Year – 2010
Subject Matter – Error in the BQ leads to QS liability
The work which is provided for in a contract and items which are excluded need to be spelt out from the outset. A QS got himself into hot water for not making it clear that the bills of quantities he prepared made no provision for site preparation work and piling. To be fair to the QS, the site preparation work and piling wasn’t left out in error; he thought it had been allowed for elsewhere in the scheme. The project in question was a development in Northern Ireland. The developers were a couple of rookies, with no experience of construction work at all until they became involved in the scheme on which the problem occurred, ultimately leading to the case of J&J Properties (Antrim) Ltd v Durnien (2010)
The claimant entered into a contract for the design and construction of 28 houses for Clanmil Housing Association in the sum of £2,030,000. Mr McMaster was appointed by the claimant as Architect and he subsequently introduced the QS Mr Durnien to the claimant. The contract documents were drawn up by Mr Durnien, which included bills of quantities. A contract was entered into with John Sturgenor for the construction of the houses in the sum of £1,285,065.94. Unfortunately the bills of quantities and a contract sum analysis didn’t mention the site preparation work and piling.
There was no argument that the site preparation work and piling was unknown to the claimant, as it had been referred to in correspondence with the Housing Association’s agent and the time allowed for the scheme had been extended from 15 months to 18 months to allow for the work. However it seems to have dropped down the crack, as no allowance was made in the costings for the scheme. It was the claimants case that he had left such matters to the defendant QS and hadn’t concerned himself with the details.
The court took the view that whilst the claimants were aware of the need for the site clearance work and piling, it was reasonable for them to have left the detail to the QS, who would be responsible for any shortfall. The court held that the QS had been negligent in not including the site clearance and piling in the bills of quantities. As the QS was also the project manager for the scheme, he should have been aware that nobody had been appointed to undertake the work. Where this type of error occurs and something is missed out of the bills of quantities, the usual defence is to argue that as the price for the work left out is an essential part of the cost for the project, the scheme would cost the same whether the item had been included in the bills of quantities, or dealt with as a variation. In this case the developer successfully argued that had the QS included the site clearance work and piling in the bills of quantities, the scheme would not have been profitable and the contract would not have gone ahead.
It was held by the court that the claimant was entitled to recover from the QS the sum of £150,596, which was the cost of the site clearance work and piling.
------------------------------------------------------------------------------------------------------------------------------------
Costain Ltd v Charles
Haswell and Partners Ltd
Year 2009Subject Matter – Evaluation of Prolongation Costs
Quantity Surveyors are often called upon to ascertain the loss and expense relating to prolongation once the architect or engineer has made a decision concerning a contractor’s entitlement to an extension of time. In doing so, it is essential for the quantity surveyor to ensure that the ascertainment is based upon actual provable loss, cost and expense, and that there is a causal link with the delay. In the case of Costain Ltd v Charles Haswell and Partners Ltd (2009), the court had to make a decision with regard to an entitlement to the recovery of prolongation costs, as to the manner in which they should be calculated.
Costain employed Haswell to provide advice concerning the design of foundations for Lostock and Rivington Water Treatment Works near Bolton. In November 2002 Haswell produced a Settlement Analysis Report which recommended that the Rapid Gravity Filters (RGF) and Inlet Works (IW) be constructed using Ground Treatment Works. These structures formed part of a larger project which was being undertaken by Costain on behalf of United Utilities. Costain had sought advice from Charles Haswell concerning the design of the ground works which was used in building up the tender. It proved to be unsatisfactory and Costain was forced to switch to piled foundations at considerable additional cost. Costain commenced an action for breach of contract which was successful; they then sought to recover the additional costs from Haswell, including additional expenditure in respect of the delays which resulted from the introduction of piling.
The court having found in favour of Costain on liability then had to make a decision regarding quantum. The RGF and IW were only two out of ten structures which comprised the contract works. However the experts from both sides agreed that the piling was on the critical path and that Costain was entitled to be paid prolongation cost. The parties however were in dispute as to how the prolongation costs should be calculated. However they both agreed that they should be ascertained at the time the foundations were being constructed. No submission was made as to the effect of the additional piling on the completion date for the project. Costain’s entitlement to an extension of time for completion of the works was not an issue in these proceedings only the liability and additional cost which flows from Haswell’s breach of contract.
