ names. The complaint made was that these agreements were unlawful and champertous. Lord Mustill gave the judgment, with which the other law lords agreed. At page 166B, he said:
‘I now turn to the wholly distinct question whether the motorists have proved that they had suffered a recoverable loss through the unavailability of their own cars pending repairs. The Defendants say that they have not, because the cars were replaced by substitute vehicles which the motorists were able to use free of charge. In essence, it is said that the motorists have mitigated what would otherwise have been a valid claim for general damages reflecting their loss of the opportunity to make use of their own vehicles.
On the opinion which I have formed of the obligations created by the obscure and incomplete terms of the two agreements this contention admits of a very short answer. In my judgment the motorists do not obtain the replacing vehicle free of charge. If the motorist had simply persuaded a garage to hire her a substitute on credit, without any of the superstructure of the present transaction, it would be no answer to a claim for damages equivalent to the sums due to the garage that these sums would not in practice be paid until a judgment in the motorist’s favour had provided the necessary funds: for the amount of the outstanding liability represents the loss suffered by the motorist, and the question whether the motorist intends to apply the damages recovered in satisfaction of the debt, or in some wholly different way, cannot effect his right of recovery.
To distinguish that case from the present the defendants are forced to contend that the consideration for the provision of the cars consisted solely of a right to recoup themselves from the damages for loss of use. As will have appeared, I do not accept this interpretation. The hiring company has no direct right to the damages. The company is not an assignee or chargee of the cause of action or its fruits, although it expects that the damages that loss of use will form part of the assets from which the motorist will in due course pay for the substitute. The liability for the car hire, although suspended as regards enforcement, rests upon the motorist throughout. It is a real liability, the incurring of which constitutes a real loss to the motorist. Whatever the publicity material may have conveyed, the provision of the substitute cars was not “free”.’
As authority for the proposition that successful claimants can do with the damages which they recover what they will, that is obviously correct and unobjectionable. That however can be distinguished from the current case which is not concerned with questions of unlawfulness or champerty or any comparable arrangement that there was in the Giles case with a car hire company.
Much reliance was placed by MCL on Total Liban SAL v Vitol Energy SA [1999] 2 Lloyd’s LR 700. Vitol sold gasoline to Mackay FOB Amsterdam; under an earlier contract Mackay had sold the gasoline to Total CIF Beirut/Dora. Following the shipping of the cargo, it was found that it was off specification, so much so that Total was ordered to reload the cargo and to remove it from Lebanon, whereupon it was taken to Rotterdam where it was subsequently sold at a judicial auction. Total claimed against Mackay for losses allegedly suffered as a result of the defective quality of the cargo, with Mackay in turn claiming against Vitol in respect of any liability owed to Total. Mackay did not have the funds to honour any award that Total could have obtained against it and was not in a financial position to pursue Vitol. Accordingly Mackay assigned to Total its rights under its agreement with Vitol including its claims in arbitration. The two issues were whether Mackay had any claim for substantial damages against Vitol and whether the assignment was void for champerty.
Mr Peter Gross QC sitting as a Deputy High Court Judge reviewed an earlier authority of Randall v Raper (1858) E.B. & E. 84. He said at page 706 (et seq), materially, as follows:
‘In Randall v Raper … the defendant (A) sold to the plaintiff (B) seed barley, warranting it to be of a particular quality but delivered seed barley of an inferior quality. Relying on the warranty, B had on-sold the seed barley with a similar warranty to sub-buyers (C). In the event C claimed from B compensation for the damage which C had suffered; B accepted that it was liable to C but had not paid C and, indeed, the amount of the compensation had not been ascertained. B now claimed from A damages in the amount of B’s liability to C …
The judgment of Erle, J (at p.90) went directly to the point.
“But then it is said that here the plaintiffs have made no actual payment; so that if they recovered such damages in this action, they might put them into their own pockets without paying the sub-vendees. But I think that the true rule is, that a liability to loss is sufficient to give the party liable a title to recover.”
