Robertson Construction Central Limited V. Glasgow Metro Llp
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2009] CSOH 71 |
| Published date | 19 May 2009 |
| Docket Number | CA36/07 |
| Court | Court of Session |
| Date | 19 May 2009 |
| OUTER HOUSE, COURT OF SESSION [2009] CSOH 71 | |
| CA36/07 | OPINION OF LORD HODGE in the cause ROBERTSON CONSTRUCTION CENTRAL LIMITED Pursuers; against GLASGOW METRO LLP Defenders: ________________ |
Pursuers: S. Smith; MacRoberts, Solicitors
Defenders: Borland; Anderson Strathern LLP
19 May 2009
[1] The pursuers are a construction company and the defenders are a limited liability partnership which owned a development site at West Graham Street and Rose Street in Glasgow. The defenders entered into a building contract with the pursuers for the design and construction of an eleven storey development comprising forty six residential flats and a ground floor commercial unit on the site. The development was to be known as the Glasgow Metro.
[2] The parties encountered difficulties in the implementation of the contract. The difficulties gave rise to competing financial claims. The parties thereafter entered into a compromise agreement to dispose of those claims but further difficulties led to that compromise agreement being rescinded. As a result the pursuers have raised this action and there is a cross action by the defenders. Both actions came before me in a debate. The principal issue between the parties in both actions was whether any part of the compromise agreement survived its rescission.
The initial contract and the compromise agreement
[3] In about June 2004 the parties entered into a design and build contract which comprised the Scottish Building Contract with Contractor's Design May 1999 Edition (January 2002 Revision) with a schedule of the parties' amendments ("the Building Contract"). Disputes arose when the contract works were not completed on time. The pursuers claimed sums in respect of the valuation of measured works and payment for loss and expense under clause 26 of the Building Contract. The defenders disputed those claims. The defenders claimed liquidated damages for delay. The pursuers contested that claim. On 22 June 2006 the parties entered into a compromise agreement in a Minute of Agreement ("the Minute").
[4] In the Minute parties agreed that the date of practical completion of the works was 22 June 2006 (see the definition in clause 1.1) but attached to the Minute an agreed schedule of works which the pursuers were to carry out. In clause 6.2 of the Minute the pursuers undertook to make good the defects and items of incomplete work detailed in the schedule to the satisfaction of the defenders within fourteen days from the defined date of practical completion. In terms of clause 3 of the Minute, the parties agreed that the pursuers were entitled to be paid £5,750,000 exclusive of VAT ("the Final Account Sum"), provided no additional works were instructed by the defenders. In clause 5 of the Minute the defenders cancelled any existing notice of non-completion, and waived any right (a) to issue such notices in future and (b) to deduct or seek liquidated and ascertained damages.
[5] As the defenders had already paid the pursuer £5,134,826 exclusive of VAT, the Minute provided that the balance of the Final Account Sum, namely £615,174, would be paid in three tranches as follows:
A. the "Agreed Payment", namely £381,174 exclusive of VAT, which, subject to the pursuers making good all defects and items of incomplete work listed in the schedule of works to the satisfaction of the defenders, would be paid within 14 days of the date of practical completion;
B. the "Deferred Payment", namely £150,000, which would be paid within 14 days of the "Deferred Payment Payment Date" (see paragraph [6] below); and
C. the "Retention", namely £84,000, which the defenders could retain for twelve months after the date of practical completion, but the retention was to be reduced thereafter to £8,000, which the defenders could keep until the earlier of the date of the issue of the notice of completion of making good defects or twenty four months after the date of practical completion.
[6] The "Deferred Payment Payment Date" was defined as:
"the earlier of (i) the completion of the sale of the final flatted dwellinghouse comprised within the Works or (ii) the issue of the Notice of Completion of Making Good Defects pursuant to clause 16 of the Building Contract".
[7] That the Minute was designed to specify the limit of the pursuers' entitlement to payment is confirmed in clause 3, which was headed "Cap on Contractor's Entitlement" and which provided as follows:
"3.1 Provided the Employer does not instruct the Contractor to carry out any additional work, the Contractor agrees that their total entitlement to payment under the Building Contract in respect of the Works is in the amount of the Final Account Sum and the Contractor shall not be entitled to payment under the Building Contract to any sums in excess of the Final Account Sum. If the Employer does instruct the Contractor to carry out any additional work this will be paid for separately by the Employer to the Contractor, and, for the avoidance of doubt, is not included in the Final Account Sum.
