Kvaerner Construction (Regions) Ltd v Kirkpatrick & Partners Consulting Engineers Ltd
| Jurisdiction | Scotland |
| Judgment Date | 26 November 1998 |
| Docket Number | No 29 |
| Date | 26 November 1998 |
| Court | Court of Session (Inner House - Extra Division) |
EXTRA DIVISION
Lord MacLean
ReparationNegligenceProfessional negligenceDamagesMeasure of damagesWhether additional costs recoverableRelevancyAverments
The pursuers formed a consortium with a third party to tender for appointment as contractors to design and construct certain building and civil engineering works. The pursuers prepared a tender for the design and construction of those works. They employed consulting engineers to undertake the initial design work for their tender in respect of the works. The engineers' responsibilities included specification and design, on which the pursuers' tender was based. The pursuers brought an action of professional negligence and breach of contract against the engineers in which they sought, inter alia, an award for additional costs and expenses incurred by them which were not recoverable from the employers, calculated as the cost of additional work carried out by the pursuers at the same rates as in the bills of quantities prepared for the pursuers' tender. The Lord Ordinary (MacLean) allowed a proof before answer. The defenders reclaimed and argued, inter alia, that for a valid claim to be made the pursuers had to make averments as to what their position would have been if the information supplied to them before they tendered had been accurate so as to allow a comparison to be made between that and their position following the acceptance of their tender.
Held (diss Lord Marnoch) that it would not necessarily be inappropriate to seek to measure the loss suffered by the pursuers as being the amount of the additional costs which they had incurred by their having proceeded on the basis of the erroneous information with which they had been supplied; and reclaiming motion refused.
Opinion (per Lord Marnoch) that the claim could only be a proper measure of damages if the pursuers were able to aver that their tender to the employers would have been increased by the same amount as the additional costs and that that increased tender would still have secured acceptance.
Kvaerner Construction (Regions) Limited brought an action against Kirkpatrick & Partners Consulting Engineers Limited, a firm of consulting engineers, in respect of their alleged professional negligence and breach of contract. The full facts and circumstances appear sufficiently from the opinion of the Lord Ordinary (MacLean).
The cause called in procedure roll for a debate on parties' preliminary pleas-in-law.
Cases referred to:
Banque Bruxelles SA v Eagle Star Insurance Co LtdELR[1997] AC 191
Di Ciacca v Archibald Sharp & Sons 1995 SLT 381
Duncan v Gumleys 1987 SLT 729
GUS v LittlewoodsSC 1982 SC (HL) 157
Haberstich v McCormick & NicholsonSC 1975 SC 1Jamieson v JamiesonSC 1952 SC (HL) 44
Joyner v WeeksELR [1891] 2 QB 31
Martelli v HollowayELR [1872] LR 5 (HL) 532
Miller v South of Scotland Electricity BoardSC 1958 SC (HL) 20
Nykredit plc v Edward Erdman LtdWLR [1997] 1 WLR 1627
Portland (Duke of) v Wood's TrusteesENR 1926 SC 640
Prudential Assurance Co Ltd v James Grant & Co (West) Ltd 1982 SLT 423
Watson, Laidlaw & Co Ltd v Pott, Cassels & Williamson 1914 SC (HL) 18
At advising, on 26 February 1998, the Lord Ordinary allowed a proof before answer.