The views of Crompton, J. were to like effect (at pp. 90-1):
“…It is said, however, that the plaintiffs have here only incurred a liability, and have made no payment. But I entirely deny that payment is necessary to entitle a party to recover. Liability alone is sufficient. It has always been customary to state, in the allegation of special damage, ‘whereby the plaintiff became liable to pay:’ I recollect a discussion once arising, whether an allegation ‘whereby the plaintiff paid’ was sufficient without an allegation ‘whereby the plaintiff became liable to pay;’ but I do not recollect a discussion whether the latter allegation was sufficient without the former. In actions for bodily injuries, the liability to pay the surgeon’s bill is always allowed as an item in the damages. It is quite clear to me that in this case the liability of the plaintiffs to pay their sub-vendees would be a proper item in estimating the damages. In an action for breach of contract you can recover only once; and the action accrues at the moment when the breach occurs. A liability to payment, which has been incurred by a plaintiff in consequence of a breach of a defendant’s contract, may well form a part of the damages, though it may be difficult to estimate them.”
‘To my mind, the judgments in Randall v Raper speak for themselves and do not require elaboration. On reading them, the impression which I formed was that Randall v Raper is an authority directly in point; the argument advanced here by Vitol (liability without payment does not found a claim for substantial damages) was advanced there and rejected; in terms of ratio and not merely dicta, Randall v Raper supports the Total case on the appeal; by contrast, the arbitrator’s reasons and the Vitol case cannot be reconciled with it.
It remains to deal with the submissions advanced by Vitol to the effect that these impressions are mistaken: …
(2) The decision is not binding on me: the argument here is that a first instance Judge is not bound by a decision of the Court of Queen’s Bench, not being the Court of Appeal or a precursor thereof. As to this, Mr Popplewell may well be correct in theory. That said, I am satisfied that the right course would be to follow it even if (i) I am not strictly bound to do so and (ii) I entertained doubts as to its correctness (which I do not), unless it is contrary to or has been supplanted by other authority binding on me.’
Thus, it is MCL’s argument that, provided that there is, as here, a liability on the part of MCL to pay MPS liquidated damages for their culpable delay, that is sufficient to secure for them the LADs for such delay as has been caused by MM’s negligence (if it had been established). In principle, if there is such a liability, prima facie that would be a recoverable head of loss. However, one has to determine what that liability is.
I have formed the view however that MCL’s arguments here are invalid. The effect of the Minute of Agreement as amended and the Share and Business Purchase Agreement is in effect to vary what the liability for the liquidated damages is. It is no longer an unconditional liability to pay liquidated damages for delay: it has become a contingent liability which will only come into play if MCL’s parent, extraordinarily, decided that it should be paid. Apart from the unlikelihood that MCL’s parent would deny itself, its group and its shareholders the right to hold on to all damages recovered from MM (including those representing LADs for delay), the liability to pay LADs only comes into play if the holding company decides that MPS should be paid. If one couples that with the absence of any evidence that the holding company will give the requisite directions so that MCL would pay or will pay any such damages on to MPS and the inherent and inferential improbability that it ever will, the claim fails also for the reason that as a matter of fact it is unlikely (and it has not been established by MCL which has the burden of proof) that the loss will be incurred.
It follows from the above that, if I had found that MM was liable in negligence, I would not have found that the liquidated damages part of the overall damages claim was recoverable.
Conclusion and Determination
There will be judgment for the Defendant as against the Claimant whose claim is dismissed. There will be judgment for the Part 20 Defendant as against the Part 20 Claimant (MM) whose Part 20 claim is dismissed.
Given the very large amount of evidence, the length and breadth of the submissions and arguments in the case and the length of this judgment already, and although I have considered all the evidence and arguments, I have had to exercise some restraint in preparing this judgment in the interests of proportionality and providing my decision within weeks as opposed to months. If any party felt that I had not addressed some key evidence or argument or have introduced any material point which was not effectively argued, I invited the parties to raise it when they saw the draft judgment which in accordance with usual practice was shown to the parties’ legal teams some time before it was formally handed down. Apart from corrections, MM and Rowen did not ask for any other amendments. MCL provided two letters from its Solicitors and a 76 page document inviting me to make wholesale amendments to the draft; a significant number of suggested amendments sought findings of fact which were already made whilst some sought unnecessary changes; only a few were legitimate alterations to seek. I have made all such amendments as are necessary and addressed, nonetheless, many of the less good or relevant points raised by MCL as well, in order to provide (even) greater clarification than had already been provided in what is in any event a very lengthy judgment