3.2 For the avoidance of doubt, save for any entitlements which may arise consequential to the instruction of additional works after the date of this Agreement and the Contractor's entitlement to payment of the Agreed Payment, Retention and the Deferred Payment, the Contractor shall have no further entitlement pursuant to Clause 30 of the Building Contract or otherwise for payment in respect of the Works."
[8] The Minute, as mentioned above, narrated the defenders' waiver of their claims in clause 5 in the following terms:
"The Employer hereby cancels any Notice of Non-Completion which has previously been issued to the Contractor. Further, the Employer waives its entitlement to issue any further Notice of Non-Completion. The Employer waives any right to deduct or seek payment of liquidated and ascertained damages from the Contractor."
The Minute also provided for the contingency of the pursuers' failure timeously to perform their new obligations in the compromise which it entailed. Clause 2.1 provided:
"... If the Contractor fails to make good all of the defects and items of incomplete work detailed in the Schedule as required by Clause 6.2 of this Agreement within 14 days of the Date of Practical Completion the Employer shall make payment of the Agreed Payment to the Contractor on the date the Contractor does comply with Clause 6.2 of this Agreement. For the avoidance of doubt, the Agreed Payment is not to be subject to any right of withholding or set off by the Employer for any reason."
In addition clause 7, which was entitled "Employer's Rights", provided:
"Except in so far as this agreement limits or excludes the Employer's entitlement (i) to issue a Notice of Non-Completion and (ii) to deduct or seek payment of liquidated and ascertained damages from the Contractor and/or (iii) to challenge the Contractor's entitlement to be paid the sums agreed hereunder, this agreement is without prejudice to the whole rights and remedies of the Employer under the Building Contract. In particular, and without prejudice to the foregoing generality, the Employer shall be entitled to enforce its whole rights and remedies in respect of any works comprised in the Works not in accordance with the whole requirements of the Building Contract."
[9] The parties' hopes that this compromise would resolve their difficulties were not realised. On 3 November 2006 the defenders purported to terminate the Minute on the basis that the pursuers had broken that contract by failing to complete the outstanding works timeously. The pursuers did not accept that the defenders' termination was valid but contended that the defenders by so acting had repudiated the compromise agreement. The pursuers continued to work on the site after November 2006 but purported to terminate the Minute on 7 April 2007 in the adjustments to their pleadings in this action; they contended that they were accepting the defenders' repudiation.
The pursuer's claims
[10] In this action the pursuers advance three discrete claims. First, in articles 3 and 4 of condescendence they seek damages for breach of the compromise agreement contained in the Minute. Secondly, they make a claim for unjustified enrichment on hypothesis that the defenders had validly terminated the compromise agreement on 3 November 2006 (article 5 of condescendence). Finally, in article 6 of condescendence they pursue a fall back claim under the Building Contract.
[11] Mr Borland for the defenders invited me to delete certain averments in article 3 of condescendence. The pursuers initially averred that there was an implied term in the Minute that the defenders would not hinder the pursuers in carrying out the scheduled works; but Mr Smith moved to amend his pleadings by deleting those averments on the second day of the debate. In the absence of the assertion of an implied term, the other averments in article 3 of condescendence which the defenders challenged, namely that the pursuers had been hindered (i) by the defenders' having allowed purchasers to occupy certain flats while the pursuers were carrying out the scheduled works and (ii) by having to deal with water ingress in two flats, became merely the factual background to the alleged delays and the defenders' purported termination of the Minute. They were not in my opinion irrelevant in that context as they might have a bearing on the reasonableness of any ultimatum which the defenders gave before they purported to terminate the Minute.
[12] Article 4 of condescendence supports the pursuers' claim of damages for breach of contract. The pursuers aver that the defenders' purported termination of the Minute constituted a repudiation of the compromise agreement and that they had accepted that repudiation. The pursuers aver that, in calculating the position which the parties would have been in but for the defenders' breach of contract, it is necessary to take into account the accrued...
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