England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
TECHNOLOGY AND CONSTRUCTION

		Royal Courts of Justice Strand, London, WC2A 2LL
		5th February 2009

Mr Justice Coulson :

Introduction

1. Due to the number and significance of the matters that had to be discussed and resolved at the Case Management Conference on 31^st January 2009, there were two disputes - the identification of possible preliminary issues, and whether or not the claimant should have permission to call two different architect experts – on which I was able to rule but, due to time constraints, I said that I would give written reasons for those rulings at a later date. These are those written reasons.
2. The defendant ("B&NES") engaged the claimant ("CJM") to carry out works of restoration and refurbishment at the world-famous Spa Buildings in Bath. The third party ("NGP") were the architects. There were problems on site, in particular in connection with the painting in the pool, and waterproofing. In April 2005 B&NES purported to accept CJM's wrongful repudiation of the contract. The circumstances in which that happened, and the validity of that alleged acceptance, are hotly contested.
3. In these proceedings, CJM claim the sum of £2.382 million as the net sum due on their final account. B&NES defend the claim and counterclaim damages in a figure just short of £20 million. The damages claims are said to arise out of delay and, in particular, the carrying out of remedial works, particularly in respect of the pool paint and waterproofing.
4. CJM defend the counterclaim. It is part of their case that the pool paint and waterproofing problems were due to inadequate specification and design. This has lead B&NES to issue third party proceedings against NGP, although I note that B&NES also make their own, separate allegations in those proceedings. The trial of all matters is due to be heard in January 2010 and the parties currently estimate that it will last for about 8 weeks.

Preliminary Issues/ General

5. The emphasis in the Civil Procedure Rules on the prompt and cost-effective resolution of civil litigation has led to an increase in the number of trials that are divided up in some way, in order to allow the court, if possible, to determine a particularly important issue in advance of the rest of the trial, in the hope that the decision will either resolve the case altogether, or prompt a settlement of the litigation as a whole. Issues which are ideal for such treatment include contract/no contract disputes; the validity and effect of alleged exclusion or limitation of liability clauses in the contract; and disputes as to the existence of an alleged common law or statutory duty, where there is little or no factual dispute.
6. Significant difficulties can arise where the proposed preliminary issues are accepted by all parties to be important, but where they are underpinned by a large number of factual disputes, or where the evidence in respect of the proposed preliminary issues may have to be trawled over a second time at the full trial, whatever the result on the preliminary issues. In those circumstances, the court will usually conclude that the issue in question is unsuitable for separate and early determination.
7. In McLoughlin v Jones [2002] 2 WLR 1279, the Court of Appeal said that preliminary issues should usually be questions of law, decided against a schedule of agreed or assumed facts, that would be decisive or potentially decisive of the case as a whole. Paragraphs 8.2-8.5 of the Second Edition of the TCC Guide recognises that, in construction disputes, it will sometimes be appropriate to deal with matters by way of preliminary issue, even if more extensive oral evidence than that envisaged in McLoughlin is required, and even if the issue will not necessarily determine the outcome of the whole case. But care is always needed to ensure that the ordering of preliminary issues does not turn out to be what Lord Scarman called "a treacherous short cut" (Tilling v Whiteman [1980] AC 1, page 25).

The Repudiation Issues

8. A brief chronology of the events relevant to repudiation/acceptance in this case is as follows:

a) On 24.3.05 NGP, on behalf of B&NES, instructed CJM, by Architect's Instruction 133, to carry out a lengthy list of works (including remedial works in respect of the pool paint and the waterproofing) and accompanied that instruction with a notice under clause 4.1.2 of the contract, requiring compliance within 7 days. Whether deliberately or not, these documents were issued by NGP just before the Easter holiday shutdown.

b) On 4.4.05, CJM replied, complaining about the short space of time in which they were being asked to carry out the work and taking a large number of other points about the detail of the works being instructed.

c) On 5.4.05, B&NES replied, requiring CJM to reply by 5pm on 6.4.05 as to whether it was their intention to comply with AI 133 or not.

d) On 6.4.05, CJM replied referring, amongst other things, to "an attempted holiday period ambush"

e) On 8.4.05, B&NES wrote to CJM purporting to accept what they alleged was CJM's wrongful repudiation of the contract. The letter referred to CJM's reaction to the issue of AI 133, but also said that they were "driven to the conclusion by this latest incident (when taken with earlier non-compliance with the contract) that Mowlem does not regard itself as bound by the contract." The letter then went on to identify numerous alleged breaches of the contract, some very general in nature, but others relating to specific, dated events. The letter required CJM to vacate the site.

f) On the same day, CJM wrote a lengthy letter to NGP dealing with AI 133.

g) On 11.4.05, CJM purported to accept B&NES lengthy letter of 8.4.05 as being itself repudiatory, because, amongst other things, it had required them to vacate the site.

