Upton McGougan Ltd v Bellway Homes Ltd & Ors

These proceedings were commenced in 2007 by the claimant engineers, Upton McGougan Limited (“UM”), seeking payment of their unpaid fees arising out of work done on behalf of the defendants, Bellway Homes Limited (“Bellway”) in connection with the development of a site in Redhill. The fee claim has been compromised, but is subject to Bellway’s counterclaim arising out of the alleged negligence of UM in relation to the removal of spoil from the site.

At a CMC in December 2008, I set out a relatively tight timetable, which envisaged the exchange of witness statements in March and experts’ reports on 17th April. There were some delays to this timetable, with the result that the engineers’ reports were not exchanged until 30th April. The trial is due to take place for five days at the start of July, and the hearing fixed for 5^th June was ostensibly the pre-trial review.

Following the exchange of experts’ reports, Beale & Co, UM’s solicitors, sent the first of a series of letters to Watson Burton, Bellway’s solicitors, complaining that Bellway’s expert’s report, prepared by Mr Brown of Jubb Consulting Engineers Ltd, contained numerous allegations that were not pleaded. They stated that amendments to the counterclaim were required in order to bring it into line with the report, which made it almost certain that the trial would have to be adjourned.

On 29th May, Watson Burton issued an application to amend their counterclaim “in line with the quantum identified by [their] experts’ reports.” No draft pleading was attached to the application. It was not in fact provided until 4th June, the day before the pre-trial review. The amendments were indeed confined to the quantum of Bellway’s claim, but were based on calculations for spoil which had been made, for the first time, in Mr Brown’s report. It was confirmed at the hearing on 5^th June that Bellway did not wish to make any other amendments to their counterclaim.

At the CMC on 5th June, UM objected to the amendments. They maintained that Bellway should be required to amend the entirety of their pleadings to bring them into line with Mr Brown’s report, and that such an exercise would inevitably mean that the trial would have to be adjourned. I doubted whether I had the jurisdiction to require a party to make amendments which they expressly said they did not wish to make. However, in view of the fact that there was a clear and significant difference between the parties as to the legitimacy of Mr Brown’s report, there was plainly a dispute that I had to resolve as soon as possible. I indicated that perhaps the better course might be for UM to make an application to debar Bellway from relying upon those parts of Mr Brown’s report that were said to go outside the current pleadings, which would then in turn give Bellway the opportunity to reconsider their position.

In addition, because there was insufficient time to deal with such a potentially complex dispute, at what had been listed as a short PTR, the hearing of that application had to be adjourned in any event. I indicated to the parties that I could accommodate the hearing of the new application today, 12th June.

The application to debar was issued on 9th June and was supported by the statement which had by then already been served, signed by Mr Henderson of Beale & Co, on 4th June. The application is opposed by Bellway, who have served a statement, dated 10th June, from Mr Anderson of Watson Burton. Bellway have not altered their underlying position that, save as to quantum, no further amendments to their counterclaim are sought or required.

I propose to set out briefly the relevant principles in Section B below, and then at Section C, I address the pleadings and compare them, at Section D, with the contents of Mr Brown’s report. At Section E, there is an analysis of the application to debar and, at Section F, a short summary of various logistical issues.

On behalf of Bellway, Ms Laney helpfully drew my attention to the case of McPhilemy v The Times Newspapers [1999] 3 All ER 775, in which Lord Woolf MR dealt with the changes brought about by the CPR, particularly in relation to the contents of a statement of case. That was a defamation case, and in his judgment he said this:

“The need for extensive pleadings including particulars should be reduced by the requirement that witness statements are now exchanged. In the majority of proceedings identification of the documents upon which a party relies, together with copies of that party’s witness statements, will make the detail of the nature of the case the other side has to meet obvious. This reduces the need for particulars in order to avoid being taken by surprise. This does not mean that pleadings are now superfluous. Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular they are still critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader. This is true both under the old rules and the new rules.”

I respectfully adopt the second part of this passage, as highlighted, as setting out the continued importance of the basic pleadings in any civil case. As to the first part of that passage, dealing with witness statements, and upon which Ms Laney placed some reliance (because witness statements have been exchanged in the present case), two points arise. First, Lord Woolf referred to the process of exchanging witness statements as one of the innovations of the CPR. In many parts of the civil justice system, perhaps it was, but in the TCC, it is a practice that has been universally adopted for the last 20 years or so. Secondly, it seems to me that Lord Woolf’s comments were of particular relevance to defamation cases: I do not think, that, in general, allegations of professional negligence in the QB or the TCC are likely to be properly pleaded if the detail of the case that the defendant has to meet only becomes apparent in the witness statements. Save in unusual cases, proper particulars of the allegations made will always be required in the underlying pleadings.