The court decided that the introduction of piling had delayed the progress of the work in the RGF and IW from 25th October 2002 until 6th January 2003 and that Costain was entitled to be paid their prolongation costs in respect of this period. Costain claimed the total weekly prolongation costs for the whole of the project, which amounted to £35,000 per week. It was argued by Haswell that this amount should not be paid as it represented the prolongation costs for the whole site, whereas the piling delays only affected the Rapid Gravity Filters and Inlet Works and therefore the claim should be rejected in its entirety. The judge agreed with Haswell when he observed:
“But no evidence has been called to establish that the delaying events in question in fact caused delay to any activities on site apart from the RGF and IW buildings. That being so, it follows, in my judgment, that the prolongation claim advanced by Costain based on recovery of the whole of the site costs of the Lostock site fails for want of proof”
The judge was reluctant to award Costain nothing in respect of this item, and ascertained from Haswell’s expert that the tender value of the RGF and IW was 13% of the total tender sum and, as a result, awarded Costain 13% of £35,000 per week, giving a total of £36,400.
Costain had been in dispute with United Utilities concerning delays to completion, entitlements to an extension of time and the resultant prolongation cost entitlement. A deal was struck by the parties, under which a global settlement was agreed. It was not clear how much was included in respect of prolongation costs, but the judge considered that based upon the total settlement amount, there could be a danger of double recovery. As there was no contemporaneous evidence of the build up of the settlement amount, the judge decided, based upon no evidence, that the amount otherwise payable by Haswell to Costain would have been less than the amount already recovered from United Utilities. Therefore, as any money for prolongation costs payable by Haswell to Costain would amount to double recovery, Costain was awarded nothing in respect of this item. They had to be satisfied with recovering the cost of the piling.
--------------------------------------------------------------------------------------------------------------------------------------------------
Proforce Recruitment
Ltd v Rugby Group Ltd
Year -2007
Subject Matter -What
is Preferred Supplier, does it guarantee a supply of work?
The Building
Merchant’s News, in its 5th November 2010 publication, announced on its front page:
“Everbuild Building
Products has secured a significant UK-wide agreement with the National Building
Group (NBG) to become the preferred supplier of building chemicals adhesives
and sealants to the organisation’s network of independent builder’s merchants.
The agreement, which
will see Everbuild replacing Bostick as the main supplier of building chemicals
to NBG members is worth in the region of £3m of new business”
This is obviously good news for Everbuild, however despite
the reference to £3m of new business, what rights would Everbuild have if in
reality the new business fell well short of the £3m, or in a worst case
scenario no new business at all came its way.
Proforce entered into
a contract with Rugby Group Ltd to supply cleaning services and equipment. A
contract was entered into for a two year minimum period during which Proforce
would hold preferred supplier status for supplying cleaning staff and
equipment. There was no definition of preferred supplier and during the two
year period Rugby began to use other agencies to supply it with cleaning staff
and equipment. Proforce commenced an action against Rugby for breach of
contract in which they argued that the contract contained the following implied
entitlements:
- Proforce would be offered
the first opportunity to supply cleaning staff and equipment in preference
to other suppliers
- Rugby would not obtain
cleaning staff and equipment from any other agency without first giving
Proforce a reasonable opportunity to meet Rugby’s requirements.
- The contract required
Rugby to obtain all of their cleaning staff and equipment form Proforce
The courts
established the rights of the parties, by reference to what a reasonable
person, having all the background knowledge available to the parties, would
interpret the contract to mean. In other words what the objective man/woman on
the bus/train (in days gone by the man on the Clapham omnibus) might have
thought. It was the view of the court that a reasonable person, having all
the knowledge available to the parties
at the time the contract was entered into, would consider the words preferred
supplier to mean only approved supplier. Where the words preferred supplier are
used, it does not mean that the supplier is preferred above all others; there
is no entitlement to exclusive rights.
Having supplied a great deal of cleaning staff and equipment
to Rugby during the two year period, it seems
that this did not satisfy Proforce, who considered that they were legally
entitled to supply all of Rugby’s requirements. If a party to a contract
is to have exclusive rights, it is essential that those right are properly
spelt out it the contract.
