Greater Nottingham Co-operative Society Ltd v Cementation Piling and Foundations Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PURCHAS,LORD JUSTICE WOOLF,LORD JUSTICE MANN |
| Judgment Date | 23 March 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0323-5 |
| Docket Number | 88/0271 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 March 1988 |
[1988] EWCA Civ J0323-5
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(OFFICIAL REFEREES' BUSINESS)
Royal Courts of Justice
Lord Justice Purchas
Lord Justice Woolf
and
Lord Justice Mann
88/0271
and
and
MR. J. DYSON Q.C. and MISS A. FOSTER (instructed by Messrs Hunt, Dickins & Willatt) appeared on behalf of the Respondents (Plaintiffs).
MR. W. AYLEN, Q.C, MR. B.M.L. STEPHEN AND MR. J. BELLAMY (instructed by Messrs Davies, Arnold & Cooper) appeared on behalf of the Appellants (First Defendants).
This is an appeal by Cementation Piling and Foundations Limited ("Cementation") under RSC 0. 58, r.4 from a decision of the late Judge David Smout Q.C. sitting as an Official Referee. It raises questions of law concerning the recovery of damages for economic loss arising out of a breach of duty in tort. The respondents to the appeal (the plaintiffs before the Official Referee) are the Greater Nottingham Co-operative Society Limited ("the Society"). Before the Official Referee Cementation were the first defendants. There were other defendants who are not parties to the appeal, namely Shepherd Construction Limited ("Shepherd") and Bylander Waddel Associates ("Bylander").
The action arose out of the execution of building works by Shepherd as main contractor with Cementation as nominated sub-contractor and Bylander as consulting engineers. The main contract between the Society and Shepherd was on "Standard Form of Building Contract for use with Quantities, Private Edition 1963. (July 1977 Revision), published by the Joint Contracts Tribunal" ("the main contract"). This provided for extension and alteration works to the Society's premises at Lumley Road, Skegness. The contract was for a fixed sum subject to variation under the terms of the contract and to be completed in a fixed period, again subject to provisions for extension under the terms of the contract. The architect, who has not played any part in these proceedings, was Mr. P. Wilson, RIBA, of the Hind Woodhouse Partnership, Leeds.
The terms of the sub-contract between Cementation as sub-contractors and Shepherd ("the sub-contract") are not clear; but for the purposes of the action they were assumed to be equivalent to the terms of the JCT standard form (1963 as revised). There was also a direct collateral agreement dated 7th June 1979 between the Society and Cementation under which Cementation warranted:
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A(l) That they had exercised and would exercise all reasonable skill and care in:
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(a) the design of the sub-contract works….
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(b) the selection of materials and goods selected by them for the sub-contract works….
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A(2)(b) That they would perform the sub-contract works so that the contractor "shall not become entitled to an extension of time under Clause 23 of the main contract by the failure of the Sub-Contractor so to supply such information or by delay on the part of the Sub-Contractor provided always that no liability shall arise in respect of such delay on the part of the Sub-Contractor until he has accepted the contractor's order in respect of the Sub-Contract Works.
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A(3) Nothing in the tender of the Sub-Contractor shall operate to exclude or limit his liability for breach of the warranties set out herein."
The remaining clauses contained undertakings not relevant to this appeal given by the Society to Cementation in relation to Clauses 25, 27 and 30 of the main contract. (Determination of main contract by the Society, prime costs for sub-contract work and interim certificate and payment).
The sub-contract work consisted of the provision of piles upon which the extension was to be built. Owing to the nature of the ground it was decided to use a particular method of driving the piles known as continuous flight augering. At the tendering stage, besides Cementation, there was a competing tender made by a specialist firm, Dowsett Piling and Foundations Limited ("Dowsett"), whose tender was not accepted. The judge found that Dowsett had at that time more experience than Cementation in the particular process but that Cementation were anxious to develop business of this nature. The diameter of the piles to be driven under Dowsett's plan was 300mm whereas Cementation's tender provided for a lesser number of piles of 450mm diameter. On the finding of the judge both systems were, in the circumstances prevailing at the tender stage, of acceptable design. Each had their own advantages and disadvantages.
