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Cite as: 2003 SCLR 188, [2003] ScotCS 21

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FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President

Lord Marnoch

Lord Macfadyen

XA28/02

OPINION OF THE COURT

delivered by LORD MACFADYEN

THE CASE FOR THE OPINION OF THE COURT OF SESSION

under the Administration of Justice (Scotland) Act 1972, section 3

between

WILTSHIER CONSTRUCTION (SCOTLAND) LIMITED

Appellant;

and

DRUMCHAPEL HOUSING CO-OPERATIVE LIMITED

Respondent:

_______

Act: Glennie, Q.C., Masons; for the Appellant

Alt: Howie, Q.C., MacRoberts; for the Respondent

29 January 2003

Introduction

The parties to these proceedings, Wiltshier Construction (Scotland) Ltd (referred to in the Stated Case and hereinafter as "the appellant") and Drumchapel Housing Co-operative Ltd (so referred to as "the respondent"), are respectively the contractor and the employer in a construction contract for the modernisation of a number of blocks of existing houses in Southdeen Road, Drumchapel, Glasgow. A dispute arose between the parties as to whether, in the light of the extent to which the work was disrupted by vandalism, the provisions of the contract relating to (a) the time for completion of the contract works, and (b) the contract sum, were superseded by an entitlement on the part of the appellant to (i) a reasonable time for completion of the works, and (ii) remuneration quantum meruit. The dispute was submitted to arbitration, and the arbiter, after sundry procedure, heard a debate on the relevancy of the appellant's pleadings. Thereafter he issued a draft interlocutor and note in which he indicated that he was minded to dismiss the appellant's claim and to a substantial extent exclude from probation their answers to the counterclaim. At the request of the appellant, the arbiter then stated a case for the opinion of this Court. In order to understand the terms and context of the questions of law formulated by the arbiter, it is necessary to look in more detail at the relevant provisions of the parties' contract, their contentions as disclosed in the pleadings in the arbitration, and the arbiter's reasons for his proposed decision.

The Contract

The parties' contract is in the form of the Scottish Building Contract Sectional Completion Edition With Quantities. Essentially it provides that the appellant will carry out the works in accordance with certain drawings and bills of quantities, in return for the contract sum, and that the parties' rights will be regulated by the conditions of the Standard Form of Building Contract With Quantities (1980 Edition) with certain amendments. The provisions of the conditions of contract to which reference was made in argument in this Court, and to which it may be necessary to make further reference, included the following. Clause 1.4 read with Clause 2.1 places on the appellant responsibility for carrying out the works in compliance with the contract documents. Clause 13 regulates variations of the works, but it is the appellant's contention that the events on which they found their claim did not involve any variation within the meaning of that clause. Clause 14.2 prohibits adjustment or alteration of the contract sum otherwise than in accordance with the express provisions of the conditions, but the appellant contends that that does not stand in the way of the claim which they seek to make, since they are looking for payment on a basis other than the contract sum. Clause 22C deals with insurance of works in or extensions to existing structures. It is the employer's responsibility to maintain in joint names an all risks insurance policy (Clause 22C.2) in respect of damage to the works. If damage results from an insured risk, the occurrence of the damage is disregarded in computing the amount payable to the contractor under the contract (Clause 22C.4.1); the insurance monies are payable to the employer (Clause 22C.4.2); and any restoration, replacement or repair is treated as a variation under Clause 13.2, and the contractor is remunerated for it accordingly (Clause 22C.4.4.2). If it is just and equitable to do so, either party may treat the occurrence of loss and damage occasioned by an insured risk as ground for determination of the contract, any dispute as to whether it is just and equitable to do so being determined by arbitration (Clause 22C.4.3.1). Clause 25 regulates the circumstances in which an extension of time may be claimed, and Clause 26 regulates the grounds on which the contractor may seek to recover loss and expense. Clause 28A enables either the employer or the contractor to determine the contract if the works have been suspended for certain periods because of force majeure, loss or damage occasioned by a specified peril, or civil commotion.

The other provision of the contract which is important for the purposes of the parties' dispute is clause 9.17 of the preliminaries set out in the bills of quantities. It is headed "Site Security". Paragraph b. requires the contractor to obtain from the police a crime profile "in order that he is fully cogniscant (sic) of the crime level in the area". Paragraph c. provides as follows:

"The Contractor shall be responsible for the security of the site and of all work done by him from the Date of Possession of the Site until the date of handover of the site or any such sections."

Paragraph d. then sets out certain minimum (but not limiting) measures to be taken by the contractor. Among the sub-paragraphs of paragraph d. particular reference was made in argument to 7 and 8. Sub-paragraph 7 indicates that in some instances security 24 hours a day may be appropriate, and states:

"The Contractor should make allowance for this level of security if this proves necessary".

Sub-paragraph 8 refers to closed circuit television and in that connection repeats the language quoted above from sub-paragraph 7. Similar language is again used in sub-paragraph a) of a later passage setting out the employer's specific requirement that security services be provided "at all times". The clause ends with the following passage:

"The Contractor is recommended to visit the site: examine and ascertain for himself the specific nature and level of security requirements which may influence or affect his tender. Any monetary or other claims made by the Contractor on the grounds of want of knowledge of any or all of the matters noted under Site Security will not be entertained by the Employer."

