Pacific Associates Inc. v Baxter

JurisdictionEngland & Wales
JudgeLORD JUSTICE PURCHAS,LORD JUSTICE RALPH GIBSON,LORD JUSTICE RUSSELL
Judgment Date15 December 1988
Judgment citation (vLex)[1988] EWCA Civ J1215-2
Docket Number88/1097
CourtCourt of Appeal (Civil Division)
Date15 December 1988
Pacific Associates Inc.

and

R.B. Construction Limited
and
Ronald Stafford Baxter & Ors.

[1988] EWCA Civ J1215-2

Before:

Lord Justice Purchas

Lord Justice Ralph Gibson

and

Lord Justice Russell

88/1097

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

OFFICIAL REFEREE'S BUSINESS

(HIS HONOUR JUDGE JOHN DAVIES Q.C.)

Royal Courts of Justice

MR A. SCRIVENER, Q.C, MR A. BURR, and MR M. HILL, instructed by Messrs Durrant Piesse, appeared for the Appellants (Plaintiffs).

MR S. TUCKET, Q.C., and MISS J.E. DAVIES, instructed by Messrs Davies Arnold & Cooper, appeared for the Respondents (Defendants).

LORD JUSTICE PURCHAS
1

These appeals raise important issues relating to the duty owed, if any, by an engineer appointed to supervise construction works. Pacific Associates Inc. ("the contractor") and R.B. Construction Ltd ("the sub-contractor") claimed against Halcrow International Partnership and thirteen individual partners (hereinafter collectively referred to as "the engineer") by writ and statement of claim damages alleged to have been caused by breach of duty by the engineer. For the purposes of the appeals the position of the contractor and the sub-contractor are equivalent. I propose to use the word "contractor" to include "sub-contractor" where appropriate after the date of the subcontract 13th April 1977.

2

The appeals relate both to a determination of a preliminary issue and to an order to strike out the amended statement of claim by His Honour Judge John Davies Q.C. sitting upon Official Referee's business on 1st December 1987. The works out of which the claim arose were dredging and reclamation work in Dubai Creek Lagoon in the Persian Gulf ("the works") to be carried out by the contractor pursuant to a contract dated 25th February 1975 ("the contract") between the contractor and His Highness the Ruler of Dubai ("the employer"). The matter first came before the judge on an application by the engineer under R.S.C. 0. 18, r.19 to strike out the contractor's claims on the grounds that they did not disclose a reasonable cause of action and were an abuse of the process of the court. By consent, it was ordered that at the same time the judge should consider as a preliminary issue the following question: "Assuming, without deciding, the facts pleaded in the amended statement of claim whether in law the plaintiffs can recover damages from the defendants and if so what damages?"

3

The background can be shortly stated. Invitations to tender for the works were issued at some date prior to February 1975 by predecessors of the engineer, Messrs Halcrow (Middle East) Limited, consultant engineers. Nothing turns on the change of formal identity which took place in July 1978. We have been told that there were some 20 tenderers of which the contractor was the successful one. The tender was made after examining, inter alia, the "drawings, conditions of contract, specification and bill of quantities", and in the light of bore hole reports and other geological information. The contractor tendered in the knowledge that the work would be supervised by the engineer in accordance with the conditions of contract.

4

It is not necessary to consider the details of the work involved, save to say that they were extensive. A central matter for consideration was the nature of the bed of the Creek the dredging of which was the subject matter of the contract. The bore hole reports which had been provided by the engineer disclosed that of the materials to be found on the floor of the lagoon a certain percentage would consist, or was expected to consist, of "hard materials". Again, it is only necessary to know that the presence of these materials rendered the dredging more difficult and expensive. In particular it required more powerful dredging equipment. The contractor's case was that the information imparted at the tender stage was inaccurate and, as a result, the tender price upon which the contract sum was based was too low. The following provisions of the contract are relevant:-

"Part I—General Conditions ("GC")