By reference to Part 18 of the CPR (the provision of further information), the White Book sets out a useful summary of the purpose of statements of case at paragraph 18.0.2, where the learned editors write:

“A major objective of case management under the CPR is to ensure that statements of case do indeed set out the parties’ case and define the dispute between them … As part of its responsibility for managing cases, the court will ensure that the parties plainly state the factual ingredients of their case so that the true nature and scope of the dispute can be identified. The particulars of claim and the defence are considered by the procedural judge after the defence is filed and, if the issues cannot be readily identified from the statements of case, directions are given to rectify this.”

Another issue that arises in the present dispute concerns the appropriate circumstances in which a reply is required. Here, the Bellway counterclaim was the subject of a detailed defence served by UM. That detailed defence was not the subject of a reply by Bellway. That now is a criticism which Mr Cross makes of Bellway and is, he says, at least one reason why the present difficulties have arisen. He referred me to paragraph 5.5.3 of the TCC Guide, which states:

“A reply to the defence is not always necessary. However, where the defendant has raised a positive defence on a particular issue, it may be appropriate for the claimant to set out in a reply how it answers such a defence.”

In the present case, I agree with Mr Cross: a reply was necessary in order to demonstrate the real disputes between the parties. I consider that point further below.

Also relevant to any consideration of the proper scope of the pleadings in a case like this is the overlap between pleadings and experts’ reports and meetings. This is an allegation of professional negligence in which the experts will play a crucial part. To that extent, Ms Laney pointed me to paragraph 13.5.1 of the TCC Guide where, in dealing with the joint meetings of experts, it is stated that one of the purposes of such meetings is “to define a party’s technical case and to inform opposing parties of the details of that case”. It was her submission that any alleged gap between the pleaded counterclaim and the expert’s report could be sorted out at those meetings.

It seems to me that, ultimately, it is a matter of fact and degree as to where a pleading should stop, and the detailed exchange of views on the technical case at the experts’ meeting should start. If an issue is plainly joined on the pleadings, and that issue requires expert evidence, then it seems to me that the experts will meet to discuss it, and those discussions may contain matters of detail that go well beyond that which is set out in the pleadings. If the experts cannot agree on that issue then, if the reports are being exchanged after the Joint Statement has been prepared under CPR 35.12 (which is commonly ordered in the TCC), then they must deal with that issue in their reports, which again may well contain considerably greater detail than that which may have been pleaded. However, it seems to me that, for this process to work effectively, there must at the outset be a clear issue on the pleadings which both sides – and both experts – understand; if there is not, then it may not be an issue which the experts are entitled to consider at all at their joint meeting, unless both parties expressly agree that they can.

Overall, therefore, there is, as ever under the CPR, a balancing act to be performed. On the one hand, particularly in a case of professional negligence or the like, a defendant is entitled to know the specific allegations of default that he has to meet at an early stage, so that his witness statements, and in particular his expert’s report, can be prepared and exchanged with a full understanding of the detail of the claimant’s case. On the other hand, requests for excessive particulars are unlikely to be proportionate and the court will adopt a relatively generous approach to disputes about what is or is not covered by any particular pleading. As Saville LJ remarked in British Airways Pensions Trustees Ltd v McAlpine 72 B.L.R. 26, “pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing.”

Bellway’s defence and counterclaim was served on 19th December 2008. It focused upon the design requirement that “the site levels needed to be determined so as to generate zero cartaway”. The particulars of breach at paragraph 27 were in the following terms:

“(a)

The claimant’s design assumptions about the topography of the site as at the date of its instruction were either wrong; further or alternatively were not verified.

(b)

Further in the alternative, the claimant

(i)

failed to determine the existing topography of the site accurately or at all;

(ii)

failed to visit the site before determining the site levels;

(iii)

failed to appreciate the existence of the bunds located on the site and determine their size; and/or

(iv)

failed to appreciate and/or advise the First Defendant and/or the Consortium that an up to date topographical 3D survey would be required in order to determine site levels that would satisfy the design requirement.

