Melville Dundas Ltd V. Hotel Corporation Of Edinburgh Limited
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Neutral Citation | [2006] CSOH 136 |
| Court | Court of Session |
| Published date | 07 September 2006 |
| Year | 2006 |
| Docket Number | CA66/05 |
| Date | 07 September 2006 |
| OUTER HOUSE, COURT OF SESSION [2006] CSOH 136 | |
| CA66/05 | OPINION OF LORD DRUMMOND YOUNG in the cause MELVILLE DUNDAS LIMITED Pursuers; against HOTEL CORPORATION OF EDINBURGH LIMITED Defenders: ________________ |
Pursuers: Mackenzie, Solicitor; Pinsent Masons
Defenders: Drummond, Solicitor; Shepherd & Wedderburn, W.S.
7 September 2006
[1] The defenders are the owners of the Sheraton Hotel in Edinburgh. The pursuers are building contractors. Prior to 2003 the parties entered into a contract for the internal fit out of the Sheraton Hotel Spa Building. The shell of the building had previously been constructed by Balfour Beatty. Following completion of the main works various defects, some of them substantial, emerged in the work that had been carried out. The most significant of the defects related to the external glazing around the spa area, where major areas of cracking had appeared. The parties were in dispute as to the responsibility for the cracking; in particular, they disputed what the causes of the cracking were and whether those were the responsibility of the pursuers or of Balfour Beatty. The parties were also in dispute as to whether the cost of the necessary remedial work was covered by the defenders' works insurance. The defenders commissioned a report from the Building Research Establishment as to the causes of the glazing problem; this was not available at the time of the agreement referred to below, but it was expected to be available shortly thereafter.
[2] In February 2003 Mr Robert McGowan, an accountant who specialized in the management of companies in financial difficulty, was appointed by the Bank of Scotland to take over the management of the pursuers. Mr McGowan gave evidence about his involvement with the pursuers; that evidence was not challenged by the defenders. Mr McGowan stated that he reviewed the pursuers' financial position and recommended that receivers should be appointed over their property and undertaking. The Bank of Scotland appointed receivers. Thereafter Mr McGowan continued to manage the pursuers' business on the receivers' behalf. That involved bringing to a close the various contracts that had been concluded by the pursuers. One of these was the contract with the defenders. The works under that contract had been completed some time previously, but defects had emerged and those still had to be rectified. In addition the final account still had to be agreed. Mr McGowan contacted the defenders with a view to reaching agreement on the various matters that remained outstanding. The defenders were also anxious to make progress, and a meeting was held on 9 July 2003 between representatives of both parties. The pursuers were represented by Mr Jim Smith, a quantity surveyor, and the defenders by Turner & Townsend, the quantity surveyors who had acted for them in connection with the project. At the meeting the defects were discussed, and a list of the then known defects was prepared. The results of the meeting were summarized in a letter from Turner & Townsend to Mr John Boland, the defenders' managing director, dated 11 July 2003. The material parts of the latter are as follows:
"Spa
MDL [the pursuers] indicated that they would be willing to complete the outstanding works if instructed to do so. When the company went into receivership, their contract was automatically terminated. They have, however, retained a core of staff to complete and facilitate handovers of existing works and in order for them to be able to implement our completion works they would require to be instructed to proceed, by letter, either from yourself or from [Turner & Townsend] on your behalf.
It is also a requirement of the Insolvency Act that the Receivers approval is needed to authorize further works. He cannot do so, however, until sufficient monies are received from the affected parties to cover the costs. MDL requested, therefore, that we review each of the snagging items to assess the liability of MDL for any outstanding works and to assess the possibility for release of a portion of the retention fund to cover these works.
· Hydropool cover -- It was accepted that the present installation was unsatisfactory and that replacement, based on a notional allowance of £10,000, should be considered.
· Heat exchanger works - Maximum cost allowance to rectify the problem agreed at approximately £2000.
· Floor lights -- Approximate cost allowance to rectify: approximately £2500.
· Round table fixings -- Isometrix 'foot' still to be tested. Further work may, however, be needed to reconfigure the spindle details: assessed at approximately £2000.
· Fixing glass partitions -- Cost allowance to rectify: approximately £1200.
· Gobo clocks -- Whilst liability for failure has still to be defined, provisional allowance for work assessed at £500.
· Wobbly sinks -- MDL to provide gaskets for Sheraton to action. Approximate cost allowance assessed at £500.
· Staining to limestone: MDL's position is to make a contribution boards cleaning of the net areas affected of £2000.
· Glass breakages -- MDL disclaimed responsibility.
The total value of direct works needed to complete the Spa snagging list, based on the above, is approximately £20,700.
This excludes any allowances for consequential losses, such as additional heating costs associated with the pool cover, or for the costs associated with glass breakages (in the latter regard, MDL are firmly of the opinion that this is an insurance matter)".
It is apparent from this letter, and was confirmed by Mr McGowan's evidence, that the parties' representatives identified the known defects in the Spa and put approximate figures on the cost of rectifying each of them. The one exception to this related to the glass breakages. As the letter indicates, the pursuers continued to deny that they were liable in any way for those breakages. The estimated cost of remedying glass breakages was somewhat less than £90,000.