11. The Tender shall be deemed to have been based on such data regarding hydrological climatic and physical conditions as shall have been supplied by the Employer in the documents furnished to the Contractor by the Employer for the purpose of tendering. The Contractor shall nevertheless inspect and examine the Site and its surroundings and shall satisfy himself…

12. The Contractor shall be deemed to have satisfied himself before tendering as to the correctness and sufficiency of his Tender for the Works…cover all his obligations under the Contract and all matters and things necessary for the proper completion and maintenance of the Works. If however during the execution of the Works the Contractor shall encounter physical conditions or artificial obstructions which conditions or obstructions could not have been reasonably foreseen by an experienced contractor the Contractor shall forthwith give written notice thereof to the Engineer's Representative and if in the opinion of the Engineer such conditions or artificial obstructions could not have been reasonably foreseen by an experienced contractor then the Engineer shall certify and the Employer shall pay the additional expense to which the Contractor shall have been put by reason of such conditions including the proper and reasonable expense…" "46. The whole of the materials plant and labour to be provided by the Contractor under Clause 5 hereof and the mode manner and speed of execution and maintenance of the Works are to be of a kind and conducted in a manner to the satisfaction of the Engineer. Should the rate of progress of the Works or any part thereof be at any time in the opinion of the Engineer too slow to ensure the completion of the Works by the prescribed time or extended time for completion the Engineer shall so notify the Contractor in writing and the Contractor shall thereupon take such steps as the Contractor may think necessary and the Engineer may approve to expedite progress so as to complete the Works by the prescribed time or extended time for completion.…"

"56. The Engineer shall except as otherwise stated ascertain—and determine by admeasurement the value in accordance with the Contract of work done in accordance with the Contract.…If after examination of such records and drawings the Contractor does not agree the same or does not sign the same as agreed they shall nevertheless be taken to be correct unless the Contractor shall within 14 days of such examination lodge with the Engineer's Representative for decision by the Engineer notice in writing of the respects in which such records and drawings are claimed by him to be incorrect."

"60. (1) Unless otherwise provided payments shall be made at monthly intervals in accordance with the conditions set out in Part II in the Clause numbered 60".

"67. If any dispute or difference of any kind whatsoever shall arise between the Employer or the Engineer and the Contractor in connection with or arising out of the Contract or the carrying out of the Works (whether during the progress of the Works or after their completion and whether before or after the termination abandonment or breach of the Contract) it shall in the first place be referred to and settled by the Engineer who within a period of 90 days after being requested by either party to do so shall give written notice of his decision to the Employer and the Contractor. Save as hereinafter provided such decision in respect of every matter so referred shall be final and binding upon the Employer and the Contractor until the completion of the work and shall forthwith be given effect to by the Contractor who shall proceed with the Works with all due diligence whether he or the Employer requires arbitration as hereinafter provided or not. If the Engineer has given written notice of his decision to the Employer and the Contractor and no claim to arbitration has been communicated to him by either the Employer or the Contractor within a period of 90 days from receipt of such notice the said decision shall remain final and binding upon the Employer and the Contractor. If the Engineer shall fail to give notice of his decision as aforesaid within a period of 90 days after being requested as aforesaid or if either the Employer or the Contractor be dissatisfied with any such decision then and in any such case either the Employer or the Contractor may within 90 days after receiving notice of such decision or within 90 days after the expiration of the first named period of 90 days (as the case may be) require that the matter or matters in dispute be referred to arbitration as hereinafter provided. All disputes or differences in respect of which the decision (if any) of the Engineer has not become final and binding as aforesaid shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The said arbitrator/s shall have full power to open up review and revise any decision opinion direction certificate or valuation of the Engineer and neither party shall be limited in the proceedings before such arbitrator/s to the evidence of arguments put before the Engineer for the purpose of obtaining his said decision. No decision given by the Engineer in accordance with the foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitrator/s on any matter whatsoever relevant to the dispute or difference referred to the arbitrator/s as aforesaid. The arbitrator/s shall not enter on the reference until after the completion or alleged completion of the...

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