------------------------------------------------------------------------------------------------------------------------------------
Name of Case -
Plymouth and South West Co-operative Society Ltd v Architecture and Structure
and Management Ltd
Year – 2006
Architects and Engineers are usually involved in projects
from the outset. Early advice given often relates to the procurement methods to
be adopted. There is an ever growing array of alternatives from which to
choose. Is it to be lowest price, or partnering with collaborative working?
Will contractor design be appropriate and is this procurement method in the
client’s best interest? If a JCT contract is to be employed, will the advice
regarding which of the JCT alternatives will apply follow the recommendations
included in “Deciding on the Appropriate JCT Contract” published by the JCT? If
the project is mainly of an engineering nature, should the client be advised to
use the current version of the standard ICE contract or the NEC contract?
The possibility
always exists for the recommendation under the circumstances to be incorrect.
For example, an Architect may recommend that a JCT With Quantities Form of
Contract be used. This is a contract which involves the Architect producing a
full design and the Quantity Surveyor a complete Bill of Quantities before the
work goes out to tender. This process is time consuming if it is to be done
properly. It is not suitable where time constraints required tenders to be
received at a time which would not allow sufficient time for the design to be
properly completed and a full Bill of Quantities prepared. Delays and
additional cost may be incurred during the construction period as a result of
the Architects drawings not being issued to the contractor on time. Under the circumstances a Design and Build
would have been more suitable.
The wrong choice of
procurement method was the issue in the case of Plymouth and South West Co-operative Society Ltd v Architecture and
Structure and Management Ltd (2006). Plymouth and West Co-operative Society
Ltd (Plymco) wished to develop its flagship store including the construction of
a number of retail units at Derry Cross Plymouth. Plymco appointed Architecture
Structure and Management Ltd (ASM) to undertake the necessary architectural,
engineering and quantity surveying services. It was a priority that the cost of
the scheme did not exceed £5.5m. ASM produced a budget in the sum of £5.65m and
were instructed to make savings to ensure the price fell within the budget.
Plymco’s board decided to go ahead with the scheme in April 1996 and ASM was
appointed shortly thereafter. On 10th October 1996 an agreement for
lease was signed by Plymco with Argos which provided for the completion of the
Argos works by 21st April 1997. It was anticipated that the building
contract would be let by July or August 1996. One of the problems associated
with the scheme was that it was a requirement that the store remained open for
business during the construction of the works.
ASM advised letting
the building contract by means of a two stage tender process using the National
Joint Consultative Consultative Committee for Building’s Code, with a view to
entering into a JCT 1980 With Approximate Quantities Form of Contract.
Competitive tenders were received and Exeter Building Company (EBC) was
selected in late October 1996. The contract however was not signed until
January 1997. The contract sum was £5,036,061 however due to the tight
timescale, 87% of the Approximate Bill of Quantities was provisional and
described as “not detailed save in outline”
It was alleged by
Plymco that a £2 million overspend resulted from the procurement method
recommended by ASM which made it impossible to operate effective cost control.
It was alleged that ASM should have advised that the work be carried out in two
distinct phases. The first phase to comprise the work for Argos, followed by
the remainder of the work.
The court held that
ASM’s over-riding obligation was to ensure that the cost of the work did not
exceed £5 million. ASM had a duty to advise Plymco on the most suitable method
of procurement. It was the courts view that ASM should have advised as to what
decisions were required to be taken by Plymco and the dates by which they were
to be made, but has failed to do so. It was the view of the court that ASM
should have advised Plymco to have work been carried out in two phases, which
would have resulted in a later completion of the works, but with cost
certainty. The court was convinced that Plymco would have accepted this advice.
Whilst this case went
against the Architect, it is often very difficult to demonstrate that if a
different method of procurement had been employed from the one advised, the
costs incurred would have been less. In the Plymco case, no doubt ASM were
under great pressure to secure the completion of all the work by 21st
April 1997. It is easy for the judge in
hindsight to say that if ASM had suggested a two phase scheme, with completion
of all but the Argos work at a much later date, it would have been accepted by
Plymco. In any event it is likely that had a two phase procurement been
accepted it is likely that the cost ceiling would have been breached. ASM
however appear to have badly managed the process of securing decisions from
Plymco, which were essential for completion of the project, resulting no doubt
in delay and additional cost.
