OUTER HOUSE, COURT OF SESSION
[2007] CSOH 81
|
CA23/06
|
OPINION OF LORD CLARKE
in the cause
AUTOLINK
CONCESSIONAIRES (M6) PLC
Pursuers;
against
(FIRST) AMEY CONSTRUCTION
LIMITED AND OTHERS
Defenders:
ннннннннннннннннн________________
|
Pursuers: Keen, Q.C., Mure; Fyfe Ireland LLP
Defenders: Cullen, Q.C., Richardson; Pinsent Masons
4 May 2007
Introduction
[1] This
commercial action concerns the contractual arrangements for inter alia, the extension of the
M6 motorway.
[2] The
defenders, Amey Construction Limited;
Sir Robert McAlpine Limited;
Taylor Woodrow Civil Engineering Limited and Barr Limited together
trading in joint venture as "Amey-Robert McAlpine-Taylor Woodrow-Barr M6 Joint
Venture" undertook to carry out Construction Works, on behalf of the pursuers
as employer, in terms of a contract dated 30 April 1997 described as the Construction
Contract M6 DBFO project (hereinafter referred to as "the Construction Contract")
(6/1 of process). The pursuers,
themselves, had by an agreement dated 24 April 1997, described as the "M6
DBFO Agreement" (hereinafter referred to as the "DBFO Agreement") (no. 6/2
of process) contracted with the then Secretary of State for Scotland to carry
out operations including the works which were then made the subject of the Construction
Contract between themselves and the defenders.
By clause 10(a) of the DBFO Agreement, the operations which the
pursuers undertook to carry out included the design, construction and
completion of the New Scottish Motorway being a:
"special road to
be constructed in Scotland ... in accordance with the New Works Requirements
between Paddy's Rickle Bridge and Cleuchbrae, together with the junctions and
slip roads relating thereto, being all the roads other than the Existing
Scottish Motorway situated within the O & M site in Scotland for which
the Secretary of State will become the roads authority following their
completion". - (See Part 1 of Schedule 1 of the DBFO Agreement).
The obligations undertaken by the
pursuers in terms of the DBFO Agreement were wider in scope than the "works"
undertaken by the defenders in terms of the construction contract, as that
expression, "works", is defined in that contract. In addition to the DBFO Agreement and the Construction
Contract, there were certain other related agreements. The first of these is what was described as
the "Routine Operation and Maintenance Contract" (hereinafter referred to as
"the ROM contract") between the pursuers and the defenders (7/4 of
process), a contract described as the Major Maintenance Call-Off Contract
between the pursuers and the defenders (7/5 of process) and certain
appointments on behalf of the defenders of designers and consultants (7/6
and 7/7 of process). Among others
things, these contractual arrangements were to provide not only for the
construction of a new section of roadway, but the maintenance thereof and the
maintenance of an existing roadway of which it formed the extension. In terms of clause 9 of the DBFO
Agreement, the pursuers' obligations (originally to the Secretary of State for Scotland
and now to the Scottish Ministers) under that Agreement, relate to a project
period of 30 years from the operations' commencement date as defined in
that Agreement. On the other hand, by
clause 51 of the Construction Contract, the defenders' maintenance
obligations are for a period of
60 months from the completion of the works they have undertaken to carry
out. In terms of the DBFO Agreement, the
pursuers' obligations in respect of, inter
alia, the design of the New Scottish Motorway are unqualified. On the other hand the defenders' obligations
in respect of the design of the New Scottish Motorway are qualified by
clause 6.1.2 of the Construction Contract in the following terms:
"In performing
its obligations under Clause 6.1.1 the Contractor shall design the Works
(including the specification of materials and Plant where required) with
reasonable skill and care and in accordance with practice conventionally
accepted as appropriate at the time of the execution of the Works having regard
to the size, scope and complexity of the Works".
[3] In
terms of clause 6 of the ROM contract (read with the definitions in
clause 1 thereof) the ROM contractors were made responsible for carrying
out routine maintenance to the New Scottish Motorway for an initial period of
5 years renewable thereafter. In
terms of clause 45 and the schedule of the ROM contract, the pursuers
stipulated for the right to instruct the ROM contractor to carry out works in
terms of a "works order". In terms of
the ROM contract moreover, the pursuers were obliged to pay for works carried
out in terms of a "works order".
[4] Under
the Major Maintenance Call-Off Contract, the pursuers stipulated, by virtue of
clause 1.1.4 for the carrying out, on their behalf, of "Major Maintenance"
(as defined) concurrently with the carrying out of the works undertaken by the
defenders in terms of the Construction Contract. "Major Maintenance" in terms of the Major
Maintenance Call-Off Contract was defined as meaning:
"all works of
repair and maintenance and any improvements required in respect of the Project
Facilities other than defects repairs under the Construction Contract or
routine operation and maintenance to be performed under the Routine Operating (sic) and Maintenance Contract".
