City Inn Ltd v Shepherd Construction Ltd [Court of Session Inner House Extra Division]

JurisdictionScotland
CourtCourt of Session (Inner House - Extra Division)
Judgment Date22 Jul 2010
Docket NumberNo 9

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Osborne Lord Kingarth Lord Carloway [2010] CSIH 68

CA101/00

OPINION OF LORD OSBORNE

in appeal

by

CITY INN LIMITED

Pursuers and Reclaimers;

against

SHEPHERD CONSTRUCTION LIMITED

Defenders and Respondents:

_______

Act: The Dean of Faculty, QC, Higgins; McGrigors LLP

Alt: McNeill, QC, Borland; Pinsent Masons

22 July 2010

Background circumstances

[1] The reclaimers and the respondents are respectively the employers and the contractors under a building contract, dated 15 October and 11 November 1998 for the construction of an 168-bed hotel at Temple Way, Bristol. The contract incorporated the conditions of the Standard Form of Building Contract (Private Edition with Quantities) (1980 Edition), together with a substantial number of additional provisions, including an Abstract of Conditions and a Schedule of Amendments, prepared for the purposes of the contract. The architects originally appointed under the contract were RMJM Scotland Limited. The date of possession was specified in the Abstract of Conditions as 26 January 1998. The date of completion, also specified there, was to be 25 January 1999. In terms of clause 24 of the Conditions of Contract and the Abstract of Conditions, liquidate and ascertained damages were to be payable at the rate of £30,000 per week for the period between the contractual completion date and the date of practical completion.

[2] On 2 December 1998, RMJM Scotland Limited, "RMJM", were dismissed as architects. At that time Messrs Keppie Architects were appointed as architects under the contract. At the same time, Messrs Blyth and Blyth were appointed as structural engineers and mechanical and electrical engineers. On 27 April 1999 Keppie Architects issued a certificate of practical completion certifying that the practical completion of the works had been achieved on 29 March 1999, although, in reality, as at that date, certain work still required to be done. On 9 June 1999, the architects issued a certificate revising the contractual completion date to 22 February 1999. On the same date they issued a certificate of non-completion, certifying that the respondents had failed to complete the works by the completion date. The result of those certificates was that the respondents were awarded a four-week extension of time, but, in terms of clause 24 of the conditions of contract, the reclaimers were entitled to deduct liquidate and ascertained damages for the five week period from 22 February 1999, the revised completion date, to 29 March 1999, the date of practical completion, at the weekly rate of £30,000. On that basis, the reclaimers deducted £150,000 from the monies due to the respondents.

[3] Thereafter, certain disputes that had arisen between the parties were referred to adjudication. The adjudicator, Mr John D Spencely, determined that the respondents were entitled to a further five-week extension of time and directed the reclaimers to repay to them the sum of £150,000 previously referred to. That determination was binding upon the parties only until the disputed matters were finally determined by legal proceedings; the matters raised before the adjudicator and other matters subsequently became the subject of dispute in the present proceedings.

[4] In 2000, the reclaimers raised the present action against the respondents, in which they sought the several remedies set forth in the ten conclusions in the action. Thereafter, the respondents lodged a counterclaim against the reclaimers, in which they sought a number of remedies set forth in the five conclusions in the counterclaim.

[5] In outline, the reclaimers contended that the respondents were not entitled to any extension of time beyond the contractual completion date of 25 January 1999 and that they were therefore not entitled to the four-week extension of time granted to them by the architects. This contention was advanced on two distinct bases: first, they relied on the terms of clause 13.8 of the conditions of contract, which was one of the special amendments added to the conditions by the parties. That clause, in summary, provided that, when an architect's instruction was liable to delay the completion date, the contractor was not to execute the instruction without following certain defined procedures. If the contractor failed to do so, he was not to be entitled to any extension of time. The reclaimers' position was that the respondents did not follow the procedures specified in clause 13.8 and accordingly, were not entitled to any extension of time. Secondly, the reclaimers contended that, as a matter of fact, none of the instructions issued by the architects caused any delay in completion. As a secondary argument, they contended that, if any delays had been caused by the architects' instructions, those delays had been concurrent with delays arising from matters that were the responsibility of the respondents. As a result, it was contended that the reclaimers were not entitled to any extension of time.

