City Inn Ltd v Shepherd Construction Ltd

JurisdictionScotland
CourtCourt of Session (Outer House)
Neutral Citation[2007] CSOH 190

OUTER HOUSE, COURT OF SESSION

[2007] CSOH 190

CA101/00

OPINION OF

LORD DRUMMOND YOUNG

in the cause

CITY INN LIMITED

Pursuer;

against

SHEPHERD CONSTRUCTION LIMITED

Defender:

(Bristol action: proof)

________________

Pursuer: Keen, QC, Higgins; McGrigor Donald

Defender: Borland; Pinsent Masons

30 November 2007

[1] The pursuers and the defenders are respectively the employer and the contractor under a contract dated 15 October and 11 November 1998 for the construction of a hotel at Temple Way, Bristol. The contract incorporates 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 specially prepared for the purposes of the contract. The contractual completion date specified in the Abstract of Conditions was 25 January 1999. In terms of clause 24 of the Conditions of Contract and the Abstract of Conditions liquidate and ascertained damages were payable at the rate of £30,000 per week for the period between the completion date and the date of practical completion. Initially the architect was RMJM Scotland Limited. That firm also acted as structural engineer and mechanical and electrical engineer. On 2 December 1998, however, RMJM was dismissed and Keppie Architects was appointed as contract architect. At the same time Blyth & Blyth was appointed as structural engineer and mechanical and electrical engineer.

[2] The date of possession specified in the Abstract of Conditions was 26 January 1998, and the defenders took possession of the site on or about that date. Thereafter works proceeded. On 27 April 1999 Keppie Architects, who at that time were the contract architect, issued a certificate of practical completion certifying that practical completion of the works had been achieved on 29 March 1999. On 9 June 1999 the architect issued a certificate revising the completion date to 22 February 1999. On the same date the architect issued a certificate of non-completion certifying that the defenders had failed to complete the works by the completion date. The result of those certificates was that the defenders were awarded a four-week extension of time but, in terms of clause 24 of the Conditions of Contract, the pursuers were entitled to deduct liquidate and ascertained damages for the five-week period from 23 February 1999 (the revised completion date) to 29 March 1999 (the date of practical completion) at a weekly rate of £30,000. On that basis of the pursuers deducted £150,000 from monies due to the defenders.

[3] Thereafter certain disputes arising between the parties were referred to adjudication. The adjudicator, Mr John D Spencely, determined that the defenders were entitled to a further five-week extension of time and directed the pursuers to repay them the sum of £150,000. That determination is not, of course, conclusively binding, and the matters argued before the adjudicator fall to be determined in the present proceedings as if no determination had been made by the adjudicator. The pursuers contend that the defenders are not entitled to any extension of time beyond the contractual completion date, 25 January 1999. They make this contention on two distinct bases. First, they rely on the terms of clause 13.8 of the contract conditions, which is one of the special amendments added by the parties. That clause, in summary, provides that when an architect's instruction is liable to delay the completion date, the contractor is not to execute the instruction without following certain defined procedures. If the contractor fails to do so, he is not entitled to any extension of time. The pursuers submit that the defenders did not follow the procedures specified in clause 13.8, and are accordingly, for that reason alone, not entitled to any extension of time. Secondly, the pursuers contend that as a matter of fact none of the instructions issued by the architect caused any delay in completion. As a secondary argument they submit that, if any delays were caused by architect's instructions, those delays were concurrent with delays arising from matters that were the defenders' fault; as a result it is contended that the defenders are not entitled to any extension of time.

[4] The defenders contend that they are entitled to an extension of time of 11 weeks in total, with the result that the contractual completion date should be fixed at 14 April 1999. That period of 11 weeks is broken down as follows. First, it is said that a delay of three and half weeks was caused by the late issue of an architect's instruction varying the form of gas membrane incorporated into the substructure of the hotel. Secondly, it is said that a delay of five weeks beyond the contractual Completion Date was 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 was based to an alternative system known as the Stramit Speedeck system; three and a half weeks of that period are said to have been concurrent with the foregoing three-week delay. Thirdly, it is said that a six-week delay was caused, following the dismissal of the original design team by the pursuers in November 1998, by the late issue of a significant number of instructions for variations and additional work and late confirmation of details in the work. In relation to clause 13.8 of the contract, the defenders contend that it only has application to instructions that are liable to cause delay because of their content; it has no application to instructions that are liable to cause delay simply because they are issued too late for the contractor's programme. In the present case, it is said, the delays were with one exception caused by the lateness of the architect's instructions, not by their content. In addition, the defenders contend that in the circumstances of the contract the pursuers in part, through the actings of the contract architect, have waived compliance with clause 13.8, or alternatively that the pursuers are personally barred from relying on clause 13.8. The pursuers dispute the defenders' construction of clause 13.8; they submit that the distinction between the lateness and the content of instructions is not well founded. They further contend that no waiver or personal bar occurred in the circumstances of the case. In addition, they contend that the system of roof cladding specified in the contract was not the built-up system claimed by the defenders but was rather the Stramit Speedeck system. The result is that the architect's instruction to use the Stramit Speedeck system was not a variation and does not give rise to a claim for an extension of time.

[5] Against the foregoing background, the pursuers have raised the present action in which they conclude for a range of remedies. First, they seek declarator that the Completion Date is 25 January 1999 and that the defenders were not entitled to the four-week extension granted by the architect. On that basis they conclude for reduction of the Certificate of Notification of Revision to Completion Date issued by Keppie Architects on 9 June 1999; that was the document through which the architect granted the four-week extension. They further conclude for payment of liquidate and ascertained damages in terms of clause 24.2 of the Conditions of Contract; those are said to be due in respect of the period from 25 January 1999 to 29 March 1999, and amount to £270,000 in total. The pursuers further seek partial reduction of two Interim Certificates, Nos 19 and 21, issued by Keppie Architects on 25 February 2000 and 13 July 2001, and repetition of the amounts that are said to have been erroneously paid to the defenders in terms of those two certificates; those amounts total £121,811.39, inclusive of value added tax. The defenders have lodged a counterclaim in which they seek declarator that they are entitled to an extension of time of 11 weeks, with the Completion Date accordingly being 14 April 1999. Consequentially, they seek reduction of the Certificate of Notification of Revision to Completion Date issued by Keppie Architects on 9 June 1999 and reduction of the Certificate of Non-Completion issued by Keppie Architects on the same date. Finally, the defenders seek payment of the (amended) sum of £27,069; that sum, they claim, is direct loss and expense suffered by them of which they are entitled to reimbursement under clause 26 of the Conditions of Contract. That sum represents two weeks' prolongation costs, and it recognizes that the adjudicator has already made an award of prolongation costs for nine of the 11-week extension of time claimed by the defenders.

[6] After a period of adjustment the action proceeded to a debate before Lord Macfadyen (reported at 2002 SLT 781). That debate covered a number of issues arising out of the parties' pleadings. For present purposes it is sufficient to note that Lord Macfadyen considered the construction of clause 13.8 of the contract conditions. He concluded that it 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. I refer to this issue further at paragraphs [140]-[144]. A reclaiming motion was marked against Lord Macfadyen's decision. This was heard by the Second Division and was refused (reported at 2003 SLT 885), although the decision proceeded to some extent on different grounds. The reclaiming motion did not, however, 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.

[7] I intend to begin by setting out the...

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5 firm's commentaries
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    ...the TCC to give a clear statement on the English position at the next opportunity. Reference: City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190 This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to Law-Now i......
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    ...case marks a turn of the tide or different approaches north and south of the border. Reference: City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190 This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to Law-Now......
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