Bovis Construction (Scotland) Ltd v Whatlings Construction Ltd
| Jurisdiction | Scotland |
| Judgment Date | 28 January 1994 |
| Date | 28 January 1994 |
| Docket Number | No. 33. |
| Court | Court of Session (Inner House - First Division) |
FIRST DIVISION.
Lord Prosser.
EvidenceContractConstructionExtrinsic evidencePrior correspondenceWhether admissible as aid to determining intention of parties
The parties were engaged in construction of a concert hall, the pursuers being the management contractors and the defenders being the sub-contractors. The sub-contract was constituted by a formal exchange of letters. However, previous correspondence was expressly incorporated into that sub-contract, by which parties agreed that the sub-contractors' liability for certain damages should be limited to 100,000. The contractors became unsatisfied with the sub-contractors' performance under the sub-contract and accordingly sued them for damages of 2,741,000 in respect of breach of contract. The sub-contractors argued that their liability was restricted to 100,000 in accordance with the earlier correspondence. The contractors, however, argued that the claim was for a repudiatory breach of contract, damages for which was not covered by the limitation agreement. They also sought to rely upon previous correspondence which pre-dated the limitation agreement and which, they argued, supported their contentions. The Lord Ordinary (Prosser) held that the correspondence which pre-dated the letters constituting the limitation agreement was admissible as an aid to construction but that it did not assist matters and that the limitation agreement applied. The claim was thus restricted to 100,000. The contractors reclaimed.
Held (1) that the correspondence pre-dating the limitation agreement was admissible in order to ascertain in the circumstances in which that agreement would apply, for the letters constituting the limitation agreement had to be seen in the context of the previous communings; and (2) that, on construing those communings, the limitation agreement did not apply, so that the claim was not restricted to 100,000; and reclaiming motion allowed.
Dicta in Houldsworth v. Gordon Cumming 1910 S.C. (H.L.) 49 at p. 56 per Lord Kinnear applied.
Bovis Construction (Scotland) Limited brought an action of damages for breach of contract against Whatlings Construction Limited. The matter was referred to arbitration but then referred to the Court of Session for determination on the question of whether the liability of the defenders was restricted to the sum of 100,000. The relevant averments of parties are adequately set forth in the opinion of the Lord President (Hope).
The cause called in procedure roll before the Lord Ordinary (Prosser) who, on 11th February 1993, found that liability was restricted and put the cause out by order for further procedure to be ascertained [see: Bovis Construction (Scotland) Ltd. v. Whatlings Construction Ltd.UNK 1993 S.L.T. 1224].
The pursuers reclaimed, the reclaiming motion calling before the First Division, comprising the Lord President (Hope), Lord Allanbridge and Lord Mayfield, for a hearing.
At advising, on 28th January 1994
LORD PRESIDENT (Hope)This is a reclaiming motion by the pursuers in an action of damages for breach of contract. The pursuers were employed as the
management contractor for the erection of a new concert hall in Glasgow. They were not themselves required to undertake any part of the construction work, as the whole of it was to be let in packages to various sub-contractors. In implement of these arrangements the pursuers entered into a contract with the defenders as sub-contractors for the construction of the east and west frames of the new building.
The defenders commenced work on the concert hall site on or about 22nd August 1988. On 16th January 1989 the pursuers wrote to them advising them that in their view they had failed to proceed diligently with the sub-contract works and that they were in breach of cl. 2 of the terms and conditions of the sub-contract. In accordance with cl. 10(i) of the terms and conditions they gave notice to the defenders that unless they took steps to rectify the situation to the pursuers' reasonable satisfaction they would summarily determine their employment under the sub-contract. On 17th February 1989 the pursuers wrote to the defenders intimating that they had reached the view that the defenders had no intention of endeavouring to rectify their breach of contract, and that they were determining their appointment under the sub-contract in accordance with cl. 10(i) of the sub-contract terms and conditions. On 28th February 1989 the pursuers raised the present action in which they claimed 2,741,000 as damages for loss, injury and damage resulting from the defenders' breach of contract and the consequent determination of the sub-contract under that clause. The defenders then lodged a counterclaim against the pursuers for sums amounting to a total of 1,041,559 in the same process.