9. In these proceedings, CJM rely upon AI 133 and/or the notice under clause 4.1.2 as an affirmation by B&NES of the continuing existence of the contract. In this way, CJM argue that all of the alleged breaches prior to 24.3.05 are irrelevant to the issue of repudiation. B&NES deny this. Further, B&NES seek to justify their acceptance of CJM's repudiation by reference to alleged defects which, they say, they discovered after CJM left site, and which therefore are not identified in the letters referred to above.
10. The alleged repudiation issues are of considerable importance in this case, but it is not entirely clear what, on their own, they might be said to be worth. This difficulty stems from the fact that B&NES have an alternative claim to the effect that, even if they are wrong and CJM had not wrongfully repudiated the contract, B&NES are still entitled to claim damages for breach of contract in respect of those defects which CJM had consistently failed to put right prior to 24.3.05. On their case, that would include many of the most important and costly defects, such as the pool paint and the waterproofing.

The Proposed Preliminary Issues

11. In these proceedings, CJM have proposed the following preliminary issues:

"1.1. Whether B&NES affirmed the building contract by the issue and service of AI 133 and the clause 4.1.2 notice each dated 24.3.05;

1.2. If the answer is 'yes' whether (1) CJM's response by letters dated 4^th and 6^th April 2005 and/or (2) the alleged subsequently disclosed defects (if true) constituted a repudiation of the contract which B&NES was entitled to accept by its termination letter of 8.4.08;

1.3. If the answers to (1) and (2) above are no, whether B&NES' letter of 8.4.05 was itself repudiatory; and so accepted by CJM's letter of 11.4.05."

12. CJM say that these preliminary issues can be resolved solely on a consideration of the handful of documents referred to in paragraph 8 above, although during argument Mr Soole QC made plain that he was also happy to operate on the basis that the court could assume as correct the pleaded allegations of breach set out by B&NES in the defence and counterclaim. Mr Soole also said that Issue 1.2 could be uncoupled from Issue 1.1 so that, even if CJM's affirmation argument failed, the repudiation argument could still be dealt with on the basis of the documents, again assuming the truth of the pleaded allegations of breach. B&NES objected to the proposed trial of preliminary issues, and Mr Friedman QC advanced a number of reasons why, on analysis, these issues ought not to be dealt with in the way proposed.
13. Parties to litigation of this sort should always try and see if there are ways of putting before the court the crucial issues at the earliest possible stage. It is clear that CJM, and their legal advisors, have thought very carefully about how to achieve such a result in this case, and Mr Soole has made a very eloquent presentation as to why I should order the preliminary issues noted above. However, with considerable reluctance, I have concluded that I should not do so. My reasons are both general and particular and are outlined below.

a) General

14. First, a court should always think twice before ordering preliminary issues in a substantial case where the defendant is so opposed to that way of proceeding. It is always preferable that preliminary issues can be ordered by consent.
15. Secondly, I think that it is almost impossible for a court to decide contested repudiation issues without hearing oral evidence from those involved at the time as to what was happening, and why the parties had reached such an unhappy stage in their relationship. I note that, in the list of possible preliminary issues set out in the paragraphs of the TCC Guide noted above, repudiation does not feature even as an example of an issue which might be suitable for resolution in this way. Whilst every case has to be looked at on its own facts, I am bound to say that, in my experience, significant disputes concerning repudiation – being so dependent on the facts, and the judge's impression of those individuals who took the critical decisions – are not an obvious candidate for resolution by way of preliminary issue.