[3] The parties' representatives reported on the meeting, and a further meeting was arranged between Mr McGowan and Mr Boland, to take place on 24 July 2003. Mr Graham Dunsmore, a partner in Turner & Townsend, also attended the meeting. Evidence about the meeting was given by all three men who were present; I discuss the significance of that evidence below at paragraphs [9]-[13]. It was agreed, however, that at the meeting Mr McGowan and Mr Boland, acting respectively on behalf of the pursuers and the defenders, reached an agreement on certain matters that were outstanding between the parties. This was recorded in an e-mail sent by Mr McGowan to Mr Boland on 25 July, in the following terms:
"Further to our meeting yesterday, my understanding of what was agreed and proposals for addressing some of the detail, are as follows:
...
b) Final Account for Spa agreed at £8,265,000. T&T to issue the necessary paperwork with retention adjusted to £20,700. Of the balance shown on the certificate as due and payable, £90,000 will be withheld by you pending resolution of glazing issue (see d) below).
c) MDL to complete the agreed list of defects (which specifically excludes the glazing issue), at which point COMDG [certificate of making good defects] will be issued and the retention paid to MDL.
d) MDL continue to refute any liability or responsibility for the glazing issue. We recognize your concerns on recoverability if you subsequently prove our liability and hence your proposal to withhold the £90,000. I confirm that we will not pursue recovery of the £90,000 held by you, provided that you pursue the matter diligently with your insurers, consultants and other contractors who may have a responsibility for recovery of your losses. On receipt of any sums from any of these sources, you will release the appropriate amounts to MDL. If you have not already released the whole amount by 31 July 2004, you will then do so, except to the extent that it has been established by our agreement or any court action that we are liable".
Four days later, on 29 July 2003, Mr Boland replied to Mr McGowan by an e-mail in the following terms:
"Thanks for this. On behalf of Hotel Corporation of Edinburgh I accept that what you have written below accurately reflects our meeting last Thursday. I shall write formally on HCE paper to confirm. By copy of this e-mail to Graham Dunsmore I ask that those actions which lie with T&T be progressed asap.
Re glazing, I am trying to move this forward".
A copy of Mr McGowan's e-mail was appended.
[4] The parties were in agreement that the essential terms of their contract were contained in Mr McGowan's e-mail of 25 July. A dispute arose as to the construction of that contract, however, in the following circumstances. Following the meeting Turner & Townsend issued an interim certificate to the effect that £237,693 was due for payment; this was based on the agreed valuation of £8,265,000 and the agreed retention of £20,700 specified in paragraph b) of the e-mail. Thereafter the pursuers made an application for payment to the defenders of that sum less £90,000, that being the sum specified in paragraph d) of the e-mail. The resulting balance was paid by the defenders. There was some correspondence leading to the issue of Turner & Townsend's interim certificate, but I do not think that that correspondence is relevant to the present dispute. After the payment to the pursuers, the defenders claimed that a number of further defects appeared in the Spa building; these are said to have been latent at the time of the meeting of 24 July 2003. The defenders contend that those defects are the responsibility of the pursuers, and in their defences they make averments specifying the defects and the estimated cost of rectification. It was agreed, however, that in the proof that gave rise to this opinion the merits of those averments should not be considered and that none of the evidence led at that proof should have any bearing on the question of liability for...
To continue reading
Request your trial
-
Luminar Lava Ignite Limited V. Mama Group Plc+mean Fiddler Holdings Limited
...which both parties had in mind, counsel referred to the following authorities: Melville Dundas Ltd v Hotel Corporation of Edinburgh Ltd 2007 SC 12, Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657, City Wall Properties (Scotland) Ltd v Pearl Assurance PLC 2004 SC 214 and [2......
-
Scott Greck V. Henderson Asia Pacific Equity Partners (fp} Lp+henderson Equity Partners (gp) Limited+henderson Equity Partners Limited+roger Greville
...Royal Joint Venture 2005 SLT 1233 at para.[13] and Melville Dundas Limited (In Receivership) v Hotel Corporation of Edinburgh Limited 2007 SC 12 at para.[17] identified the correct approach to construction. Under reference to McBryde, The Law of Contract, 3rd ed. paras.8-10 to 8-13, he subm......
-
Arthur William Simmers V. James Grigor Innes
...in this respect counsel relied upon a number of cases. The first of these was Melville Dundas Ltd v Hotel Corporation of Edinburgh Ltd [2006] CSOH 136. In paragraph 17 of the Opinion of Lord Drummond Young the general principles of interpretation of a commercial contract were set out. It ha......
-
JH & W Lamont of Heathfield Farm v Chattisham Ltd
...and Athletic Co Ltd 1999 SC 628; 2000 SLT 80; 2000 SCLR 209; [1999] IRLR 787 Melville Dundas Ltd v Hotel Corporation of Edinburgh Ltd [2006] CSOH 136; 2007 SC 12; [2006] BLR 474 Novasen SA v Alimenta SA [2013] EWHC 345; [2013] 2 All ER (Comm) 162; [2013] 1 Lloyd's Rep 648; [2013] 1 CLC 405;......