In terms of the Major Maintenance
Call-Off Contract, the pursuers were obliged to pay for the carrying out of any
Major Maintenance Works.
[5] The
factual context of the dispute, now before the court, is averred by the
pursuers in Article 4 of Condescendence in the following terms:
"Since the Final
Completion of the Phases of the New Scottish Motorway, the pursuers have
identified major and important Defects within the pavement of the road, namely
the absence of a, et separatim the
inadequacy of the, bond between the upper and lower roadbase courses. The performance, structural integrity and
longevity of the pavement depends upon the stiffness of the roadbase within
it".
The averments go on to provide more
specification about the problem and its consequences. In particular, in Article 6 of
Condescendence they aver:
"The Defects
have to date caused visible problems in several areas of the New Scottish Motorway,
necessitating repair works, and will continue to do so until such time as the
Defects themselves are remedied in terms of Clause 51.1. The Defects have caused a very significant
reduction in the residual life of the pavement."
In the first conclusion of the
summons, the pursuers seek a declarator in the following terms:
"For declarator
that the defenders are liable in terms of Clause 51 of the contract
between the parties dated 30 April 1997 ('Construction Contract
M6 DBFO Project') to remedy the lack of et separatim inadequacy of, bond between the upper and lower
roadbase courses in the New Scottish Motorway (as defined in the said Contract)".
They then, in the second conclusion
seek the following order:
"For an order
ordaining the defenders to remedy the lack of, et separatim inadequacy of, bond between the upper and lower
roadbase courses in the New Scottish Motorway (as defined in the said Contract)
at their own cost and to the pursuers' reasonable satisfaction, and that within
the period of two years from the date of decree to follow hereon, or within
such other reasonable period as the Court shall seem fit."
The Dispute focuses, accordingly,
in the first place, on the proper construction and effect of clause 51 of
the Construction Contract which is in the following terms:
"51 MAINTENANCE PERIOD
51.1 Rectification of Defects
The contractor
shall complete the work, if any, outstanding on the date in the Permit to Use
as soon as practicable after such date and remedy to the Employer's reasonable
satisfaction, and within such reasonable time as the Employer may specify
having regard to the nature of the Defect, all Defects (whenever arising or
manifesting themselves) in the New Works insofar as notified to the Contractor
by the Employer within 60 months of Final Completion of all Phases of the
Scottish Works and of the English Works part of the New Works (each of which
60 month periods are referred to in this Contract as the 'Maintenance
Period' for such part and in the case of the Ancillary Works and the
Accommodation Works, subject to clause 17.1(b) of the M6 DBFO
agreement).
51.2 Cost of Remedying Defects
51.2.1 All work referred to in
clause 51.1 shall be executed by the Contractor at its own cost unless the
necessity thereof is a direct result of a wilful act or breach of this Contract
by the Employer.
51.2.2 If in the opinion of the
Employer's Agent such necessity is a direct result of a wilful act or breach of
this Contract by the Employer, it shall determine an addition to the Contract
Sum in accordance with Clause 54 and notify the Contractor accordingly."
In the definition clause of the
Construction Contract "Defect" is defined as meaning:
"any defect
howsoever arising including without limitation:
(a) any defect that is the result
of defective design or defective materials or defective workmanship;
(b) any failure of the New
Works to meet, or to continue to meet (except to the extent permitted in the O
& M Requirements), the New Works Requirements; or
(c) any damage, destruction
or other effect consequential on any such defect;"
The defenders, relying on their
general plea to the relevancy, plea-in-law 2, sought to have the action
dismissed on the basis that the pursuers had failed to aver the cause of any
defect upon which they rely, in particular, that any such defect arose as the
result of a breach of contract by the defenders and more specifically, if so,
whether any such breach arose in respect of the defenders' contractual
obligations regarding workmanship, materials or design.
[6] The
court allowed the defenders a debate in respect of their second
plea-in-law. I was favoured with
detailed and concise written submissions from both parties which were expanded
upon in oral submission before me.
Discussion
[7] Both
sides referred, not only to provisions in the Construction Contract in relation
to the question as to what the meaning and purpose of clause 51 was, but
also to provisions in the DBFO Agreement, the ROM contract and the Major
Maintenance Call-Off Contract to support their respective stances on how
clause 51 should be construed. The
defenders also sought assistance in that respect from the two agreements
between themselves and their designers, numbers 7/6 and 7/7 of
process.