b) Particular

16. There can be no doubt that the critical letter from B&NES of 8.4.05 relies on a large number of alleged breaches of contract by CJM that occurred before 24.3.05. Accordingly, CJM's affirmation argument (preliminary issue 1.1) would, if successful, render those breaches irrelevant for the purposes of the repudiation dispute. That could have a potentially devastating effect on B&NES's case. In such circumstances, I would be very uncomfortable simply to assume as true the matters in the defence which are pleaded as breaches, and then determine the affirmation argument on that basis. That would seem to me to be artificial and at least potentially unjust. It would prevent the court from establishing the true context and background, by reference to the evidence of those involved on both sides, of both the affirmation and the wider repudiation disputes
17. In this regard, I note what Moore-Bick J (as he then was) said in Yukong Line v Rendsburg Investment Corporation of Liberia [1996] 2 Lloyds Rep 694 on the issue of affirmation. First he pointed out that affirmation of the contract would be implied "where the injured party acts in a way which is consistent only with a decision to keep the contract alive or where he exercises his rights which would only be available to him if the contract had been affirmed". The repeated use of the word "only" identifies the relatively high hurdle that a party relying on an affirmation argument must get over, and, speaking for myself, I would not be happy about reaching a conclusion that the injured party affirmed the existence of a contract without hearing any oral evidence.
18. Secondly, in a later passage in his judgment, Moore-Bick J said:

"…the court should not adopt an unduly technical approach to deciding whether the injured party has affirmed the contract and should not be willing to hold that the contract has been affirmed without clear evidence that the injured party has indeed chosen to go on with the contract notwithstanding the other party's repudiation. In my view, the court should generally be slow to accept that the injured party has committed himself irrevocably to continuing with the contract in the knowledge that if, without finally committing himself, the injured party has made an unequivocal statement of some kind on which the party in repudiation has relied, the doctrine of estoppel is likely to prevent any injustice being done."

It seems to me that, for the reasons that I have given, it would be "unduly technical" to consider these issues without hearing evidence as to what the chief protagonists on each side thought about the pre-24.3.05 events, their understanding of the effect of AI 133 and the notice of the same date, and any other matters which may be relevant to the alleged decision to "go on with" the contract.

19. There is a related point. Some of the allegations of breach by B&NES are rather generalised, and make criticisms of CJM's performance which are unlinked to specific events. Assuming the truth of a generalised allegation will be of very little assistance to the court in determining whether or not AI 133 affirmed the contract. It seems to me that evidence as to the particular earlier events relied on by B&NES as constituting the background or context for AI 133, which may include some of those matters listed in the letter of the 8.4.05, will need to be first pleaded and then dealt with by both parties in the witness evidence.
20. Accordingly, I consider that the whole question of the pre-24.3.05 breaches/affirmation can only be determined by a consideration of the relevant events, and that will require oral evidence. As noted above, all events relied on by B&NES in connection with either the affirmation argument, or the validity of the matters in the letter of 8.4.05, will need to be pleaded out so that they can be dealt with by the witnesses on each side.
21. I should also stress that of course this conclusion does not mean that the trial judge will necessarily conclude that the pre-24.3.05 events are relevant to, or can have any effect upon, the affirmation issue; he or she may well decide that AI 133, and the notice under clause 4.1.2 that accompanied it, constitute the clearest possible affirmation of the contract, and that all prior events are indeed irrelevant. But it is simply that, as things presently stand, I would not wish to pre-judge that question without giving leave for oral evidence.
22. The parties are agreed that if I thought that oral evidence on the affirmation point was at least potentially relevant, then Issue 1.1 would not be suitable for a preliminary issue hearing. That is because of the likely volume of such evidence. Moreover, if that is right, it would follow that Issues 1.2 and 1.3, which are themselves linked to the outcome of the affirmation issue, must also await the main trial. Furthermore, if the affirmation issue is decided against CJM, then I consider that oral evidence as to the pre-24.3.05 events noted in B&NES' letter of 8.4.05 will be imperative; for the reasons previously given, it would again be inappropriate merely to assume generalised allegations of breach. Such oral evidence will overlap significantly, if not entirely, with the evidence that may be relevant to the background/context of the affirmation issue.
23. There is a further and separate point which has led me to conclude that I should not order a trial of these preliminary issues in advance of the rest of the trial. For the reasons noted above, I am not persuaded that, even if Issues 1.1-1.3 were resolved in CJM's favour, it would automatically have a significant effect on this case. It may well do so, but since B&NES has an alternative case to the opposite effect (see paragraph 10 above) it is, I think, impossible to say so for sure.
24. For these reasons, I have concluded that it would not be in accordance with the CPR and the proper exercise of my case management functions to order the proposed preliminary issues. No other issues have been suggested by any other party and certainly none jumped out at me when I read through the pleadings. Accordingly, it seems that, unfortunately, there is little option but for the parties to push on to a full trial of all the issues in this case at the start of next year.