The Appellant's Pleadings

In statement of fact 4 for the appellant the problem which they encountered in carrying out the contract works is identified in the following terms:

"... the time taken to carry out the Works and the manner and cost of their being carried out was radically altered as a result of vandalism, theft, damage and fire-raising greatly in excess of what could reasonably have been foreseen by an experienced contractor in the position of the [appellant], and greatly in excess of what was foreseen by the [appellant], as a reasonable and experienced contractor."

There follows specification of the level of vandalism experienced at the site. It is then averred:

"Despite the [appellant's] best efforts, due to the nature and extent of the vandalism, theft, damage and fire-raising experienced on site, it is both impractical and impossible for the [appellant] to identify the nexus between the said incidents of lawlessness and corresponding heads of loss suffered by it."

The appellant goes on, in the same statement, to describe the respondent's reaction to the problem. It is averred that:

"... the actings of the respondent, and its funder, Scottish Homes, were such that it was clear that they wished the [appellant] to remain on site and carry out the works, notwithstanding this change in the time, manner and cost of carrying them out."

Re-phasing was proposed, but rejected by the respondent. The problem was raised with a Mr Hastie of Scottish Homes. He was told that the appellant was considering determination of the contract. It is not said under which provision of the contract they were considering taking that step, or whether that was made clear to Mr Hastie. It is averred that he:

"... noted that Scottish Homes could provide additional funding for the ... project in the same way as they had on another problematic site ...".

It is averred that at a meeting representatives of the appellant expressed concern about the problem, and advised the architect of the possibility of their determining the contract. Again there is no further specification of the provision under which the appellant was contemplating acting. At a later meeting the appellant's representatives were "given to understand" by a representative of the respondent:

"... that the issue of significant losses being incurred by the [appellant] on the project could be addressed by the involvement of Scottish Homes."

The contention is then advanced that:

"In the whole circumstances, the respondent thereby effectively requested that the [appellant] remain on site and carry out the works notwithstanding the radical change in the time, manner and cost of doing so. ... The [appellants] carried out the said radically different works."

The appellant's contention is then developed in statement of fact 5. It is said that as a result of the vandalism, the works actually done were not covered by the contract, but were such as to be outside its scope. It is reiterated that the actings of the respondent and Scottish Homes were such that it was clear that they wished the appellant to remain on site and carry out the works, notwithstanding the radical change in the time, manner and cost of carrying them out. It is contended that the provisions of the contract relating to the original scope of the works were rendered inapplicable. The contention continues:

"The parties did not, however, address the terms on which the [appellant] would be paid in respect of these radically different works, nor the time for completion of those works. Accordingly, in substitution for the original provisions of the Contract as to time for completion and remuneration, there was implied into the Contract an entitlement that the [appellant] would be required to complete the said radically different works within a reasonable time, and that the [appellant] would be paid reasonable remuneration in respect thereof."

There then follows an alternative contention that in the circumstances the respondent has been unjustly enriched by the appellant's execution of the "radically different" works, and that it is equitable that that enrichment should be reversed.

The Arbiter's Proposed Decision

In his Note, the Arbiter sets out at considerable length the submissions which were made to him in the course of the debate, but it is unnecessary to refer to these in detail. At pages 52 to 55 of his Note he sets out his Decision in five numbered sections. Sections 1 and 2 are in the following terms:

	"1.	Notwithstanding the [appellant's] arguments to the contrary, Site Security, as called for and presented in the contract documents, is a risk item to be borne fully by the contractor. Specifically, Clause 9.17(c) in the preliminaries in the Bill of Quantities places the risk expressly on the contractor. This absolute nature of the responsibility for this risk is not restricted by the wording of Appendix iii, including the handwritten insertion of the phrase 'as required', nor by the wording of clause 9.17(d).
	2.	It follows that, irrespective of the allegedly higher than normal incidence of vandalism and lawlessness - and it is said that this was of an extreme nature - delays, loss and expense arising therefrom and not otherwise reimbursable under the contract, are and remain the responsibility of the contractor."

The arbiter then notes, in section 3, that the appellant does not aver that the contract came to an end, either as a result of breach of contract on the respondent's part, or on the ground of frustration. He summarises what the appellant does aver in statements of fact 4 and 5. He then continues in the following terms:

"In the first place I do not accept that in the absence of a breach or termination of the contract a change in the time, manner and cost of carrying out the contract work is a change, which entitles the [appellant] to any payment, which goes beyond what is expressly provided under the contract. I do not accept that there is any basis for an implied right to reasonable time and reasonable remuneration in favour of the contractor in these circumstances. I am persuaded of this in particular by [certain authorities] and by the express contractual allocation in this case of responsibility for security risk to the contractor.