(c)

In determining the site level, the Claimant failed to take account of arisings that would be generated by excavations to the foul and storm water drainage; further or in the alternative, failed to inform or warn the First Defendant and/or the Consortium that it had not taken account of the same.”

In addition, there is a further allegation at paragraph 31 in relation to the excess spoil, to the effect that UM “failed to take account of arisings generated by excavations to the foul and storm water drainage”. In addition, there is an allegation at paragraph 34 that, although UM advised that the excess quantities would be in the region of 25,000 cubic metres, the actual amount removed was in the region of 100,000 cubic metres. That was referred to during the course of the argument by Ms Laney as the res ipsa loquitur point.

Broadly speaking, I accept Mr Cross’s submission that these various particulars arose out of two overarching criticisms of UM, that were then put in a number of different ways in the counterclaim. First, there was an alleged failure to determine site levels that would have resulted in zero cartaway because, it is said, UM ignored the surplus soil in the bunds and the soil generated by the excavations for the drainage. Secondly, there was the allegation that UM failed accurately to determine the quantity of excessive spoil that would be generated, again for largely the same reasons. The criticisms are then brought together in the comparison between the figure for excess spoil estimated by UM and the figure for spoil actually removed.

UM served their defence to the counterclaim on 23rd January 2009. Amongst other things, they pleaded in considerable detail a series of “potential causes of generation of excess spoil which were outside the Claimant’s knowledge or control” (paragraph 47). These included spoil generated by works on the private drains and sewers, by the works to form the foundations of the buildings, by natural causes, by the methods of construction, and by reference to areas of the site to which UM had no access. There was also an express reference to additional excavation in block E. In addition, paragraph 48 of the defence to the counterclaim, which is pleaded in express answer to paragraph 34 of the counterclaim, addressed the alleged comparison between the estimated and actual spoil figures.

Bellway did not serve a reply to the defence to the counterclaim. As noted above, it seems to me, certainly with hindsight, that this was an error because, on any view, UM’s case as to the other reasons for the increases in spoil was an essential element of their defence. In the absence of a reply, it was wholly unclear if, or to what extent, those detailed matters were being challenged by Bellway. That is a matter to which I return below.

On behalf of UM, their expert’s report, prepared by Mr Carpenter, consisted of two principal elements. First, part 5 of his report deals with the factual background and contains expressions of his opinion largely connected with the removal of spoil. At paragraph 5.10.1, he says that: “It is clear that more spoil was produced than could have been retained on site.” Secondly, part 6 of his report sets out his detailed comments upon the allegations made against UM from paragraphs 27 to 34 inclusive of the counterclaim. In this way, Mr Carpenter doubtless believed that he was addressing the critical parts of the pleaded case against UM.

As noted, Mr Brown’s report was served on 30th April. It contained two principal elements: part 1, which is called “Independent Proposed Site Level Assessment”, and part 2, entitled “Evaluation of Upton McGougan’s Design, Including Volumetric Assessment”. The report runs to 96 pages and no less than 33 appendices. It just about fits into one over-stuffed lever arch file.

UM say that part 1 of Mr Brown’s report is based on a detailed and entirely new design carried out by Mr Brown, allegedly using the same baseline data that UM had, but then utilising his own design assumptions, which assessment produces low figures for excess spoil. The ultimate purpose of the exercise in Mr Brown’s report (as set out at paragraph 3.6.8) is to demonstrate that “UM’s design could have been undertaken in a way which would have generated significantly smaller quantities of spoil to be removed off site”.

As to part 2 of Mr Brown’s report, UM complain that, in setting out an independent assessment of “the volumes of surplus excavated material that could reasonably be expected to arise from constructing the works to the formation levels and finished levels proposed by UM” (paragraph 4.0.1 pf the report), attacks are made upon the UM design and performance in a variety of ways which are, again, not pleaded in the counterclaim.

It is Bellway’s case that Mr Brown’s report falls within the scope of their pleaded counterclaim. Ms Laney submits that, on a fair analysis, the counterclaim as pleaded includes the following technical issues, namely:

It is not, I think, disputed that part 1 of Mr Brown’s report is an entirely new exercise. There can also be no doubt that its purpose was to enable Bellway to say to UM: this is how you should have done it. No element of that exercise is pleaded in the counterclaim.