[6] By contrast, the respondents contended that they were entitled to an extension of time of eleven weeks in total, with the result that the contractual completion date should be fixed at 14 April 1999. That period of eleven weeks was broken down in the following way. First, it was said that a delay of three and a half weeks was caused by the late issue of an architect's instruction varying the form of the gas membrane to be incorporated into the substructure of the hotel. Secondly, it was said that a delay of five weeks beyond the contractual completion date had been caused by the late issue of an architect's instruction varying the roof cladding of the hotel from the built-up system on which the contract had been based to an alternative system, known as the Stramit Speedeck system; three and a half weeks of that period was said to have been concurrent with the foregoing three and a half-week delay. Thirdly, it was said that a six week delay had been caused, following the dismissal of the original design team, RMJM, by the reclaimers in November 1998, by the late issue of a significant number of instructions for variations and additional work and late confirmation of details of the work. In relation to clause 13.8 of the conditions of contract, the respondents contended that it had application only to instructions that were liable to cause delay because of their content; it had no application to instructions that were liable to cause delays simply because they were issued too late for the contractors' programme. In the present case, it was said that the delays were, with one exception, caused by the lateness of the architects' instructions, not by their content. In addition, the respondents contended that, in the circumstances of the contract, the reclaimers, in part through the actings of the contract architects, had waived compliance with clause 13.8, or alternatively that the reclaimers were personally barred from relying on that clause.

[7] The reclaimers disputed the respondents' construction of clause 13.8; they submitted that the distinction between the lateness and the content of instructions was not well founded. They further contended that no waiver or personal bar occurred in the circumstances of the case. In addition, they contended that the system of roof cladding specified in the contract was not the built-up system claimed by the respondents, but was rather the Stramit Speedeck system. The result was that the architects' instruction to use the Stramit Speedeck system was not a variation and it did not give rise to a claim for an extension of time.

[8] It should be explained that, after a period of adjustment of the pleadings in the action, a debate took place before the Lord Ordinary (Lord Macfadyen), whose decision is reported at 2002 S.L.T. 781. The debate ranged over a number of issues arising out the pleadings. In particular, the Lord Ordinary considered the construction of clause 13.8 of the conditions of contract. He concluded that the clause applied to late instructions which, because of their content, gave rise to a need to adjust the contract sum, or to grant an extension of time, but that it did not apply to late instructions which, merely because of their lateness, gave rise to a need to adjust the contract sum or grant an extension of time. A reclaiming motion was marked against that decision but was subsequently refused. The decision in the reclaiming motion is reported at 2003 S.L.T. 885. The reclaiming motion did not cover the question of whether clause 13.8 extended to late instructions which, because of their lateness, gave rise to a need for an adjustment of the contract sum or an extension of time.

[9] Following the determination of that reclaiming motion, a proof was held on a number of dates between March 2004 and February 2006, running over 29 days in all. On 30 November 2007, the Lord Ordinary pronounced an interlocutor in the following terms:

"The Lord Ordinary, having considered the cause, grants the defenders' motion to amend their defences and allows them to add new fourth and fifth pleas-in-law, to deal with waiver and personal bar respectively; sustains the defenders' second, third and fourth pleas-in-law in the principal action, the fourth being restricted to the issue of the gas venting instruction; assoilzies the defenders from the conclusions of the principal action; sustains the defenders' first plea-in-law in the counterclaim; in respect of the first conclusion of the counterclaim, finds and declares that the defenders are entitled to an extension of time of nine weeks for the completion of the works under the contract between the parties, with the completion date thereunder accordingly being 29 March 1999; sustains the defenders' second and third pleas-in-law in the counterclaim; reduces the certificate of notification of revision to the completion date and certificate of non-completion...

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