In the second place, I do not consider that there are averments in the pleadings, which form the foundation for any case that there was express alteration to the contract. The [appellant] made numerous representations to the Respondent both by letter and at meetings. The most encouraging response it received according to the pleadings was that the issue could be addressed by the involvement of Scottish Homes. That does not amount to an averment of an agreement to alter the contract. The [appellant] says that the Respondent effectively requested it to remain on site and carry out the contract works. In the circumstances that was no more than its existing contractual duty."

The arbiter then proceeded to reject the contentions that what the appellant had to do was outside the scope of the contract, or that there was any renegotiation of the contract, or that any new terms as to time and payment were implied into the contract.

In section 4 the arbiter deals with the issue of unjust enrichment. He states:

"The contract works remained the contract works and, standing my decision on responsibility for the risk associated with site security, it follows that the 'changed circumstances' narrated by the [appellant] were matters which fell to be dealt with within the framework of the contract. ... There is no room for the application of the principle of unjust enrichment."

In section 5 the arbiter rejects the claim that time became "at large".

The Questions of Law

It is in the context of those contractual provisions, those pleadings, and that draft decision that the questions of law stated by the arbiter fall to be considered. The questions, which are to be found in paragraph 10 of the Stated Case, are in the following terms:

	"10.1	On its true construction, does the responsibility for security imposed on the Appellant by Clause 9.17 of the preliminaries preclude it, in the circumstances condescended upon, from claiming for payment for the works quantum meruit, et separatim claiming that it was entitled to "a reasonable time" as the period for completion of the contract works et separatim claiming on the basis of unjust enrichment?
	10.2	Does the fact that the contract was not terminated preclude, in the circumstances condescended upon, the claims made on record by the Appellant for a reasonable time to complete the work et separatim an entitlement to be paid for the works on a quantum meruit basis et separatim payment on the basis of unjust enrichment? If it precludes any of those claims, which does it preclude?"

The Appellant's Submissions

The appellant's claims for a reasonable time to complete the works and for reasonable remuneration proceed primarily on the basis that on a sound view of the circumstances there was a supervening agreement between the parties which superseded the original contractual provisions regulating time for completion and the basis of the appellant's remuneration. Mr Glennie, who appeared for the appellant, submitted that that supervening agreement could be regarded indifferently either as a modification of the original contract, or as a collateral agreement. That agreement was reached in knowledge of the extent of the vandalism problem and the fact that it rendered the execution of the works something radically different from that which had been contemplated when the contract was concluded. It recognised that in those circumstances the contractual provisions regulating time for completion and remuneration could no longer be regarded as applicable. The agreement was to be inferred from the respondent's actings, in face of the appellant's intimation that they were considering determining the contract, by which they had encouraged the appellant nevertheless to complete the works. The agreement that the appellant should complete the work although the contractual provisions as to time and remuneration were no longer applicable did not go so far as to identify substitute provisions on these matters. In that situation, the ordinary implied terms that (a) work for which no time for completion is agreed must be completed within a reasonable time, and (b) that work for which no remuneration is agreed is to be remunerated quantum meruit, came into operation.

Mr Glennie submitted that the relevancy and the sufficiency of the specification of the appellant's averments in support of the agreement for which they contended were not matters for this Court. It was not the subject of either of the questions formulated by the arbiter. The Court should, he submitted, be slow to interfere uninvited in matters of specification of pleadings, which were truly matters of procedure for the arbiter (ERDC Construction Ltd and HM Love & Co 1996 SC 523 per Lord President Hope at 528).

Mr Glennie submitted that on a sound construction of clause 9.17 of the preliminaries, it did not place on the appellant responsibility for ensuring the security of the site in all circumstances. The purpose of the provision was twofold. First, it drew to the attention of the contractor the need to include in his tender price provision for meeting the cost of appropriate security arrangements. It placed on him an obligation to inform himself about the ascertainable circumstances bearing on the security risks affecting the site. It ruled out any claims for extra remuneration where loss was incurred by the contractor through underestimating the cost of making provision against foreseeable security risks. Secondly, it made an allocation of responsibility to the contractor which would be relevant as part of the background to the insurance arrangements provided for in Clause 22C of the conditions of contract. It was, however, the employer who was obliged to take out insurance. What clause 9.17 did not do was make the contractor responsible for losses resulting from unforeseeable security risks. That was made clear by the provisions (such as the last paragraph of clause 9.17) which referred to the inquiries to be made and the knowledge to be acquired by the contractor. Here the averment was that the vandalism which occurred was quite beyond what had been foreseeable to an experienced contractor. It was therefore not something the risk of which had been imposed on the appellant.

In any event, Mr Glennie submitted, whether he was right or wrong about the scope of the contractor's obligation under clause 9.17, the existence of that provision could not preclude the sort of supervening or collateral agreement for which the appellant contended. Even if, on a sound construction of the contract as originally entered into, the whole responsibility for the risk of vandalism, foreseeable and unforeseeable, rested on the appellant, that could not be regarded as preventing the respondent from entering into a subsequent agreement accepting that because of the level of vandalism the original provisions for time and remuneration were no longer appropriate. It followed, therefore, that clause 9.17, properly construed, did not preclude the appellant's case based on a supplementary or collateral agreement for a reasonable time for completion and remuneration quantum meruit.

