Mclaren Murdoch And Hamilton Limited V. The Abercromby Motor Group Ltd
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Date | 22 November 2002 |
| Docket Number | CA128/00 |
| Court | Court of Session |
| Published date | 29 November 2002 |
| OUTER HOUSE, COURT OF SESSION | |
| CA128/00
| OPINION OF LORD DRUMMOND YOUNG in the cause McLAREN MURDOCH & HAMILTON LIMITED Pursuers; against THE ABERCROMBY MOTOR GROUP LIMITED Defenders: ________________ |
Pursuers: J. W. McNeill, Q.C., Borland; Simpson & Marwick, W.S.
Defenders: J. J. Mitchell, Q.C.; DLA
22 November 2002
[1]The pursuers practise as chartered architects. Their present managing director is Mr Michael Towers. The defenders are car dealers, and own and operate car dealerships in a number of places in Scotland. Their managing director is Mr Alaster Cunningham. Prior to November 1994 the pursuers had provided professional services to the defenders, and in particular had designed and supervised the construction of a number of car showrooms at Halbeath, Dunfermline. In about November 1994 the parties, and in particular Mr Towers and Mr Cunningham, began to discuss a proposal by the defenders to construct four car dealership showrooms and associated workshops at Kerse Road, Stirling. In due course the pursuers were appointed architects for the project, and the workshops were ultimately constructed in accordance with the pursuers' design and under their supervision. Two disputes have arisen between the parties.
[2]First, the parties are in dispute as to the level of fee to which the pursuers are entitled. In the principal action the pursuers claim unpaid fees to which they say they are entitled for the works at Kerse Road. Second, the defenders have lodged a counterclaim alleging breach of contract and negligence on the part of the pursuers. They claim in particular that the pursuers were at fault in the design of the showrooms and workshops. Substantial parts of the counterclaim were abandoned by the defenders during the proof that took place before me, and all that remains is a claim by the defenders that the pursuers were negligent in the design of the heating system for the showrooms and workshops. For their part the pursuers have accepted that they were at fault in the design of the heating system. They dispute, however, whether the defenders have established any loss or damage consequential upon the pursuers' fault. Thus the only live issue in the counterclaim is the question of what loss, if any, the defenders have established as a result of the pursuers' negligent design of the heating system.
Pursuers' entitlement to fees
[3]The pursuers claim fees amounting to £29,375.57 in total. That claim is based on an invoice dated 16 April 1998. In that invoice the main part of the pursuers' fee is based on a scale fee of 8% of the final account for the building works at Kerse Road. That final account is said to amount to £1,853,910; consequently the scale fee is said to be £158,312.80. Two additions to that scale fee are claimed, known as the Audi uplift and the CDM uplift. These amount respectively to £23,488 and £11,909. The total fee due to the pursuers is thus said to amount to £183,709.80. Of that sum, £158,709.31 has been paid, leaving a balance of £25,000.49. VAT of £4,375.08 is due on that sum, resulting in the alleged debt of £29,375.57. It can thus be seen that the pursuers' claim for fees is based on four propositions: that the pursuers are entitled to a scale fee based on the final contract sum; that the net fee is 8% of the final contract sum; that the pursuers are entitled to the Audi uplift; and that the pursuers are entitled to the CDM uplift. Each of those propositions is disputed by the defenders. Consequently it will be necessary to consider each of them independently. Before that, however, it is convenient to set out the evidence relating to the formation of the parties' contract and the manner in which the two additions to the scale fee are said to have arisen.
[4]It is common ground that the parties entered into negotiations over the proposed works at Kerse Road in or shortly before November 1994. Those negotiations were conducted between Mr Cunningham and Mr Towers. Mr Cunningham gave evidence that, when the discussions about the Kerse Road project started, Mr Towers expressed dissatisfaction with the level of profit that the pursuers had obtained from previous work undertaken for the defenders, and Mr Cunningham had accordingly agreed to come up with a proposal to increase the pursuers' profit from the Kerse Road development. The defenders' development at Halbeath had just been completed, and it was assumed that the units at Kerse Road, consisting of showrooms and a workshop, would be similar to those at Halbeath; consequently it was thought that the design work should be relatively simple. One difference, however, related to the identity of the contractor. The defenders' previous developments had all been constructed by an associated company, but because external financing was required for Kerse Road it was necessary to employ an outside contractor and a standard professional team.