Should B&NES Be Allowed To Call Two Expert Architects?

25. B&NES's application to call a second expert architect arises in this way. They say that their current architectural expert, Mr Jowett, has formed the clear view that the problems on site were principally, if not exclusively, matters of workmanship. They say that their third party claim against NGP is very much a secondary case, piggy-backing on CJM's allegations as to the inadequacies in the specification and design. Thus, as Mr Friedman put it, it would be difficult for Mr Jowett to give evidence which encompassed both design and workmanship; he would be trying to look in two different directions at once. Mr Friedman said that in such circumstances it would be easy to envisage attacks on Mr Jowett's credibility by both CJM and NGP.
26. On the face of it, this point has some force. But I then paused to consider what would happen if I gave B&NES permission to call a second architect expert ("X"), whose brief, as Mr Friedman explained, would be expressly limited to design and specification matters. When X came to be cross-examined by NGP's counsel, the first question in respect of, say, the pool paint defects would be to suggest that, in truth, the problem was really one of workmanship. If X said that he had not considered workmanship and only looked at design, then the credibility of his views on anything at all would be fundamentally weakened: it may well be impossible to say that an expert has reached a reliable view on the cause of a particular problem if he has not even considered one glaringly obvious possibility.
27. If X had considered the cause of the defect in detail (as it seems to me any expert would have to do) he would have one of two choices. He would either agree with Mr Jowett, in which case the whole point and purpose of calling a second expert on design is lost, or he would disagree with Mr Jowett, and the other parties in the case will then make submissions as to the flaws in a large counterclaim advanced by reference to the evidence of two expert architects who fundamentally disagreed as to the cause of the problems.
28. In essence, it seems to me that B&NES' difficulties in relation to expert evidence are inherent in the particular case that they are running in these proceedings, no matter how many expert architects they wanted to call. They have made plain that their principal case is workmanship and, of course, if that is proved right, then their claim over against NGP may be irrelevant. However, B&NES have also chosen to pursue a positive case against NGP. It is therefore for B&NES to prove that case in the usual way. It is entirely appropriate for such a case to be established by reference to Mr Jowett, the expert architect who has been involved for a considerable period of time advising B&NES in relation to these matters.
29. A second reason why I have concluded that it would not be appropriate to allow B&NES' application is more straightforward. Mr Soole demonstrated from the papers that Mr Jowett has already considered NGP's design and specification in some detail, just as I would have expected. It appears that Mr Jowett has made certain criticisms of that design and specification; indeed, a report co-authored by Mr Jowett, which makes some of these criticisms, has been expressly pleaded by CJM. Accordingly, it is inevitable that Mr Jowett will be cross-examined on design matters in any event, and it would be disproportionate and contrary to the overriding objective to allow B&NES to call another expert architect to give evidence on the very same topic.
30. I am in no doubt that B&NES will not suffer any prejudice as a result of this decision. After all, it is not uncommon for an employer to blame workmanship and/or design, and not uncommon for one expert to explain which alternative he favours (and why), but also to explain what elements of any secondary case he adopts (and why). Mr Jowett has been advising B&NES for some considerable time and will doubtless be in a position, by the time of the trial, to explain both the primary case on workmanship and, to the extent that he adopts it, the subsidiary case on design. The involvement of a second expert architect will not spare Mr Jowett any cross-examination on design matters; such cross-examination seems to me to be inevitable. It will also add a further, potentially expensive layer of unnecessary cost: I note that the fees payable to B&NES' consultants, including Mr Jowett, are already said to be £2.4 million. In addition, a second expert could easily lead to confusion and contradiction, doing more, rather than less, harm to B&NES' case in consequence.
31. For all these reasons, I decline to allow B&NES' application to call a second architect expert.