[8] It
is appropriate that I refer to certain of the other provisions in these other
contracts which formed part of the discussion before me. The defenders, in the first place, under
reference to the DBFO Agreement, schedule 1, schedule 2 and
schedule 4 submitted that the construction obligations undertaken by the pursuers
to the Secretary of State, and now the Scottish Ministers, were much more
extensive than those undertaken by the defenders to the pursuers under the Construction
Contract. The pursuers undertook the
design, building, financing and operating of the new roadway in question. Their obligations included not only the
building of the new section of motorway but the maintenance and operation of it
and the maintenance and operation of the existing section of road. The whole of the project period under the
DBFO Agreement amounted to 30 years, - see clause 9 and
clause 10(b). Clause 10(c)
deals with the pursuers' obligations to remedy defects in the "New Works". It does so in the following terms:
"Without
prejudice to Clause 10(b), the remedying to the Secretary of State's
reasonable satisfaction, and within such reasonable times as the Secretary of
State may specify having regard to the nature of the Defect, of all Defects
(whenever arising or manifesting themselves) in the following parts of the New
Works -
(i) each part of the New
Scottish APR which forms part of a Phase;
(ii) the New English APR if
constructed under this Agreement;
(iii) the Ancillary Works;
(iv) the Accommodation
Works; and
(v) all other parts (if any)
of the New Works not covered by the Company's obligations under Clause 10(b)
in respect of the O & M works,
insofar as notified
to the Company by the Secretary of State within 12 months of Final
Completion of such part of the New Works (each of which 12 month periods are
referred to in this Agreement as the 'Defects Correction Period' for such part
and in the case of the Ancillary Works and the Accommodation Works, subject to Clause 17.1(b)); ..."
In schedule 1 to the DBFO
Agreement "Defect" is defined as meaning
"any defect
howsoever arising including without limitation -
(a) any defect that is the
result of defective design or defective materials or defective workmanship;
(b) any failure of the New
Works to meet, or to continue to meet (except to the extent permitted in the O & M
Requirements), the New Works Requirements;
or
(c) any damage, destruction
or other effect consequential on any such defect."
Counsel for the defenders stressed,
in their submissions, that the pursuers' obligations under clause 10(c) of
the DBFO Agreement were not, in terms, transferred to the defenders under the Construction
Contract. The period of maintenance in
terms of clause 51 of the Construction Contract was 60 months whereas
that in clause 10(c) of the DBFO Agreement was 12 months. The context of these provisions, it was
submitted, made clear that the obligations undertaken by the pursuers, on the
one hand, in terms of the DBFO Agreement
and, on the other hand by the defenders in terms of the Construction Contract
were quite different. The court's attention
was drawn to paragraph (E) in the preamble to the Construction Contract
where it is stated that:
"The Employer
has reached agreement with the Contractor whereunder the Contractor undertakes
and each member of the Contractor jointly and severally undertakes that it will
design, construct, test, complete and maintain the Works in accordance with
this Contract to enable the Employer to discharge its obligations to the
Secretary of State for Scotland in respect of the Works in accordance with the
terms of the M6 DBFO Agreement and the Employer undertakes to exercise any
right or power granted to it under the M6 DBFO Agreement, on request by
the Contractor, which may be necessary to enable the Contractor to discharge
its obligations to the Employer in accordance with the terms of this Contract."
In the definition clause contained
in the Construction Contract 1.1 the "works" are defined as meaning:
"the New Works,
the Maintenance and the Relevant O & M Works and any works which
are a necessary or ancillary part of these works and, where the context
requires, any works carried out as a Variation;"
"New Works" are defined as having "the
meaning given in clause 10(a) of the M6 DBFO Agreement". The word "maintenance" is defined as meaning
"all works to be carried out in accordance with Clause 51". The "Relevant O & M
works" are defined as meaning "such of the O & M Works as are
applicable to the obligations of the Contractor under this Contract and which
are generally described in Schedule 17".
Schedule 17 is in the following terms:
"RELEVANT O &
M WORKS
Those elements
of the Planned Maintenance Works described in the ROM Agreement which are on
the line of the New Works".
The ROM contract was entered into
between the parties. Under it the
defenders undertook certain of the obligations of the pursuers, regarding
maintenance of the roadway for an initial period of 5 years with the
possibility of subsequent renewals.
Counsel for the defenders commented that, in accordance with these
contractual arrangements, it was only part of the pursuers' obligations in
relation to operation and maintenance contained in the DBFO Agreement which
were passed on contractually to the defenders.