If there was no such agreement, the appellant's alternative approach was to make a claim on the basis of unjust enrichment. Clause 9.17 did not preclude that claim either. If the construction of that clause contended for by the appellant was correct, the responsibility which the contractor undertook in respect of security was limited to foreseeable risks. That limited responsibility did not preclude the unjust enrichment claim. That claim proceeded on the basis that the risks which eventuated were unforeseeable. It was because of the unforeseeable level of vandalism that the work done was not the work contemplated in the contract, but was more extensive and costly and thus conferred unjust enrichment on the respondent.

In these circumstances, it was Mr Glennie's submission that both in relation to the claim based on supplementary or collateral contract and in relation to the claim based on unjust enrichment, the first question fell to be answered in the negative.

So far as the second question was concerned, Mr Glennie's submission was that the fact that the original contract had not been terminated had no bearing at all on the validity of the claim based on supplementary or collateral agreement. The point was incapable of elaboration.

Mr Glennie accepted that the unjust enrichment basis for the appellant's claim would not be available in circumstances in which the original contract remained in effect and contained provisions which regulated the time for completion and the computation of remuneration in the events which had happened. He submitted, however, that to the extent that the level of vandalism had been such as to render the work done something different from that for which the contract contained time and remuneration provisions so that those provisions were no longer applicable, and in the event that there was no supplementary or collateral agreement regulating expressly or by implication the remuneration of that changed work, a claim for unjust enrichment was available.

For these reasons, the appellant's submission was that the second question too should be answered in the negative.

The Respondent's Submissions

Mr Howie for the respondent made a preliminary submission that the appellant's case, in so far as Mr Glennie based it on the contention that the parties had entered into a collateral contract (as distinct from a variation of the original contract), raised an issue which was beyond the arbiter's jurisdiction. The joint Deed of Submission refers "all disputes which have arisen ... under and arising out of the Contract". A contention based on the creation of a separate collateral contract could not be said to fall within the scope of that reference. Moreover, Mr Howie submitted that there was a further difficulty in the way of a case based on collateral contract. That approach wholly failed to address the need for the parties by some means to be quit of the provisions of the original contract relating to time for completion and remuneration before any implied terms as to reasonable time and reasonable remuneration could be held to take effect. In the light of those difficulties in the way of a case based on collateral contract, Mr Howie concentrated in his main submissions on meeting the contention that there was to be inferred a variation or alteration of the original contract substituting for the original contractual provisions as to time and remuneration an entitlement to a reasonable time for completion and remuneration quantum meruit.

Mr Howie identified as fundamental to the appellant's contentions the proposition that the level of vandalism experienced in the course of the contract was such, and its disruptive impact on the works so great, that the works ceased to be what the contract had contemplated, and became something separate and distinct for which the contract made no provision. He submitted that on a sound construction of clause 9.17 it could not be said that the contract did not contemplate the conditions that were experienced. On the contrary, clause 9.17 placed absolute responsibility for site security on the appellant, and it followed that, however bad the level of vandalism was, it was within the contemplation of the contract. The leading provision of clause 9.17, according to Mr Howie's analysis, was paragraph c., which placed responsibility for security of the site for the entire duration of the contract on the contractor in entirely unqualified and open-ended terms. Its effect was to oblige the contractor either to take security measures which were effective whatever befell, or else to bear the risk of all and any additional costs resulting from inadequate security. The all-encompassing nature of the responsibility placed on the contractor by clause 9.17 was not qualified by paragraph d., since it expressly declared that it was concerned to set out minimum requirements which did not limit the obligation. The fact that paragraph b. placed on the contractor an obligation to obtain a crime profile to inform his assessment of the risk did not affect the breadth of the primary obligation. Nor did the fact that the last paragraph of the clause recommended that the contractor visit the site to inform his pricing for site security, and stated that claims based on want of knowledge would not be entertained. These provisions, while emphasising the importance of obtaining information in advance, did not provide a measure of a less than absolute level of responsibility. There was nothing in paragraph c. to suggest that the contractor was only to make provision for reasonably foreseeable threats to security. On the contrary, sub-paragraphs 7 and 8 of paragraph d. made it clear that the contractor was to make allowance for whatever level of security proved in the event to be necessary. The insurance provisions in Clause 22C of the conditions had no bearing on the interpretation of clause 9.17 of the preliminaries.