In my judgment, a negligence case put in that way would require to be pleaded by Bellway. UM cannot sensibly defend themselves against an allegation that their design should have been different, and would therefore have generated less spoil, unless they know what alternative design is being relied on, and why it is said that such a design was feasible. Obviously, until they saw the detailed exercise in part 1 of Mr Brown’s report, they were not able to begin to address this new case.

It is, I think, only necessary to consider for a moment one of the issues that is likely to arise out of the exercise in part 1 of the report to see both the force and the fairness of the conclusion that such a case will need to be pleaded. Mr Brown’s alternative design is based (as it is bound to be) on a number of important design assumptions relating to construction methods, scope of work and the like. He says those assumptions “should be considered by a reasonably competent engineer”. Such assumptions need to be set out plainly, so that UM can decide whether or not they are reasonable. If not, there will be a dispute between the parties as to what constitutes reasonable design assumptions in all the circumstances. The acceptance or rejection by the court of such assumptions could be determinative of this part of the case. At present, this is not a topic which is dealt with at all on the face of the pleadings. It should be.

Another example of the difficulties created by part 1 of the report is apparent from paragraph 3.6.3. In that paragraph, Mr Brown says that UM’s levels:

“…may have been set unnecessarily low due to a failure to appreciate site boundary constraints, additional sources of spoil from excavations arising from building foundations, road foundations, drainage and services excavations, inconsistent topographical survey format and additional excavations such as the block F basement.”

It is not pleaded on the face of the counterclaim that UM’s levels were set unnecessarily low. I cannot accept the suggestion in Mr Anderson’s statement that the general allegation that UM’s design levels were wrong must be interpreted as meaning that they were set too low. It seems to me that, if it were that simple, it would have been pleaded expressly in those terms. But, in any event, just because the design levels were wrong does not mean that it follows that they were too low. Design level issues depend on a variety of particular, fact-specific matters. Accordingly, it seems to me that the suggestion that UM’s levels were too low is a new and unpleaded allegation.

Furthermore, in my judgment, it is not set out in the pleadings advanced by Bellway that there were numerous sources of spoil, now identified by Mr Brown which, he says, UM should have appreciated but failed so to do. The Bellway counterclaim only identifies spoil generated by drainage excavations and bunds as part of the allegations of negligence against UM. Thus, for example, surplus spoil created by building or road foundations forms no part of that counterclaim, although they are matters now relied on by Mr Brown. In addition, of course, spoil from road excavations is relied on by UM as part of their defence, on the (unchallenged) assumption that this was no part of the case against them, and there was no reply which suggested that this excess spoil was, after all, UM’s responsibility. I deal with that aspect of the dispute in greater detail by reference to part 2 of the report below. However, for all these reasons, it seems to me that this aspect of the part 1 exercise is, again, clearly and obviously new.

As part of her submissions, Miss Laney made the point that, on analysis, part 1 of Mr Brown’s report was merely a response to UM’s original assertion that zero cartaway was not feasible. Having looked at the detail of part 1, I am unable to accept that submission. It seems to me clear on the face of the report that part 1 goes way beyond any issue concerned with zero cartaway. It is too detailed, and it is used to make too many varied criticisms of UM, for me to conclude that that was its sole or even principal purpose.

For these reasons, I find that the detailed exercise at part 1 of Mr Brown’s report was outside the scope of the presently pleaded counterclaim. Accordingly, it seems to me that, on the basis of that counterclaim, Bellway could not rely on part 1 of Mr Brown’s report at the trial in July.

The volume of surplus spoil referable to the UM design is assessed by Mr Brown in part 2 of his report. It is relied on for a variety of reasons. First, it is said that the assumed quantities are “not within the range that could have been achieved by a reasonably competent engineer”. It is clear that both the assessed quantities and the allegations arising from them are new in that, although they are covered in detail in Mr Brown’s report, they have not been set out or anywhere dealt with in the counterclaim.

Secondly, part 2 of the report contains a raft of detailed allegations about the matters that, so it is said, UM failed to take into account and which were sources of excess spoil. Those sources of spoil include many of the matters pleaded by UM in paragraph 47 of their reply (excavations for roads, block E etc). They are, however, all new allegations of negligence. I accept Mr Cross’s submission that they represent a significant departure from the current counterclaim, which deals with this aspect of the case simply by reference to the estimated natural cartaway figures and, as I have indicated, specific allegations about the spoil generated by drainage foundations and bunds.

