Shanks & McEwan (Contractors) Ltd v Strathclyde RC
| Jurisdiction | Scotland |
| Judgment Date | 11 February 1994 |
| Docket Number | No. 35. |
| Date | 11 February 1994 |
| Court | Court of Session (Inner House - Second Division) |
SECOND DIVISION.
ContractBuilding contractConstructionVariation of contractConstruction of underground sewerCracking of segmentsEngineer confirming cracked segments acceptable subject to requirement that contractor made them watertightWhether variationI.C.E. Conditions of Contract (5th edn., June 1973, revised January 1979), cll. 13(3) and 51(1)1
The respondents entered into a contract with the claimants for the construction of an underground sewer which contract was governed by the I.C.E. Conditions of Contract (5th edn.). There were also special contractual provisions relating to the segments of the tunnels so far as the precast concrete segments and accessories were concerned. As construction proceeded, a number of concrete segments developed cracks and as a result the claimants lost a significant amount of compressed air from the pipes. This meant that they were unable to maintain the required air pressure in the tunnel which, in turn, meant that they had a claim for additional cost and expense to which they were put, due to the cracking of the segments. Clause 13(1) of the Conditions of Contract obliged the contractors to adhere to the engineer's instructions and directions. Clause 13(3) entitled them to reimbursement of any costs caused by unforeseeable disruption to their arrangements and methods of construction arising from an instruction or direction, and deemed any variation required by an instruction or direction to have been given pursuant to cl. 51. Clause 51(1) provided that "variations" included "changes in quality, form and character". Clause 361.9 provided that certain prefabricated tunnel segments should be capable of withstanding a variety of specified forces without cracking. The engineer had approved the segments which the contractors had used and which had cracked. On seeking reimbursement the engineer had written on response to that request that "the cracked segments were acceptable subject always to the requirement to make them reasonably watertight". The matter was referred to the arbiter who found that the contractors were not responsible for the cracking and were entitled to payment for the variation of the contract. The respondents appealed to the Court of Session by way of stated case and argued, inter alia, that no variation of the contract had taken place but rather that the letter from the engineer had been simply a concession to the contractors.
Held (1) that as the engineer had concluded that the responsibility for the underdesign of the segments did not lie with the claimants, it followed that the engineer's instruction could not be regarded as a concession to the contractors who had failed in their obligations and that instruction had constituted a change in the terms of the contract in that the segments to be incorporated into the permanent works were no longer to be capable of withstanding stress without cracking which, in turn, constituted a change in quality; and (2) that such a change in quality constituted a variation in terms of cl. 51, so that the arbiter had not erred and the claimants were entitled to payment of their additional costs attributable thereto; and questions answered accordingly.
Opinion (per the Lord Justice-Clerk (Ross), that the letter had also been an instruction or direction requiring a variation in terms of cl. 13(3) and was therefore to be deemed a variation in terms of cl. 51.
Strathclyde Regional Council entered into a contract with Shanks & McEwan (Contractors) Limited for the construction of an underground sewer known as Garnock Valley sewer phase 2. The building contract was governed by the I.C.E. Conditions of Contract (5th edn.). A dispute arose, resulting in the parties submitting to arbitration a claim by the company for reimbursement for additional costs incurred in the performance of the contract. The arbiter found in favour of the company. The council thereafter requested that the arbiter state a case for the opinion of the Court of Session.
The cause called before the Second Division, comprising the Lord Justice-Clerk (Ross), Lord Murray and Lord Sutherland, for a hearing.
The questions posed for the opinion of their Lordships were in the following terms: "(1) Was the arbiter correct in law in concluding that the engineer assumed sole responsibility for the design of the segments, thus absolving the claimants from their liability under the contract to provide segments capable of withstanding the loads and pressures specified in the contract?
(2) Was the arbiter correct in law holding that the contract was varied in terms of cl. 51 of the conditions of contract, thus entitling the claimants to reimbursement of their extra jobs?"
At advising, on 11th February 1994
LORD JUSTICE-CLERK (Ross)On 27th July 1987 the respondents entered into a contract with the claimants for the construction of a sewer known as the Garnock Valley sewer phase 2. Their contract was governed by the I.C.E. Conditions of Contract (5th edn.). There were also special contractual provisions relating to the segments of the tunnels and so far as the precast concrete segments and accessories were concerned these were contained in cll. 361.1 to 361.13.
The claimants commenced work in July 1987, and work was completed on 6th March 1990. A number of disputes arose between the parties, and the present arbitration is the fourth arbitration between them. This arbitration is concerned in particular with the sewer, which was constructed within ground which contained large amounts of water with the result that the claimants required to carry out work under compressed air in order to keep water from entering the pipe during construction. As construction proceeded, a large number of concrete segments developed cracks and as a result the claimants lost a significant amount of compressed air from the pipes. That meant that they were not able to maintain the required air pressure in the tunnel, which in turn meant that they had a claim for additional costs and expense. In the present arbitration the claimants are seeking to be paid extra payments for the additional cost and expense to which they were put, due to the cracking of the segments.
In the arbitration the arbiter had to determine the cause of the cracking. The respondents contended that it was due to inter alia bad workmanship, but at the end of the day, the arbiter found that the cracking was due to underdesign. Counsel for the respondents intimated that the respondents did not now challenge that finding of the arbiter. Having reached that conclusion, the arbiter found the claimants entitled to reimbursement for additional costs arising from the cracking of the segments. Counsel for the respondents explained that the question which now arises for determination was whether, having regard to the terms of the contract, the arbiter was entitled to hold that the claimants were entitled to payment of additional costs.
Both the respondents and the claimants had invited the arbiter to state a case on certain questions of law. The respondents had requested him to state a case on two questions of law, and the claimants had asked him to state a case on four additional questions of law. The arbiter refused to state a case on three of the questions of law put forward by the claimants, but he did state a case on the two questions put forward by the respondents and one question put forward by the claimants. The solicitor-advocate for the claimants, however, intimated that he was not inviting the court to answer the question put forward by them. In these circumstances what the court now has to do is to answer the two questions which have been included in the case at the request of the respondents. These questions are in the following terms: [his Lordship quoted the questions and continued:]
In order to answer these questions it is necessary to have regard to the...
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...(1990) 8 Const LJ 174 at 179, per Judge Fox-Andrews QC. See also Shanks and McEwan (Contractors) Ltd v Strathclyde Regional Council [1994] CILL 916; Scriven, “Design Risk and Liability under Design and Build Contracts” (1996) 12 Const LJ 226 at 234–235; Tobin, “he Allocation of Construction......