Immediately adjoining the site there was a restaurant, the Windsor Restaurant, which was owned by the Ling family. The piling operations were started by Cementation on 17th July 1979 and were continued on 18th and 19th. At about midday on the 19th, owing to the negligent operation of the equipment by one O'Brien, damage was occasioned to the fabric of the Windsor Restaurant. The Ling family brought a separate action for damages against the Society which was settled in the sum of £82,000 and the Society carried out in addition further remedial works to the restaurant which cost them £41,832. Cementation do not dispute that they are liable to indemntify the Society in these two sums.
When the damage was noticed Cementation had driven eight piles and were engaged on driving the ninth pile. Work was suspended immediately. On the following day there was a site meeting and an attempt to complete the ninth pile was abandoned at a depth of 15m on the instruction of the engineer.
In discussions on 24th July Cementation expressed their reluctance to continue with the 450mm diameter piles and were thereupon instructed to grout up and withdraw the augers from two piles then in course of being driven and to remove piling equipment from site. Alternative methods were discussed between the various parties involved. On the following day Cementation wrote to Shepherd requiring an architect's instruction under Clause 21(2) of the main contract to postpone the works together with an award for an extension of time for completion in accordance with the provisions of Clause 23(e). In the meanwhile on 23rd July Shepherd had written to Cementation holding them responsible for the disaster and on 24th July a trial bore was drilled in the centre of the site with a 450mm diameter auger. This was not satisfactory and the work was stopped in mid-flight.
The Official Referee has carefully set out in his judgment the events which took place during the ensuing month or so. It is necessary only to summarise them in this judgment. First of all, it appeared that the site had unusual geophysical properties and that it presented, therefore, unusual risks the presence of which should be brought to the attention of Cementation's insurers. Mr. Brown, the partner in Bylanders involved, was expressing the view that Cementation had not been negligent in the execution of the work; but was favouring a change to 300mm diameter piles. The "over-excavation" which was already a main suspect and was later found by the judge to be one of two causes of the damage to the Windsor, was said to be due not to the negligent operation of the equipment by O'Brien but due to "the clay being softer than indicated in the site investigation". This caused Cementation's insurers strenuously to repudiate liability. The Sun Alliance, who were the insurers under the main contract, were on risk for damage "excepting that caused by negligence, omission or default". They did not accept Brown's views and were themselves unwilling to give any indication as to their attitude to liability.
Meanwhile the Society's solicitors on 26th July were advising them that they must "carry their insurers with them" before any work other than immediate and remedial work was recommenced. Cementation were pressing for extensions under Clause 23(3) of the main contract without which they were not willing to continue the work. By 27th July Bylanders had consulted Dowsett. Dowsett expressed the view that the cause of the damage was attributable to "lack of experience on the part of the operator when faced with the problem of transition from soft material to harder clay". Brown on 31st July told the Society that Cementation had proposed an alternative piling system which was much more expensive, namely £95,000 as against the original contract price of a little over £25,000. Dowsett, on the other hand, still favoured the continuous flight augering system but with 300mm diamater piles. This would probably have remained at the original tender price of £30,500.
The Society, therefore, was faced with a position of dispute and conflict between their own professional advisers. They called a meeting on 6th August 1979 which they intended to result in a positive decision which would enable work on the site to proceed. At the beginning of the meeting neither Cementation nor Dowsett were present; Brown advised the Society and Shepherd that there were two alternatives:
(a) through the present contract to instruct Cementation to accept Dowsett as a sub-sub-contractor to fulfil the present contract; or
(b) to determine Cementation's contract and to instruct Shepherd to appoint Dowsett as a new sub contractor.
Cementation then joined the meeting and emphatically refused to sub-contract to Dowsett. Their attitude was that if the Society wished to have the services of Dowsett then they would have to determine their contract...
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