[9] The
defenders relied to a significant extent in their approach to matters, on the
wording of the design obligations contained in the Construction Contract. Clause 6.1.1 provides:
"The Contractor
shall be responsible for the design, construction, completion, commissioning
and testing of the Works, which shall be carried out in strict accordance with
the New Works Requirements, the Certification Procedure, the Review Procedure
and all other requirements of this Contract".
Clause 6.1.2, as has already
been noted, provides that
"in performing
its obligations under Clause 6.1.1 the Contractor shall design the Works
(including the specification of materials and Plant where required) with
reasonable skill and care and in accordance with practice conventionally
accepted as appropriate at the time of the execution of the Works having regard
to the size, scope and complexity of the Works."
The expression "New Works Requirements"
appearing in clause 6.1 is defined in clause 1.1 as meaning:
"the conditions,
procedures, standards, specifications and requirements for design and
construction set out or identified in Schedule 2 as amended from time to time
in accordance with this Contract."
Clause 9.1.3 also provides:
"the Works when
constructed and the Maintenance when completed will comply in all respects with
the New Works Requirements."
Schedule 2 provides:
"NEW WORKS
REQUIREMENTS
This Schedule shall be deemed to consist of the provisions of Schedule 2
of the M6 DBFO Agreement as if the same has been incorporated at length herein
but declaring that:
(i) the provisions so
incorporated shall be deemed applicable only to the scope of work under this
Contract as set out in the Conditions and the Schedules and so far as relevant
to the description of the Works;
(ii) the definitions used in
the M6 DBFO Agreement shall apply to provisions incorporated herein as aforesaid;
(iii) Clause references
contained in the provisions incorporated herein as aforesaid shall be taken to
be to references to the applicable clauses within the M6 DBFO Agreement;
(iv) information contained in
the provisions incorporated herein as aforesaid which, when read in conjunction
with the M6 DBFO Agreement is relevant only to that Agreement, shall be
treated as irrelevant to this Contract."
Under reference to these
provisions, the defenders once again stressed that the pursuers' obligations
under the DBFO Agreement were not transferred "wholesale" to the
defenders. They particularly emphasised
that clause 6.1 of the Construction Contract provided for design
obligations which were qualified by reference to certain standards and
requirements.
[10] In the Major Maintenance Call-Off Contract, paragraph E of
the preamble provides:
"The Employer
(i.e. the pursuers) has reached agreement with the Contractor (i.e. the
defenders) in the terms set out below with regard to the works of Major
Maintenance required for the Project so as to enable the Employer to discharge
its obligations to the Secretary of State for Scotland in respect of the
Project in accordance with the terms of the M6 DBFO Agreement and the Employer
undertakes to exercise any right or power granted to it under the M6 DBFO
Agreement, on request by the Contractor, which may be necessary to enable the
Contractor to discharge its obligations to the Employer in accordance with the
terms hereof."
Clause 1.1.4 of the same
agreement defines "Major Maintenance" as meaning:
"all works of
repair and maintenance and any improvements required in respect of the Project
Facilities other than defects repairs under the Construction Contract or routine operation and maintenance to be
performed under the Routine Operating (sic)
and Maintenance Contract" (emphasis added).
Again clause 3 of the same
contract sets out the procedure for instructing major maintenance works
including machinery for agreeing the contract sums. Clause 4 provides for payment of the contractor.
[11] The ROM contract between the parties states in paragraph E
of its preamble as follows:
"The Employer
(i.e. the pursuers) has reached agreement with the Contractor (i.e. the
defenders) whereunder the Contractor undertakes and each member of the Contractor
jointly and severally undertakes that it will carry out the routine operation
and maintenance of the Project Road in accordance with this Contract to enable
the Employer to discharge its obligations to the Secretary of State for
Scotland in respect of the Works in accordance with the terms of the
M6 DBFO Agreement and the Employer undertakes to exercise any right or
power granted to it under the M6 DBFO Agreement, on request by the
Contractor, which may be necessary to enable the Contractor to discharge its
obligations to the Employer in accordance with the terms of this Contract."
As has been noted, the combined
effects of clause 6 of the ROM contract and the definition of "contract
period" contained in that contract is that the ROM contract was agreed to
endure for 5 years with the possibility of renewals for a further
5 years up until the end of the project period which is
30 years. The "works" to be carried
out under the ROM contract are defined in the definition clause as meaning:
"subject to the
provisions of Clause 43.4 the Planned Maintenance Works, the Minor Call-Off
Maintenance Works carried out under a Works Order and Defects Repairs and,
where the context requires, any works carried out as a Variation."
Clause 43 provides for the commencement
of the carrying out of the works in respect of various areas according to
various dates. In respect of the Existing
Scottish Motorway, commencement date is said to be the:
"Operations
Commencement Date" and in respect of 'each part of the New Scottish Motorway
which forms part of a Phase from the date of issue from the Permit to Use for
such Phase'".