The parties were agreed that the dispute between them fell within the arbitration clause in the sub-contract. The action was sisted for arbitration on 28th May 1990, but it was then appreciated that one particular issue which the defenders wished to raise in respect of the pursuers' claim against them for breach of contract raised a question of law which was more appropriate for determination by the courts than by an arbiter. This was the defenders' contention that, in terms of certain letters which formed part of the sub-contract, their liability in damages to the pursuers was limited to 100,000. So the parties entered into a minute of agreement which preserved the arbitration for all purposes other than the resolution of the particular dispute as to limitation and set out the agreed procedure for having the dispute resolved by the courts. The sist was then recalled and the case was appointed to the commercial roll for a hearing on the limitation dispute, which it was agreed could be resolved without the need for proof The Lord Ordinary, having heard a debate on the matter on the procedure roll, held that the defenders' liability to pay damages to the pursuers in respect of the breach of contract condescended on by them in this action was limited to the sum of 100,000. He repelled the pursuers' first plea-in-law which challenged the relevancy of the defenders' averments regarding limitation of liability, and he sustained the defenders' second plea-in-law in relation to the question of limitation and their fifth plea-in-law, as amended at the bar, to the extent of refusing decree for any sum over the figure of 100,000. It is against that interlocutor that the pursuers have now reclaimed.
The provisions of the sub-contract on which the defenders' argument depends may conveniently be referred to as the limitation agreement. This agreement is to be found in a series of letters which were included by express agreement among the sub-contract documents. The sub-contract was constituted by the
defenders' offer dated 29th April 1988 with which they enclosed their tenders for the west and east packages of the main frame of the concert hall, which was accepted by the pursuers' qualified acceptance dated 15th July 1988, the defenders' letter dated 2nd August 1988, the pursuers' letter dated 5th August 1988 and the defenders' letter dated 12th August 1988. Included among the documents in terms of which tenders had been invited for these packages were the Bovis sub-contract terms and conditions which were to be the terms and conditions of the contract between the pursuers and the successful tenderer. There was no mention in the tender documents of any limitation on the sub-contractor's liability in damages for breach of contract, nor was there any provision in them for liquidated damages. But the parties agreed, in terms of an exchange of letters which were written as a result of correspondence passing between the parties in May and June 1988, that there should be a limitation on the defenders' liability to pay damages. In their letter dated 15th July 1988 the pursuers put on record the parties' agreement that the sub-contract documents were to include the pursuers' letters dated 6th, 8th and 15th July 1988 and the defenders' letters dated 7th and 8th July 1988. This was agreed to by the defenders' letter dated 2nd August 1988. No mention was made in either of the letters dated 15th July and 2nd August 1988 of the correspondence which had preceded the exchange of letters by which the limitation agreement was constituted.
The sub-contract terms and conditions contained a number of clauses which are relevant to the dispute which has now arisen, and it is convenient to set them out at this stage. The first clause, which is headed "Subcontractor's undertaking" is in these terms: "The Subcontractor will provide upon and subject to the following conditions everything which is necessary for the execution and completion of the Subcontract Works in accordance with all Drawings, Specifications and/or instructions supplied to him and will deliver up the Subcontract Works to Bovis, complete in every particular to the satisfaction of Bovis and of the Architect or Engineer appointed under the Principal Contract.
"No approval whether express or implied by Bovis, the Architect or Engineer shall in any way relieve the Subcontractor of his responsibility for complying with the requirements of this Subcontract."
There then follows cl. 2 headed "Progress and Completion", which provides:
"The Subcontract Works are to be commenced within fourteen days after the Subcontractor is instructed to proceed and are to be completed within the Subcontract period subject only to such fair and reasonable extension of time as Bovis shall allow where the Subcontract Works are delayed by causes which result in an extension of time under the Principal Contract. The Subcontract Works are to be carried out diligently and in such order, manner and time as Bovis may reasonably direct so as to ensure completion of the Main Works or any portion thereof by the completion date...
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