[5]On 28 November 1994 Mr Cunningham sent Mr Towers a letter in the following terms:
"I refer to recent correspondence and discussions on the above and thought it would be worthwhile to put my thoughts on paper as a discussion document for us to use perhaps later this week.
In view of the fact that the overall proposals and work to date have been speculative and remain so at present, I accept that in the event that the development becomes a commercial reality then the payments to your firm, which has participated in some of the front end risk, should reflect that risk.
This will obviously also be the job which hopefully equalises your profit opportunity in relation to this Company, as much of the work has already been done on Halbeath...
...
In order to address the subject of fees, I have endeavoured to make some assumptions which help to come up with actual cash sums. Once you have considered the schedule in some detail I would like to remove percentages and replace them with actual amounts. This will enable me to raise cheque requisitions and instruct... our group Finance Director to pay the amounts on receipt of the various pieces of paper without my personal involvement in the approvals.
Assumptions
... [T]he projected price for a stand alone unit at Halbeath was £240 K. Therefore I have assumed that the total contract price for Stirling would be approximately as follows:
| Units 1,2 & 3 @ £240K | £550,000 |
| 1 x VAG unit + small industrial | £720,000 |
| Total Contract Price | £1,270,000 |
| say | £1,300,000 |
Notwithstanding the repetition etc, I suggest an initial team fee of 8%, which should increase with some small success-related bonuses. It would be my intention to pay the whole fee to McLaren Murdoch & Hamilton. Your firm would then be responsible for agreeing payments to any Engineers, Quantity Surveyors etc and also for ensuring that any requirement for collateral warranties etc were fulfilled adequately....
My proposal on the 8% fee (£104,000) is as follows:
| 1 | On submission of detailed planning application: | 2% | (£2,080) |
| 2 | On receipt of satisfactory detailed planning consent: | 0% | (Nil) |
| 3 | On missives becoming unconditional and land paid for: | 28% | (£29,120) |
| 4 | On submission for building warrant: | 0% | (Nil) |
| 5 | On receipt of building warrant: (Fee for stage warrants to be divided accordingly) | 15% | (£15, 600) |
| 6 | On completion of Bill of Quantities: | 10% | (£10,400) |
| 7 | On acceptance of Contractor: | 10% | (£10,400) |
| 8 | On an equal monthly basis for the duration of the contract: | 20% | (£20,800) |
| 9 | On receipt of certificate of completion: | 5% | (£5,200) |
| 10 | On issue of "Making good defects" certificate: | 3% | (£3,120) |
| 11 | On final account agreement: | 2% | (£2,080) |
| 12 | On concluding all the above points within the timescale of the pre-agreed programme: | 12 2% | (£2,080) |
| 13 | On concluding the entire project within the pre-agreed budget | 3% | (£3,120) |
| 14 | On having all the units trading prior to 14 July 1995 | 5% | (£5,200) |
| Total | 105% |
I look forward to discussing these, and any other points you may wish to raise, later this week".
Both parties accepted that that letter set out certain of the terms of their contract. In particular, the pursuers rely on it to establish a scale fee of 8%. In this connection, two points should be noted. First, the fee contemplated in the table was 105% of 8%, but that was dependent on having all units trading prior to 14 July 1995. Second, the figures used in the letter (as against the percentages) were derived from the Halbeath contract. New figures had to be substituted for Kerse Road. Mr Cunningham gave evidence that, when he sent the letter, he intended that the fee payable to the pursuers should be based on a fixed sum, not an unknown sum, because he thought it wrong to reward a huge overspend. He accepted, however, that the figures (as against the percentages) were indicative only, and that the actual figures for the Kerse Road project would be different.
[6]Mr Towers responded to Mr Cunningham's letter of 28 November 1994 by a letter dated 19 December 1994. So far as material, this was in the following terms:
"Thank you for your letter and the fee proposal of 28 November 1994. I confirm acceptance of this proposal, and I can advise that Thomson Bethune, Chartered Quantity Surveyors and Goodson Associates, Consulting Civil & Structural Engineers have agreed terms with us to join the Design Team....
... Once we have submitted for planning, I would suggest that Thomson Bethune prepare a Cost Plan, and with feedback from Planning, we should be able to put in place a final budget and project programme".
Meanwhile extensive discussions continued in relation to the project, but both Mr Cunningham and Mr Towers accepted that these did not relate to the fees payable to the pursuers. On 14 August 1995, Mr Rodney Smith, who at that time was managing director of the defenders, wrote to Mr Towers in the following terms:
"re: Cluster dealership development at Kerse Road, Stirling
I write to confirm my Board's...
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