Langstane Housing Association Limited V. Riverside Construction Aberdeen Limited+ramsay And Chalmers+john S. Ramsay+alexander T. Chalmers+peter J. Fraser+ramsay Chalmers Limited+cumming And Co Aberdeen Limited+neil Rothnie+alan Cumming
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2009] CSOH 52 |
| Date | 03 April 2009 |
| Docket Number | CA66/06 |
| Court | Court of Session |
| Published date | 03 April 2009 |
| OUTER HOUSE, COURT OF SESSION [2009] CSOH 52 | |
| CA66/06 | OPINION OF LORD GLENNIE in the cause LANGSTANE HOUSING ASSOCIATION LIMITED Pursuers; against (FIRST) RIVERSIDE CONSTRUCTION (ABERDEEN) LIMITED, (SECOND) RAMSAY & CHALMERS, (THIRD) JOHN S. RAMSAY, (FOURTH) ALEXANDER T. CHALMERS, (FIFTH) PETER J. FRASER, (SIXTH) RAMSAY CHALMERS LIMITED, (SEVENTH) CUMMING & CO (ABERDEEN) LIMITED, (EIGHT) NEIL ROTHNIE and (NINTH) ALAN CUMMING Defenders: ________________ |
Pursuers: Clarke QC; CMS Cameron McKenna (Scotland) LLP
Second to Sixth Defenders: Dean of Faculty, Dunlop; Brodies LLP
(First, Seventh, Eighth and Ninth Defenders not participating)
3 April 2009
Introduction
[1] This preliminary proof before answer concerns the question of what terms were incorporated into the contract between the pursuers and the second defenders and the extent to which the second defenders are entitled to rely upon them. In issue are questions of contractual construction, incorporation of terms and the application of the Unfair Contracts Terms Act 1977 as amended.
[2] The pursuers are the Langstane Housing Association Limited. In about May 2001, they purchased subjects known as 411/2 Union Street, Aberdeen from Granite Developments. The subjects comprised the first to fifth floors of a larger building which included retail units. In March 1998 a fire in the lower part of the building caused extensive damage, including damage to the subjects. A renovation scheme to reinstate and develop the subjects was initiated by Granite Developments and was, in general terms, adopted by the pursuers after they purchased the subjects.
[3] During the course of the renovation works, a partial collapse of the subjects occurred. This action is brought by the pursuers to recover damages which they claim to have suffered in respect of that collapse. They aver that the collapse resulted from the breach of contract and/or negligence of the contractors, of the architect and of the consulting engineers. The second defenders were the consulting engineers. In this action the pursuers claim against the defenders "jointly and severally, or severally" for an amount in excess of £3 million.
[4] In Article 5 of Condescendence, the pursuers aver that their representatives met with the staff of the second defenders on 9 March 2001; that by letter dated 15 March 2001 to the pursuers, the second defenders set forth their fee proposals and the proposed basis of their engagement; and that thereafter the pursuers engaged the second defenders as consulting structural and civil engineers for the scheme of works. It is not in dispute that the contract between the pursuers and the second defenders was formed by the second defenders' letter of 15 March 2001 and the pursuers' conduct in instructing the work and subsequently paying for it in accordance with the terms of that letter. In the course of the proof, reference was made to the second defenders' invoice after completion of the work and the pursuers' payment thereof. The invoice clearly referred to the letter of 15 March 2001, and the remittance advice from the pursuers in turn referred to that invoice.
[6] In Answer 5, the second defenders aver that the contract between them and the pursuers was subject to and governed by the Association of Consulting Engineers Conditions of Engagement, B(1), (the "ACE Conditions"). The importance of the ACE Conditions for present purposes lies in the Net Contribution Clause, clause B8.2, which is in the following terms:
"Subject to B8.1 but notwithstanding otherwise anything to the contrary contained in this Agreement, such liability of the Consulting Engineer for any claim or claims shall be further limited to such sum as the Consulting Engineer ought reasonably to pay having regard to his responsibility for the loss or damage suffered as a result of the occurrence or series of occurrences in question, on the basis that the Lead Consultant, all Other Consultants and all Contractors and Sub-Contractors shall be deemed to have provided contractual undertakings on terms no less onerous than those set out in B2.3 to the Client (whether or not they shall have been so provided to the Client) in respect of the carrying out of their obligations and shall be deemed to have paid to the Client such proportion which it would be just and equitable for them to pay having regard to the extent of their responsibility."