Part of the appellant's reasoning, in arguing that it was to be inferred that there had been a variation of the contract to remunerate them for the additional cost flowing from the high level of vandalism, was that they were in the circumstances contemplating termination of the contract. Mr Howie submitted, however, that neither of the provisions mentioned in that context by Mr Glennie, namely Clause 22C.4.3.1 and Clause 28A, entitled them to terminate the contract. So far as Clause 22C.4.3.1 was concerned, there were two preconditions to its operation. First, in terms of Clause 22C.4, on the occurrence of loss or damage, the contractor required to give notice to the architect and the employer of the extent and location of it. There was no suggestion that such notices had been given, but equally no suggestion that it was impracticable to give them. Secondly, the contractor could only determine the contract if it was just and equitable that he should do so. The facts (a) that he would be remunerated under the contract for the original work (Clause 22C.4.1), (b) that the repair work would be treated as a variation under Clause 13.2 (Clause 22C.4.4.2), and valued as such under Clause 13.5, and (c) that it followed from the fact that repair work was treated as a variation that any loss and expense caused by disruption due to the repairs made necessary by the vandalism could be the subject of a claim under Clause 26.2.7, all bore on whether it would have been just and equitable for the appellant to terminate the contract. A fortiori, if the respondent's construction of clause 9.17 was correct, it could hardly be said to be just and equitable for the contractor to determine the contract on grounds related to his own default in maintaining site security. So far as Clause 28A was concerned, the contractor's right to determine under that provision was conditional on the whole works having been suspended for a month or more. Suspension of the works was a matter for the architect, and there was no suggestion that there had been any such suspension in the present case. Moreover, Clause 28A.2 excluded determination where the loss or damage in question was caused by default of the contractor. Thus, again, if the respondents were right in their construction of clause 9.17, determination under Clause 28A was excluded.

The appellant's reasoning further depended on the proposition that the original contract made no provision which was capable of providing proper remuneration for the work in the form in which it had to be undertaken in the light of the vandalism. On the contrary, Mr Howie submitted, the contract made adequate provision for that, by (1) preserving the remuneration due for the original execution of subsequently damaged or destroyed work (Clause 22C.4.1); (2) treating the repairs as if they were a variation instructed by the architect under Clause 13.2 (Clause 22C.4.4.2), and thus remunerable in accordance with the rules in Clause 13.5; and (3) admitting a claim for loss and expense in respect of disruption caused by the repair works (Clause 26.2.7). In so far as the appellant's claim in the arbitration was stated as a global claim on account of the alleged impracticability of identifying the nexus between individual acts of vandalism and corresponding heads of loss, it could not be said that that approach would be any less available in a claim for loss and expense under Clause 26.2.7. In short, it could not be said that the original contract did not cater for the eventuality which occurred.

Mr Howie further submitted that on a sound construction of clause 9.17 it excluded any claim based on unjust enrichment. Since clause 9.17 placed an unlimited responsibility for site security on the contractor, it could not be said that the events which happened were beyond the contemplation of the parties when the entered into the contract. On the contrary, the contract made provisions which were applicable in the events which happened. They went a long way towards enabling the appellant to be remunerated for the additional work which had to be carried out as a result of the vandalism, and for the disruption occasioned by their having to do so. The basis on which the appellant advanced the unjust enrichment case was therefore undermined.

For these reasons, Mr Howie submitted that Question 1 should be answered in the affirmative, both in relation the claim based on a variation of the contract and in relation to the claim based on unjust enrichment.

Turning to Question 2, Mr Howie accepted that the fact that the original contract had not been terminated did not per se preclude the possibility of the conclusion of a new contract providing for a reasonable time for completion of the contract works and remuneration on a quantum meruit basis. He submitted, however, that if he were correct in submitting that the original contract contained provisions capable of dealing with the consequences of the high level of vandalism, that militated against the likelihood of the respondent agreeing to such a new arrangement. So too, if he were correct in submitting that the appellant was not in fact in a position to determine the contract, that rendered it improbable that the respondent would have agreed to the arrangement contended for by the appellant.

The continued subsistence of the contract, Mr Howie submitted, did preclude the claim based on unjust enrichment. The construction of clause 9.17 for which the respondent contended meant that what the contractor did, in completing the works despite the high level of vandalism, was no more than he was contractually bound to do. In return he was entitled to such remuneration as the contract provides for, whether by way of payment at the contract rates for the original work, or payment for the repair work as if it were a variation, or payment for disruption consequent on the need for the repair work as a claim for loss and expense. In so far as the contract leaves the appellant unremunerated for any aspect of the consequences of the high level of vandalism, that is consistent with the allocation of risk effected by the subsisting contract, and in particular clause 9.17.

For these reasons, Mr Howie submitted, Question 2 should also be answered in the affirmative.

Mr Howie advanced a further submission relating to the relevancy and specification of the appellant's averments in support of the existence of a supplementary or collateral agreement providing for a reasonable time for completion of the works and remuneration on a quantum meruit basis. He was inclined to accept, however, that that argument did not directly address either of the questions on which the arbiter had sought the opinion of this Court. It is sufficient to record the argument briefly. It involved an examination of the appellant's averments in statement of fact 4 at pages 7 and 8 of the Closed Record dealing with the communings between the parties after the problem with the level of vandalism emerged. On the one hand, the appellant communicated that they regarded the nature of the work as having changed radically. On the other hand the respondent evinced a wish that the appellant should remain on site and complete the work. Extra remuneration was sought, but one response, from Mr Hastie of Scottish Homes, was irrelevant because he did not represent the respondent, and the other, from Ms Dhir, merely gave the appellant to understand that the issue of losses could be addressed through the involvement of Scottish Homes. There was nothing to show that the respondent accepted that the original contractual provisions were no longer applicable, or that in seeking the completion of the work they were consenting to additional time and additional remuneration. The facts averred did not yield the inference that the respondent had entered into a fresh contract. The arbiter had correctly indicated an intention to reject the relevancy of the case based on further contract.