There are examples of
cases being brought by contractors against professional consultants they have
engaged in compiling their tenders. In the case of Copthorne Hotel v Arup and
Associates (1996) the pre-tender assessment of piling costs was half the actual
costs incurred by the contractor but negligence was not established. In a case
relating to advice provided by professional consultants in assisting
contractors to secure contracts the contractor must be able to show that it relied
upon the information provided by the consultant, which they often are unable to
demonstrate. In Gable House Estates v Halpern Partnership (1996) it was shown
that the employer would have taken a course of action regardless of the
consultant advice, which meant there was no loss involved.
In cases of this
kind, expert evidence plays a large part. In the Plymco case, experts appointed
for both sides were of the opinion that if cost certainty was the objective and
if Plymco lacked sufficient experience of this kind of work and the need to
make timely decisions, then ASM had not performed its duties in the appropriate
manner.
------------------------------------------------------------------------------------------------------------------------------------
Name of Case - City
Inn v Shepherd Construction
Year -2010
Subject Matter
–Entitlement to extension of time; concurrent delays
This case dealt with a dispute concerning the contractor’s
entitlement to an extension of time and the employer’s right to deduct
liquidated damages. The fixing of a revised completion date is not a precise
science and various methods of arriving at an answer have been approved by the
courts, some of which appear to be in conflict with each other.
The case in question involved City Inn and Shepherd
Construction, in relation to the construction of a hotel in Bristol. The
contract used was the JCT Private Edition With Quantities, 1980 Edition, which
had been amended. The Date for Possession was 26th January 1998, and
the Date for Completion, 25th January 1999. Practical Completion was
certified as having occurred on 29th March 1999. The original
Architect, RMJM, was dismissed and replaced by Keppie in December 1998. Delays
occurred, Shepherd requested an extension of time and Keppie awarded four weeks
to provide a revised Date for Completion of 22nd February 1999. The
liquidated damages figure included in the contract was £30,000 per week. With a
five week overrun having occurred to the extended completion date, City Inn
deducted liquidated damages in full in the sum of £150,000.
Shepherd Construction was not satisfied with the extension
of time which had been granted by the Architect and referred the matter to
adjudication. The adjudicator, Mr John Spencely, found in favour of Shepherd
Construction and in his decision ordered that the £150,000 deducted by City Inn
should be repaid. City Inn disputed the decision of the adjudicator and
referred the matter to court. It was contended by City Inn that Shepherd
Construction was not entitled to any extension of time at all and should
therefore have completed the works by the original completion date of 25th
January 1999.
City Inn’s Case
City Inn supported their argument
that there was no entitlement to an extension of time with two reasons:
- Clause 13.8 was a special
clause which does not appear in the standard form used for the
contract. This clause states that
where an Architect’s Instruction was liable to delay the completion date,
the contractor should not carry out the instruction without following certain
defined procedures. If the contractor failed to follow the procedures, he
would not become entitled to any extension of time for completion. It was
alleged, on behalf of City Inn, that Shepherd Construction did not follow
the procedure.
Alternatively
- If the delays had been
caused by Architect’s Instructions, the delays were running concurrent
with delays caused by Shepherd Construction and hence there was no
entitlement to any extension of time.
Shepherd Construction’s
Case
Shepherd Construction argued that
they were entitled to an nine weeks extension of time for the following reasons:
- The late issue of an
Architect’s Instruction varying the gas membrane which was to be
incorporated into the substructure of the hotel.
- The late issue of an
Architect’s Instruction varying the roof cladding, from a built up system,
to a system known as Stramit Speedeck. Some of this delay was concurrent
with the gas membrane delay.
- Delay which had occurred
following the dismissal of RMJM, together with the late issue of a
significant number of instructions for variations and additional work and
late confirmation of details of the works.
With regard to clause 13.8,
Shepherd Construction argued that this clause only applied to instructions that
we liable to cause delay because of their content. It had no application to
instructions which were liable to cause delay simply because they were issued
too late to comply with its programme. In the present case it was argued that
with one exception the delays were caused by the lateness of the Architect’s
Instructions and not by the content. Shepherd Construction also asserted that
as a result of the actions of the Architect, there had been a waiver of
compliance with clause 13.8.
Lower Court Decision
In accordance with procedures in
the Scottish Courts the matter was referred to the Lord Ordinary (Lord Macfadyen).