Clause B8.1, which is referred to in the opening words of B8.2 quoted above, is a "Limitation of Liability" clause which bears to limit the liability of the Consulting Engineer to a sum to be inserted at A.10 of the Memorandum of Agreement. The Memorandum of Agreement is a blank form attached to the ACE Conditions which is intended to be completed by the contracting parties.
[7] The third to fifth defenders are sued as the partners in the second defenders. The sixth defenders are a limited company connected with the business of the second defenders. They accept that if the acts of the second defenders amounted to a breach of contract or fault or negligence, the obligation to make reparation arising therefrom is owed by them rather than by the second to fifth defenders. It is not clear whether there is any dispute about this issue but, if there is, it does not arise for decision at the present stage. The preliminary proof was conducted between the pursuers and the second to sixth defenders. None of the other defenders took part in it.
The ACE Conditions of Engagement
[8] The ACE Conditions of Engagement are a set of standard terms drawn up by the Association of Consulting Engineers. They are intended to be used as the basis of agreements between a client and a consulting engineer. The earliest version which was put in evidence is dated 1 March 1963, reprinted and incorporating amendments to July 1979. This is generally referred to in the documents as the ACE Conditions of Engagement 1963, Amended 1979. There have been a number of versions since then. There were included with the documents put before the court the 1981 edition, the 1984 edition (with reprints in 1986, 1988 and 1990), the 1995 edition and, finally, "Conditions of Engagement 1995, 2nd Edition 1998" ("the 1998 revision"). In addition, there would periodically be amendments made to the then current version of the Conditions, which would usually, as I understand it, at least recently, take the form of loose leaf pages.
[9] Each edition of the ACE Conditions contained a number of different Forms of Agreement, to be used depending on, for example, whether the Consulting Engineer was engaged as a Lead Consultant, or was engaged directly by the Client but not as a Lead Consultant, and so on. In the earlier versions, these were lettered A, B, C, D and E. By 1981, this has changed to numbering. However, by 1995 the different Forms of Agreement were again lettered. Agreement B, which is the applicable one here, was for use when the Consulting Engineer was engaged directly by the Client, but not as a Lead Consultant. Agreement B was itself published in two variants for different engineering disciplines, variant 1 for Civil and Structural Engineering and variant 2 for the Engineering of Electrical and Mechanical Services in Buildings. The services supplied by the second defenders were Civil and Structural Engineering. Accordingly, Agreement B1 was the appropriate Form of Agreement for the present case if either the 1995 Conditions or the 1998 revision were to be used.
[10] Over the years, the different versions of the ACE Conditions of Engagement changed considerably, both in content and in form. Unlike previous versions, the 1995 edition contained a lengthy pro forma Memorandum of Agreement to be filled out by the parties. In the 1998 revision, the Memorandum of Agreement ran to some 12 pages. In the Introduction to the 1995 Conditions, the Association of Consulting Engineers refer to the various choices given to the parties by the standard Conditions and comment that:
"The agreements are not intended to be used as unsigned reference material with the details of an engagement being covered in an exchange of letters, although much of their content could be used as a basis for drafting such correspondence."
In the Guidance on Completion of Agreements issued by the Association of Consulting Engineers in connection with the 1998 revision, the point is made that:
"The Memorandum of Agreement is a major element of the contract and contains all the spaces which must be filled in to create an Agreement for a specific commission. It is vitally important that it should be completed correctly in order to create a legally valid and comprehensive contract."
The Guidance then goes on to discuss what needs to be completed in relation to the various paragraphs of the Memorandum of Agreement. In paragraph 14 of the Guidance, it is stated that clause B8.1:
"is drafted on the basis that a limit of liability will be agreed with the Client and two options have been provided in A10, one of which must be deleted."
Paragraph 20 of the Guidance points out that
"B8.2 differs from the traditional joint and several formula and provides for 'net contribution', i.e. that the Consulting Engineer will be liable for only his fair share of the loss, taking into account his share of responsibility."
There is no suggestion that any additional agreement needs to be entered into to make clause B8.2 effective.
[11] The Net Contribution Clause first made its appearance in the ACE Conditions of Engagement in September 1993, by Amendment Sheet No 6. That Amendment Sheet set out a number of amendments which were to apply to the texts of the 1981 and 1984 Conditions of Engagement. Paragraph 4 of the Amendment Sheet contained the text of the Net Contribution Clause in substantially the same terms as the clause in the 1998 revision. In the 1995 Conditions, the Net Contribution Clause appeared as part of a package of clauses in which it was combined with an...
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