In schedule 4 of the ROM contract
there are certain exceptions from the O & M work, undertaken by
the pursuers under the DBFO Agreement, which the defenders are obliged to carry
out as Planned Maintenance Works. The
most significant of these exceptions, for present purposes, is that there is excepted
"rectification of defects in road pavement".
The responsibility for such defects remains with the pursuers under the
DBFO Agreement. Counsel for the
defenders pointed out that in terms of the DBFO Agreement, there was no express
requirement of any bond to be part of the road pavement.
[12] Under the ROM agreement, the defenders agreed to carry out not
only the planned maintenance works but also "Minor Call-Off Maintenance Works"
which are defined as meaning:
"the works of Routine
Operation and Maintenance (other than the Planned Maintenance Works) to be
carried out by the Contractor as specified in a Works Order."
In the definition of "Works Order"
it is provided that it:
"means an order
issued by the Employer's Agent in accordance with Clause 45 requiring the Contractor
to carry out works other than Planned Maintenance Works and shall include those
works expressly excluded from the scope of the Planned Maintenance Works in Schedule 4."
Counsel for the defenders pointed
out that the remedying of a defect in the road pavement could be covered by
those provisions and, if those provisions were employed by the pursuers, then,
the contractor, i.e. the defenders would require to be paid for any such work
by virtue of the provisions of clause 45 of the ROM agreement.
[13] As shall be seen, clause 51 of the ROM contract played a
significant part in the discussion before the court as to how clause 51 of the Construction
Contract should be construed. The
provisions of clause 51 of the ROM contract are as follows:
"DEFECTS
CORRECTION
51.1 Duration of Defects Correction Period
In this Contract,
'Defects Correction Period' shall mean a period of 12 months from the
issue of the Certificate of Completion and shall apply solely in respect of
Works carried out under a Works Order.
51.2 Remedying Defects
The contractor shall execute to the reasonable satisfaction of the Employer's
Agent all such work of amendment, reconstruction, and remedying of defects,
shrinkages or other faults as the Employer's Agent may instruct and at such
times as the Employer's Agent may instruct the Contractor to execute either
during the Defects Correction Period or within 14 days after its
expiration, as a result of an inspection made by or on behalf of the Employer's
Agent prior to its expiration and shall agree a programme for the Defects
Repairs with the Employer's Agent.
51.3 Cost of Remedying Defects
All work referred to in Clause 51.2
shall be executed by the Contractor at its own cost if the necessity thereof is
in the opinion of the Employer's Agent, due to:
51.3.1 the use of materials Plant
or workmanship not in accordance with this Contract or the specific
requirements of any Works Order; or
51.3.2 any fault in design where
such design has been exclusively prepared by the Contractor or where the design
was not so prepared where the Contractor could reasonably have been expected to
detect that fault; or
51.3.3 the neglect or failure on
the part of the Contractor to comply with any obligation, express or implied,
on the Contractor's part under this Contract;
or
51.3.4 any breach of the
Contractor's warranties.
If the remedial
works are not required as a consequence of any of the reasons specified in Clauses 51.3.1
to 51.3.4 above then an addition to the Contract Sum shall be calculated
in accordance with the provisions of Clause 54."
[14] Junior counsel for the defenders in his submissions ventured to
suggest that the difference between the wording employed in clause 51.3 of
the ROM contract, on the one hand, and the wording employed in clause 51.2
of the Construction Contract could be explained by reason of the fact that
clause 51.2 of the ROM contract required not only remedying of defect but
also "reconstruction and amendment works"
[15] The last of the "suite" of agreements I was invited to consider
were the contracts previously referred to 7/6 of process and 7/7 of
process whereby the consultants employed by the defenders in relation to design
were obliged to exercise all reasonable skill, care and diligence in carrying
out their services.
[16] It was submitted on the defenders' behalf, that in terms of the
Construction Contract the defenders, had undertaken only part of the pursuers'
responsibilities regarding the design and construction of the New Scottish
Motorway. The pursuers' obligations
relating to design under the DBFO Agreement were not qualified as were the
defenders', by virtue of 6.1.2 of the Construction Contract. Thus, it was said, the whole design risk was
retained by the pursuers and had not been passed on to the defenders.
[17] It was against all of that contractual background, and context,
submitted the defenders, that, the provisions of clause 51 of the Construction
Contract fell to be considered. It was a
matter of agreement between the parties that the final completion of both
phases of the New Scottish Motorway took place on 25 October 1999 and the Permits to Use the relevant
phases were issued on 16 April
1999 and 30 April
1999.