There were various applications to Lord Macfadyen by the parties, during the
period from March 2004 and February 2006, to change their pleadings, together
with a hearing which lasted for an overall period of 29 days. At the conclusion,
Lord Macfadyen decided that Shepherd Construction was entitled to an extension
of time of 9 weeks, thus fully absolving them from any liability to pay
liquidated damages. Lord Macfadyen, with regard to the interpretation of clause
13.8, considered that it only applied to late instructions which because of
their lateness gave rise to an adjustment of the contract sum and/or an
extension of time. It did not apply to an instruction, which by its nature
would, whenever issued, have given rise to an entitlement to an adjustment to
the contract sum and /or extension of time.
·
Balfour Beatty Building Limited v Chestermount
Properties (1993)
·
Henry Boot v Malmaison Hotel (Manchester) Ltd
(1999)
·
Royal Brompton Hospital NHS Trust v Hammond and
Others (2001)
·
John Doyle Construction Ltd v Laing Management
(Scotland) Ltd (2004)
Applying Common Sense
In arriving at a decision, it was pleasing to read in the judgement
that Lord Osborne considered, when deciding whether a relevant event had caused
delay, it should not be resolved by philosophical principles of causation, but
rather by the application of the principles of common sense. With regard to the
use of a critical path analysis, his Lordship considered that if it was soundly
based, it may be of assistance. However, the absence of such an analysis does
not mean that a claim for an extension of time must necessarily fail.
Concurrent Delays
In arriving at his decision Lord Osborne made some useful
observations concerning the term concurrent delays. He considered that the term
could relate to any one of the following situations:
·
The delays occur in a way in which they have
common features
·
The delays share a common start and finish date
·
The delays share either a common start or finish
date
·
For part of the time the delays overlap
·
The delays all had an influence upon some
subsequent event such as the completion date
Dominant Cause of
Delay
Lord Osborne was of the opinion that if a dominant cause of
delay can be identified as the cause of a particular delay to the completion of
the works, effect can be given to that by leaving out of account any cause or
causes which are not material. Depending on whether or not the dominant cause
is a relevant event, the claim for an extension of time will or will not
succeed. This approach is supported by the text book Keating on Building
Contracts. Lord Osborne however didn’t offer any explanation of what
constitutes a dominant cause of delay.
Where a situation exists in which two causes of delay occur,
one being a relevant event and the other the responsibility of the contractor,
but neither is a dominant cause, Lord Osborne considered that the claim for an
extension of time will not necessarily fail.
In arriving at this decision Lord Osborne considered the
decision in Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993)
where Colman stated:
The parties agreed the following which was accepted by the
Court
“... if there are two concurrent causes of delay, one of
which is a relevant event and the other is not, then the contractor is entitled
to an extension of time for the period of delay caused by the relevant event
notwithstanding the concurrent effect of the other event”
Apportionment
It was decided in the case of John Doyle Construction Ltd v
Laing Management (Scotland) Ltd 2004 that where a global claim had been
submitted, involving a number of competing causes of loss, it was legitimate to
apportion loss between the different causes of loss in an appropriate manner.
Perhaps influenced by this decision, Lord Osborne concluded that where there s
more than one cause of delay and there is no dominant cause, in a broad sense,
it will be open to the Architect or Engineer who is making the decision, to
apportion the delay as between the relevant event and the other matter causing
delay, provided it is approached in a fair and reasonable manner. Lord Osborne
considered that Lord Macfadyen was correct in the decision he made regarding
Shepherd Construction’s entitlement to an extension of time.
Interpretation of
Clause 13.8
Lord Osborne considered that the reasoning of Lord Macfadyen
relating to the interpretation of clause 13.8 was sound. However Lord Carloway
considered that both Lord Osborne and Lord Macfadyen were wrong as their
reasoning isn’t merited by the wording of the clause. The wording of clause
13.8 appears under a heading of Variations and Provisional Sums. The clause
therefore does not deal with instructions which are merely late. Lord Carloway
considered that the rigmarole under clause 13.8 would not apply to a mere late
instruction. It applies to instructions which relate to variations. However he
considered that even if he did not agree with the reasoning of Lord Macfadyen
he accepted that his decision was correct.
Waiver
The arguments put forward on behalf of City Inn concerning
waiver were dismissed by both Lord Macfadyen and Lord Osborne.
------------------------------------------------------------------------------------------------------------------------------------
No comments:
Post a Comment