The Appellant's Response

In responding to Mr Howie's submission that the original contract could cope adequately with the remuneration of the appellant in the events which happened, Mr Glennie submitted that it was wrong to suggest that the appellant would have had a claim under Clause 26.2.7. Such a claim depended on the issue of an architect's instruction requiring a variation of the work. Here there had been no architect's instruction. In any event, even if a Clause 26.2.7 claim was available, it would not cover loss and expense resulting from disruption caused directly by the interruption of the work occasioned by the vandalism (as distinct from disruption caused by carrying out the work necessary to repair the damage done by vandalism). To that extent, at the least, the original contract made no adequate provision for the events which had happened.

Augmenting his submission that this Court should not concern itself with the relevancy and specification of the averments intended to support the inference that there had been an additional agreement providing for a reasonable time for completion and remuneration quantum meruit, Mr Glennie began by pointing out that in terms of section 3 of the Administration of Justice Act 1972 ("the 1972 Act") a case could only be stated on a question of law, and only on such a question arising in the arbitration. Although it would have been competent to do so (John G. McGregor (Contractors) Ltd v Grampian Regional Council 1989 SLT 299), the respondent had not sought to have the arbiter ordained to state a case on the relevancy and specification of the averments about the additional agreement. The only issues before the court were therefore those raised by the two questions actually stated by the arbiter. It was clear that the arbiter regarded the answers to these questions as material to his proposed decision. Given that the extent to which the arbitration proceeded by way of conventional pleadings was a matter peculiarly for the arbiter to determine, it was especially inappropriate that the Court should enter upon issues of relevancy and specification which were not focused in the questions formulated by the arbiter. It was to be remembered that the arbiter had had before him substantial bundles of productions, including witness statements, and the Court could not know to what extent he had taken them into account. Moreover, once the questions were answered, it would be open to the parties to seek to make further submissions to the arbiter in the light of the answers. Before the arbiter there was scope for amendment of the pleadings, whereas there was no such scope before the Court in the Stated Case. In these circumstances, Mr Glennie declined to answer the submissions made by Mr Howie (see paragraph [29] above) regarding the relevancy and specification of the averments about a varied or additional agreement.

Discussion
(a) The Scope of the Case

In view of the dispute between the parties as to the extent to which it is appropriate for this Court to address the question of the relevancy and specification of the averments by which the appellant seeks to set up the alleged additional agreement, we begin by reminding ourselves of the nature of these proceedings. They are in the form of a case stated by the arbiter under section 3 of the 1972 Act for the opinion of the Court on questions of law arising in the arbitration. Although the Stated Case bears to be in an "Appeal by" the appellants, and they are designated in it as appellants, there is in truth no appeal. The purpose of a stated case is not to bring a decision already taken under review, but to enable the arbiter, before he makes his decision, to obtain (or to enable the parties to procure that the arbiter obtains) the guidance of the Court on questions of law which arise in the arbitration. Although the Court may, on the application of a party, order the arbiter to state a case on particular questions, no such order has been sought or made in the present case. It therefore falls to this Court to answer as we consider appropriate the questions on which the arbiter has sought our assistance.

As Lord President Hope pointed out in ERDC Construction Ltd and HM Love & Co at 528B and D, given the breadth of the arbiter's discretion on matters of procedure, it may be an abuse of section 3 to bring questions of mere procedure before the Court on the pretext that they are questions of law. It seems to us, however, that if an arbiter has chosen (as the arbiter in the present case has done) to proceed by way of conventional pleadings, and has heard a debate on them, a proposed decision by the arbiter on the relevancy (and even the specification) of the pleadings may well depend on questions of law on which it is perfectly legitimate for him to seek the assistance of the Court by way of a stated case. In the present case, we do not consider that we are precluded from considering the relevancy and specification of the pleadings about the additional agreement on the ground that these are matters of procedure within the arbiter's discretion. We can, however, only properly consider those matters to the extent that it is necessary to do so in order to answer the questions which the arbiter has formulated.

Both of the questions posed by the arbiter contain the phrase "in the circumstances condescended upon". The effect of that phrase is to make it legitimate and necessary for us to take into account the whole terms of the appellant's pleadings when considering how to answer the questions. Moreover, although it is clear from his Note that the arbiter is minded to take a certain view of the sufficiency of aspects of the appellant's pleadings, we are not constrained by that view. In answering the questions we must consider the effect of the circumstances condescended upon for ourselves. It would not, however, be helpful to take this point further in the abstract.

(b) Question 1

The first step towards answering this question is to construe clause 9.17. It forms part of the preliminaries section of the bill of quantities. The function of the bill of quantities is to set out the work which the employer requires to have carried out in a way that enables the contractor to assign prices to items of work and thus build up the amount of his tender. The contractor must include in his tender inter alia an amount representing his price for doing what is required of him by the terms of the preliminaries. That appears in the tender summary as "Amount of PRELIMINARIES", and in this contract is stated at £310,457.00. Clause 9.17 contains a mixture of procedural requirements, substantive requirements and advice and guidance to the contractor. In our opinion, Mr Howie rightly identified paragraph c. as containing the main substantive requirement. It provides:

"The Contractor shall be responsible for the security of the site and of all work done by him from the Date of Possession of the Site until the date of handover of the site ...".