In clause 50.1.1 of the Construction
Contract, it is provided:
"Not later than
25 Working Days prior to the date upon which the Contractor expects the
issues of a Substantial Completion Certificate for a Phase, the Contractor
shall issue to the Employer a notice to that effect, and the Contractor shall
deliver to the Employer such Substantial Completion Certificate as soon as it
is available in the form required to enable the Employer to comply with
clause 14.1(a) of the M6 DBFO Agreement. If the Substantial Completion Certificate is
in the form required by the M6 DBFO Agreement the Employer shall forthwith
deliver the Substantial Completion Certificate to the Secretary of
State ..."
50.1.2 provides:
"Following the
decision of the Secretary of State under clause 14.1(b) of the
M6 DBFO Agreement, and within five Working Days of such decision, the
Employer shall either:
50.1.2.1 issue
a notice to the Contractor acknowledging the issue of such Substantial
Completion Certificate (a 'Permit to Use');
or
50.1.2.2 notify
the Contractor that in the opinion of the Secretary of State notwithstanding
issue of the Substantial Completion Certificate the Phase has not reached Substantial
Completion. In that event the Employer
shall state in such notice the respects in which the Secretary of State
considers such Phase has not reached Substantial Completion."
Substantial completion is defined
as follows in the definition clause:
"substantial completion" of a Phase means
Final Completion of such Phase except for incomplete items which do not
prejudice the operation, or safe use by Users of such Phase, and in the case of
all Phases other than the Accommodation Works, shall not be earlier than the
date of satisfactory completion of the Stage 3 Audit Procedure for such
Phase and the date on which all Lanes are available to traffic."
Final Completion is defined as:
"'Final
Completion' of a Phase or of any part of the New Works means completion of such
Phase or such part of the New Works fully in accordance with the New Works
Requirements except for outstanding or incomplete works to a value not
exceeding:
(a) г200,000 in the case of the
Paddy's Rickle Bridge
to Beattock Phase;
(b) г200,000 in the case of the
Beattock to Cleuchbrae Phase; and
(c) г200,000 in the case of the
New English Motorway and the New English APR,
which do not
materially affect Users or Third Parties."
The significance of these provisions,
it was said, by junior counsel for the defenders, was that they indicated that
the first part of clause 51.1 in the Construction Contract was concerned
with completion of outstanding work.
Moreover once a Permit to Use was issued, the provisions of the ROM contract
were activated. As has been seen
clause 51.1. provides that the maintenance period is 60 months from
final completion of all phases of the "Scottish Works" and of the "English
Works part of the New Works".
Clause 50.5 of the Construction Contract provides as follows:
"Subject to the
requirements of this Clause 50 and Clause 51 the Contractor's liability
under this Contract for any failure to comply with this Contract which becomes
apparent after the end of the Maintenance Period or for any defect in the Works
which becomes apparent after the end of the Maintenance Period shall be in
damages. Such liability shall be limited
to:
50.5.1 the
direct Loss suffered by the Employer arising out of such failure or
defect: and
50.5.2 any
Consequential Loss suffered by the Employer but subject to Clause 69."
It was important, it was submitted
on behalf of the defenders, to read clauses 50.5 and 51
together. In clause 51.1 the
remedying of defects required was not linked to any technical standard. It was simply to be done to "the reasonable
satisfaction of the employer". The
clause, it was submitted, should be read as imposing an obligation on the
defenders to remedy any breach of contract on their part notified to them
within the 60 month maintenance period.
Junior counsel for the defenders submitted that the pursuers had failed
to aver that the problem in the road arose from a defect as defined in either
(a) or (b) or as the consequence of such, under (c) of the definition of "Defect"
in the Construction Contract. In
Article 4 of Condescendence, the pursuers make no reference at all as to
the cause of the absence or inadequacy of the adhesive bond and, in particular,
that it arose because of defective design, defective materials or workmanship
or any combination of these. The only
averment of the pursuers which connected the work of the defenders with the "bond
issue" was the averment in Article 4, page 20, c-d to the following
effect:
"Full bond
between roadbase courses is implicitly assumed in specifying design and
construction requirements for such pavements, and is expected to be a
characteristic of completed pavements.
The Design prepared for the New Scottish Motorway implicitly assumed
full bond between roadbase courses. The
absence, et separatim the inadequacy,
of such a bond in the pavement of the New Scottish Motorway is a Defect in
respect of clauses 1.1 and 51.1 of the contract."
The pursuers conspicuously, it was
said, do not aver that the absence of bond itself represents non-compliance
with the New Works Requirements. The
word "bond" did not appear in any of the contract documents. For all the pursuers offered to prove, the
defenders may have performed all their obligations in terms of the Construction
Contract. The pursuers were contending,
on the basis of a bare assertion, that the defenders should rectify the
"problem" at their own cost.