On this aspect of the case, it originally seemed to me that Ms Laney’s best point was that, since these matters were pleaded (albeit by UM rather than Bellway), it would be wrong to conclude that these matters were not in issue, and the fact that Bellway had not addressed them until now did not mean that these matters should come as a surprise to UM, since they arose out of UM’s own pleadings. However, on analysis, I do not believe that that submission can be sustained, and there are two reasons for that.

First, quantities of spoil in relation to these elements have not actually been pleaded by either side. There is obviously no pleading from Bellway because there is no reply, but there are no figures produced by UM either. Figures have, for the first time, been calculated by Mr Brown in his report. The experts could meet to discuss the question of the figures, but it is difficult and unsatisfactory for them to do so where there is no indication of any figures in the pleadings. The spoil generated by one or more of these sources may be significant, but it may also be minimal, and therefore irrelevant: the quantities of spoil involved, even in round figures, will shape this dispute, and they need to be pleaded.

Secondly, and much more importantly on this aspect of the dispute, the present difficulty is that these items are all pleaded one way: they are all said to be items which were not the responsibility of UM. That is the purpose of paragraph 47 of their defence to counterclaim. If they were matters of which Bellway allege that UM should have taken account, then that was a case which required to be pleaded. The absence of any such pleaded case does again mean that this way of putting Bellway’s case is entirely new.

In my judgment, as I indicated in argument, this aspect of the dispute gives rise to a classic case for a reply. Essentially, what Bellway would have been saying was: “Yes, we accept that this was a source of additional or excess spoil but, for the following reasons, that was UM’s fault.” Thus, so it seems to me, in the absence of a reply, these matters must be regarded as new and unpleaded.

There is a third and final point which, in my judgment, confirms that part 2 of Mr Brown’s report represents a new case. Mr Brown’s calculations of the amount of surplus spoil referable to the UM design are now utilised by Bellway in the proposed amendments to the quantum of the counterclaim. Those amendments delete the old reference to 100,000 cubic metres excess spoil (the actual figure, so it is said) and replace that figure with the new calculated figure of just over 70,000 cubic metres, which is said to be “consequent upon the Claimant’s failure to determine a site level that satisfied the design requirement”.

The 70,000-odd figure comes directly from part 2 of Mr Brown’s report, where each individual amount of excess spoil is calculated and totalled up to produce the 70,000. Thus, not only is it a new figure, but it has been calculated in an entirely new way by Mr Brown and in a manner in which those advising UM have not yet had a proper opportunity to address.

For the reasons noted above, I consider that UM’s application to debar is made out. Those parts of Mr Brown’s report about which complaint is made fall outside Bellway’s current pleading. That explains why those matters were not addressed in Mr Carpenter’s report.

I make it clear that these findings are not intended to be any sort of criticism of Mr Brown, who as an expert was obliged to deal with the issues as he saw them, and in the manner which he considered to be the most appropriate. That said, I cannot help but note that Mr Brown was instructed by Bellway prior to the service of the original counterclaim. It does seem a fair inference that he had not done the detailed exercises (upon which he now relies) at the date that the pleading was served. In those circumstances, it seems to me that the problems that have now arisen are, at least in part, a product of the original tight timetable and the late preparation of these various exercises by Mr Brown.

That point is, I think, made good (certainly in relation to part 1 of Mr Brown’s report) by other documents, which show that Mr Brown was not even asked to do that exercise until March 2009. That explains the difficulties that have now been created: not only was this important assessment not done at the time of the original pleading, but it was not done until just three months before the trial.

It follows from what I have said that Bellway now have a choice to make, although I was unsurprised by Ms Laney’s earlier response to my question that, if I was minded to grant this application, Bellway would be making an application to amend their counterclaim. It seems to me, therefore, that, having decided that UM’s application has been made out, I ought to make an order which makes plain that success, but which does not, as yet at any rate, strike out parts of the report, and allows Bellway some time (although not long) to confirm their decision as to what they want to do next and to get their pleadings in line with Mr Brown’s report.

It is inevitable that, if Bellway do make an application to amend, as Ms Laney has indicated, then the trial will have to be adjourned. That, indeed, was where we started at the PTR last week. Thus the remaining issue for this afternoon is the question of the costs thrown away by any such adjournment.