In our opinion, that is an unequivocal and unlimited allocation of responsibility to the appellant for the provision and maintenance of site security. It is true, as Mr Glennie pointed out, that other parts of the clause are concerned in one way or another with the obtaining of information about security requirements. Paragraph b. obliges the contractor to obtain a crime profile of the area from the police "in order that he is fully [cognisant] of the crime level in the area". The last paragraph of the clause contains a recommendation that the contractor visit the site and "ascertain for himself the specific nature and level of security requirements which may influence or affect his tender". It is also true that the last paragraph of the clause contains a declaration that claims made by the contractor "on the ground of want of knowledge" of security matters "will not be entertained by the Employer". We do not consider, however, that it is correct to infer from those references to the acquisition of knowledge and the consequences of want of knowledge that the contractor's responsibility is limited to making provision for security measures against risks reasonably foreseeable by an experienced contractor. Other parts of the clause set minimum requirements which are expressly said not to limit the measures which the contractor must take (paragraph d.), and within that paragraph certain of the requirements emphasise that the contractor must make allowance for such level of security as proves necessary (sub-paragraphs 7 and 8). When account is taken of the whole provisions of clause 9.17, we are of opinion that it contains nothing which limits the responsibility of the contractor for site security. We do not consider that that involves requiring the contractor to perform the impossible by taking measures which will prevent all breaches of security, however unforeseeable. On the contrary, the clause functions as a provision allocating risk. The contractor can protect himself to some extent by obtaining as much information as he can about what measures are likely to be necessary to maintain site security. The cost to him of those measures will no doubt inform the amount which he enters in the tender summary as "cost of preliminaries" (although how far it is reflected therein is, in the context of competitive tendering, a matter for his judgment). But once his tender has been accepted and the contract has been entered into, the risk of loss and expense caused by breaches of site security in our opinion remains with him in terms of clause 9.17c., whether the loss or expense results from foreseeable events or unforeseeable events.

In reaching that construction of clause 9.17, we also take into account the fact that the severity of the impact of that construction on the appellant is in our view mitigated by other provisions of the contract. In so far as a breach of security results in a loss covered by the all risks policy of insurance which the employer is obliged to take out under Clause 22C.2, the contractor will indirectly benefit from that insurance. He will retain his entitlement to be paid under the contract for the work damaged by the breach of security (Clause 22C.4.1), and will in addition be paid for "restoration, replacement or repair" as if that work were a "Variation required by an instruction of the Architect under clause 13.2" (Clause 22C.4.4.2). In addition to that, because the repair work is deemed to have been instructed by the Architect as a Clause 13.2 variation, any loss suffered through delay and disruption of the completion of the contract works through carrying out such repair can (without an actual Architect's instruction) be made the subject of a claim under Clause 26.2.7. As Mr Glennie rightly pointed out, no Clause 26 claim would be available in respect of delay and disruption caused directly by the interruption of the work by the occurrence of episodes of vandalism (as distinct from such delay and disruption caused by the need to execute the repair work), but the fact that the conditions of contract merely mitigate and do not wholly elide for the contractor the impact of the risk which he assumed under clause 9.17 is not in our opinion surprising.

If, as we have held, clause 9.17 is to be construed as placing the whole responsibility for, or risk of, breaches of site security on the appellant, the next matter to be addressed is the impact of that construction on the claims which the appellant seeks to advance in the arbitration. We consider first the contractual claims. (We do not consider it necessary to deal with Mr Howie's submission that the appellant's case, so far as based on collateral contract, is outwith the arbiter's jurisdiction; Mr Glennie was indifferent as to whether his contractual case was treated as based on a collateral contract or a variation of the original contract.) In our opinion it is theoretically correct, as Mr Glennie submitted, that, even if clause 9.17 is construed as imposing an absolute responsibility on the contractor, that does not exclude the possibility that the employer and the contractor, faced with a much higher incidence of vandalism than anyone had foreseen, might have reached an agreement modifying the original contract and providing for a different approach to time for completion and a different approach to the contractor's remuneration. But Question 1 is not a theoretical, abstract question. As we have already noted, it is concerned with whether the construction of the clause precludes the appellant's claims "in the circumstances condescended upon". It is therefore necessary to examine the way in which the appellant maintains the new agreement came about, to see how far that can stand with our construction of clause 9.17.