[18] Junior counsel then proceeded to refer to various authorities
relating to the construction of contracts including in particular Emcor Drake & Scull Ltd v Edinburgh Royal Joint Venture 2005
SLT 1233, Melville Dundas Ltd v Hotel Corporation of Edinburgh Ltd
(2006) CSOH 136 and BCCI v Ali (2002) AC 251, particularly per
Lord Bingham at page 259. In
the present case there was no substantial dispute between the parties as
regards the proper approach to interpretation of contractual provisions of the
kind with which the present proceedings were concerned or what the relevant
matrix of facts was. As well as the
general rules set out in the above authorities, there was some textbook
discussion to be found in relation to defects liabilities clauses in construction
contracts. In this connection reference
was made to Hudson on Building Contracts (8th edition),
paragraphs 5-025 to 5-039. At
paragraph 5.039 under the heading "Types of Maintenance and Defects Liability
Clauses" the following passage appears:
"It should be
made clear that in clauses of this kind the word 'defects' will today usually
be held to indicate any deficiency in the quality of the work, whether
structural on the one hand or merely decorative on the other and whether due to
faulty materials or workmanship, or even in design or performance, if that is a
part of the contractor's obligation. In
some cases, the making good or repair obligation may be limited expressly to
cases of breach of contract on the part of the contractor, but the modern
tendency is to require making good or repair whatever the cause of the defect,
but with full compensation to the contractor in cases where he is not in breach
of contract. In other less usual cases,
the repair obligation may be 'absolute', in the sense that the contractor may
be obliged to make good without additional cost to the owner whether or not he
is at fault."
At paragraph 5.040 after
having stated:
"In building
contracts in England
the defect, whatever its cause, is often defined as one which 'shall appear'
within the maintenance or defects liability period."
The writer continues:
"The word
'defect' in this particular context may in practice often mean the symptom
rather than the cause, which may often be difficult to establish (and so any
consequential questions of liability), until work has been demolished, removed
or uncovered, or special investigations carried out.
Despite the
similarity of many modern clauses, there are in fact different types of wording
which may occasionally be met within construction contracts and which may have
very different consequences, particularly in those cases where the contractor's
obligation is to arise independent of fault on his part, so that he is not
entitled to extra payment whatever the cause of the defect. ..."
Junior counsel for the defenders
submitted that before holding that a defects liability clause had the effect last
described in the passage from Hudson one would be looking for very clear
wording to that effect. The important
point in the present case was that there was not a single mechanism open to the
employer to have "maintenance" work done.
He had rights under the ROM and Major Maintenance Call-Off contracts in
that regard which were concurrent with his rights under clause 51.1. In a nutshell, the defenders' contention was
that the pursuers' construction of clause 51.1 would have the effect of
imposing strict, no fault, liability on the defenders to rectify any problem
arising during the maintenance period, and this was not tenable when one had
regard to the other relevant provisions of the Construction Contract and the
accompanying agreements.
[19] In expanding upon the submission just noted, junior counsel, in
the first place focused on the wording of clause 51.1 itself. Contrary to what the pursuers appeared to
contend (in their written submissions) the provision was not intended, in
particular, to transfer the pursuers' obligations under the DBFO
Agreement. It was concerned with the
defenders' obligation to complete the defenders' works undertaken under the Construction
Contract. It was inherent in the nature
of the word "defect" that there had been a failure to achieve a required
standard - that could be seen from the wording of clause 51.1 itself
where "defect" was qualified by "in the New Works". The expression "New Works" as has been seen,
carried with it another definition "the New Works Requirements". The standard which the defenders had to reach
was that necessitated by the New Works requirements. When that standard was not achieved there
would be a defect, and the pursuers would be entitled to instruct the defenders
to put that right at no cost to the pursuers.