LORD MACLEAN'SOpinionIn 1992 the pursuers, at a time when they were known as Trafalgar House Construction (Regions) Limited, formed a consortium with John Brown Engineering Limited, now known as Kvaerner Energy Limited, the third party in this action, to tender for appointment as contractors to design and construct for Strathclyde Regional Council water treatment works situated at South Moorhouse, Neilston, and Picketlaw. The pursuers and the third party each prepared a tender for their share of supply. The pursuers' Share of Supply was for the design and construction of the building and civil engineering works. The pursuers aver that the defenders agreed to undertake for the pursuers the initial design work for their tender in respect of the works. The defenders were provided with a copy of the main contract specification and drawings. According to the pursuers, the defenders were aware of the building and civil engineering requirements set out therein. Representatives of the pursuers and the defenders met on 13 May 1992 and discussed the terms of the pursuers' standard form agreement for design services. At that meeting it was agreed, so the pursuers aver, that the design information needed before tender submission would have to be detailed and involved detailed drawings. The defenders were informed that the pursuers were to appoint a professional quantity surveyor to prepare bills of quantities on the basis of the detailed design information provided by the defenders. The pursuers further aver (but this is not admitted by the defenders) that the defenders agreed to carry out the initial design work generally in accordance with the standard form agreement for design services. By the end of the meeting the pursuers and the defenders, it is averred, were in agreement: (i) that prior to the tender submission the defenders would carry out those of the architectural and consulting engineers services set out in the agreement which required to be carried out prior to the submission of a tender; (ii) that in the event of the tender being successful the defenders would be entitled to a fee and therefore a formal written agreement in substantially the same terms as the said agreement would then be executed; (iii) that the defenders would respond during the tender period to the pursuers' proposals relating to the form of agreement and fee structure; and (iv) that once executed, the agreement would govern all work carried out by the defenders on the project both before and after the agreement's execution.
The defenders carried out the initial design work for the works between the date of the meeting on 13 May 1992 and about 12 October 1992, and the tender prepared in reliance upon that design work was submitted by the consortium to Strathclyde Regional Council on 15 October 1992. The tender was successful and on 9 February 1993 the consortium entered into an Agreement with Strathclyde Regional Council for the design and construction of the three water treatment plants. The tender was in the sum of 11,537,323 of which 5,514,408 was attributable to the pursuers' Share of Supply.
From at least September 1992 the pursuers and the defenders were in negotiation about the terms of the agreement for design services. By 11 March 1993 its terms were agreed, and the agreement itself was executed by the defenders on 12 May 1993 and by the pursuers on 21 May 1993. The pursuers aver that on a proper construction of the agreement, and having regard to all the surrounding facts and circumstances, it applied to and governed all work done by the defenders on the project, including work carried out by them prior to the execution of the agreement, to which it applied retrospectively. I should add that the defenders deny that they agreed to be bound by the terms of the agreement in respect of work carried out by them before 11 March 1993.
In their pleadings the pursuers refer to certain clauses of the agreement, and in particular clause 11 which provides as follows: The Consultant shall accept full responsibility for any neglect, error or omission in carrying out the design g of the Works the subject of this Agreement and all other duties and obligations under this Agreement and shall indemnify and keep indemnified the Contractor from and against any proceedings, actions, claims, demands, losses, costs and expenses which may be brought or made against or sustained or incurred by the Contractor by reason of or however arising out of any breach or failure in this connection, providing always that the Consultant is informed in writing of any such proceedings, actions, claims, demands, losses, costs and expenses as they occur and is given the right to conduct the action. Any accepting (sic) or endorsed (sic) by the Contractor of any drawings, specifications or data provided by the Consultant shall in no way relieve the Consultant from his obligations hereunder. In the agreement the defenders are the Consultant and the pursuers are the Contractor.
In article 4 of the condescendence the pursuers aver that there was neglect, error or omission on the part of the defenders in a number of respects in carrying out the design of the works and their other duties and obligations under the agreement. They aver also that it was an implied term of the agreement and in any event it was the defenders' duty to exercise the ordinary care of a reasonably competent architect and engineer in the services provided by them, and that they relied upon the defenders to exercise such care. No reasonably competent architect or engineer exercising ordinary care would have failed in the respects which the defenders did. As a result of these failures the defenders were in breach of contract and also at fault and negligent as is clear from later averments. The various respects are then set out in some detail in the pleadings. I was invited by counsel for the pursuers and the defenders to concentrate for the purposes of the debate solely upon heading a (on pp 2634 of the closed record) and claim A (on pp 7072), although, according to the defenders' counsel, there were objectionable averments also in headings D, F and H.
In heading A the pursuers attempt to specify the defenders' alleged failures. They aver that, after the contract was awarded to the consortium, the construction drawings then produced indicate significant increases in construction materials and elemental dimensions when compared with the information previously produced by the defenders for the preparation of the tender. These differences which are referred to as discrepancies, caused the pursuers to incur loss and additional cost arising from the incorporation...
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