The underlying proposition on which the appellant's claim is based is that a new agreement was entered into because the original contract did not contemplate vandalism of the level that was in fact encountered, and did not make appropriate provision for time or remuneration in those altered circumstances. In our view that proposition is seriously undermined if clause 9.17 is to be construed as we construe it. If we are right about clause 9.17, it allocated responsibility for site security to the appellant in unqualified terms, and was thus applicable however unexpectedly severe the vandalism problem was. Moreover, in view of the provisions of Clause 22C to which we have referred in paragraph [36] above in our discussion of the construction of clause 9.17, it cannot, in our view, be said that the original contract made no provision for appropriate remuneration in the events which happened. It may not have ensured that the appellant was remunerated for every aspect of the consequences of the high level of vandalism (e.g. for disruption caused by interruption of the work by vandalism), but it did provide for payment both for the original work and for the repair work, and made available claims for loss and expense caused by the disruption resulting from the remedial works. In this context, nothing turns, in our view, on the fact that the appellant makes averments in the arbitration seeking to justify the making of a global claim (see the last passage quoted in paragraph [4] above). It is not appropriate for us to say anything in this case about the circumstances in which a global claim may be available, but it seems to us that a global claim would be available to the same extent in a loss and expense claim under Clause 26 as in a claim of the sort which the appellant seeks to make in the arbitration.

Another factor on which the appellant places some stress in arguing for a new agreement on time and remuneration is that, in their discussions with the respondent, they indicated that they were considering termination of the contract. We note that nothing is said in their pleadings in the arbitration about the ground on which they were contemplating doing so. In submissions before us, Clauses 22C.4.3.1 and 28A were mentioned. In our view, however, Mr Howie was right, for the reasons he gave, in his submission (see paragraph [22] above) that neither of those clauses was likely to be of any avail to the appellant in the circumstances that prevailed. Of course, the fact that the circumstances did not appear to give the appellant good ground to determine the contract does not mean that they did not indicate that they were considering doing so. Nor does it mean that their threat would necessarily be ignored by the respondent, for whom the loss of the appellant as contractor, on good or bad grounds, would no doubt have been disruptive and highly undesirable. But, taken with the other points which we have discussed, it renders less cogent the argument for a new agreement on time and remuneration.

To summarise our reasoning so far, we construe clause 9.17 as placing on the respondents unqualified responsibility for the provision and maintenance of site security. We accept that in theory that does not exclude the possibility of a new agreement between the appellant and the respondent providing for a reasonable time for completion and reasonable remuneration in light of the level of vandalism actually encountered. We note, however, that if clause 9.17 is to be construed as we construe it, it cannot be said that the original contract did not contemplate or make provision for the event of an unforeseen level of vandalism being experienced. Nor can it be said that the contract made no provision appropriately regulating remuneration in such an event. Nor does it appear that the appellants had good ground for determining the contract. In all these circumstances, which Question 1 requires us to take into account, it seems to us that our construction of clause 9.17 precludes the appellant's contractual claims, unless there are clear averments of a new agreement reached despite all these difficulties.

It is in these circumstances that it is open to us, indeed necessary for us, to consider the relevancy and specification of the appellant's averments in support of the alleged new agreement. In our opinion the arbiter was right to express the view that there were no sufficient averments of such an agreement. The averments proceed on the basis that the level of vandalism has taken the work outwith the scope of the contract. That is contrary, in our view, to the effect of clause 9.17, and ignores the provision in the original contract by which the question of remuneration in such circumstances can be addressed. There is, however, no averment that, or from which it can be inferred that, the respondent accepted the appellant's position on the matter. Nor is there any averment suggesting that the respondent accepted that the appellant might be entitled to determine the contract. It is averred that there was discussion of additional funding. What Mr Hastie said about that is in itself irrelevant, because he did not speak for the respondent, although we consider that it might be relevant to the extent of colouring any subsequent statement by or on behalf of the respondent. That the appellants were "given to understand" by Ms Dhir that the issue of losses "could be" addressed by the involvement of Scottish Homes, is in our view a wholly inadequate basis for asserting agreement on the respondent's part to remuneration quantum meruit. In our opinion the appellant's averments, viewed as a whole, are quite insufficient to support the proposition that, despite our construction of clause 9.17, the parties contracted that the remuneration provisions of the contract were superseded in the manner contended for by the appellant. It follows that clause 9.17, on its true construction, does, in the whole circumstances condescended upon, preclude the appellant's claim based on the assertion of a contract for a reasonable time for completion and remuneration quantum meruit.

We can deal briefly with Question 1 so far as it relates to the unjust enrichment case. On the sound construction of clause 9.17, it cannot be said that the high level of vandalism yielded the result that the works done were outwith the scope of the contract, or that the contract ceased to provide for remuneration for them. In these circumstances, any claim the appellant may have is regulated by contract, and resort to a claim based on unjust enrichment is precluded.

We therefore answer Question 1 in the affirmative.

(c) Question 2

In our opinion the fact that the original contract was not terminated would not preclude the appellant's claims based on contract, if they were otherwise available. In the light of our answer to the contractual aspect of Question 1, however, the point is not a live one.

We are of opinion that the fact that the original contract was not terminated does preclude the appellant's claim so far as based on unjust enrichment. The point can be expressed shortly. We have held that on a sound construction of clause 9.17, the original contract provided for the events which happened. It follows that so long as that contract remains undetermined, there is no room for a claim on the basis of unjust enrichment.

We therefore find it unnecessary to answer Question 2, so far as it relates to the appellant's contractual claim. So far as it relates to the claim based on unjust enrichment, we answer it in the affirmative.