In contrast to that approach of the defenders, the pursuers offered no standard
against which any defect was to be measured and, in place of any such standard,
they appeared to contend that the defect was constituted by a mere assertion on
their behalf. However wide the
qualifying words of the definition of "defect" in the Construction Contract,
they could not be read to remove the requirement of some reference to a
standard. The pursuers' construction of
clause 50.1 really involved giving the pursuers power to instruct the
defenders to do virtually anything in respect of the road. That appeared to reduce the significance of
the provisions regarding employers' variations in terms of clause 53.4 of
the Construction Contract. Junior
counsel for the defenders then referred the court to the provision of
clause 21.1 and 21.2 of the Construction Contract which deal with the
care of the works until the issue of the Permit to Use. They are in the following terms:
"21.1 Care
Subject to Clause 21.4,
the Contractor shall be responsible for and shall take the full risk in the
care of the Works and materials and Plant for incorporation therein from the
date of execution of this Contract or, if earlier, the date when it commences
manufacture of materials or Plant until the date of issue of the Permit to Use
when such risk and responsibility in the relevant part of the Works shall pass
to the Employer or Local Person or the Secretary of State provided that the
Contractor shall take full responsibility for the care of and risk in:
21.1.1 any Maintenance and
materials and Plant for incorporation therein during the Maintenance
Period; and
21.1.2 any Works to be carried out
in respect of a Phase remaining to be completed between the issue of the
respective Permit to Use for that Phase and the acknowledgement by the
Secretary of State pursuant to clause 14.3 of the M6 DBFO Agreement and by
the Employer pursuant to clause 50.3.2 of the corresponding Final
Completion Certificate and any materials and Plant for incorporation therein
until such Final Completion Certificate is issued;
21.2 Responsibility to Rectify Loss
or Damage
If any loss or
damage happens to the Works, or any part thereof, or materials or Plant for
incorporation therein, during the period for which the Contractor is
responsible for the care thereof in accordance with clause 21.1, from any
cause whatsoever, (subject to Clause 21.4) the Contractor shall, at its
own cost, rectify such loss or damage so that the Works conform in every
respect with the provisions of this Contract to the satisfaction of the
Employer's Agent."
These provisions, it was submitted,
incorporated a clear and explicit imposition of absolute liability to be placed
on the defenders which fell to be contrasted with the wording of
clause 51.1. It was also important
to note, it was said, that clause 21.4 removed from the defenders,
liability under the clause for damage or loss to the works caused by force majeure
as defined. If the pursuers' arguments
were correct, regarding the construction of clause 51.1, the defenders
would be bound to put right, at their own cost, defects which were caused by
force majeure. The width of the
obligations which the pursuers' contention involved, was added to by virtue of
the provisions of clause 50.5.
While the specific performance obligations of the defenders were
restricted in time, there was under clause 50.5, a potential liability
upon them for damages without limit of time.
[20] In reply, senior counsel for the pursuers stressed that, at
this stage, the issue for the court was one of relevancy - had the
pursuers averred a relevant case or not?
The pursuers' position was that for the purposes of averring a relevant
case under clause 51.1, the pursuers did not require to identify, in
averment, the cause of any defect but simply the existence of a defect. As a result, the pursuers submitted that they
were not required to aver that any complaint was attributable to a breach by
the defenders in their obligations regarding workmanship, materials or
design. As far as the Construction
Contract itself was concerned, paragraph E of the preamble thereto made it
clear that the parties were agreed that the defenders were to discharge their
obligations to the pursuers in terms of that contract and not some other
contract. Clause 70.2 of the Construction
Contract provides:
"This Contract
(including the Schedules) and the Construction Direct Agreement constitutes the
whole agreement and understanding of the Parties as to the subject matter
hereof and there are no prior or contemporaneous agreements between the Parties
with respect thereto."
This established the primacy of the
provisions of the Construction Contract for the purposes of the present
dispute. The defenders were not party to
the DBFO Agreement which related to operations which went far beyond the New
Works which were the subject of the Construction Contract. The total length of the motorway was
92 kilometres. Of that total
length, 29 kilometres constituted the New Motorway. The DBFO contract was not just concerned with
building and maintaining a new road for 30 years, but was concerned with
the pursuers taking over an existing motorway and maintaining it. From the commencement of the DBFO Agreement,
the pursuers had an obligation to operate and maintain the existing motorway
quite apart from the obligations regarding the construction and maintenance of
the new motorway. The pursuers entered
into the ROM and Major Maintenance Call-Off contracts which related to both the
New and Old Motorway. In clause 3
of the DBFO Agreement, certain other agreements were referred to as 'the related
documents'. These included the ROM
contract but did not include the Major Maintenance Call-Off Contract. The last mentioned contract was concerned
only with the existing motorway. Reference
in that respect was made to paragraph E of the preamble to the last
mentioned contract and clause 1.1.4 and clause 3 thereof. Any major maintenance which was to be
instructed under that contract required to be the subject of a works contract. If there was a works contract then there
required to be payment made for the works undertaken by the defenders under
clause 4 of that contract. The
provisions of the Major Maintenance Call-Off Contract, it was submitted,
therefore advanced neither parties arguments, particularly because of the
express exception of the defenders' defects responsibilities under the Construction
Contract.
[21] As regards the ROM contract, it would fall to be renewed at
5 year intervals. It was, therefore,
not to be assumed that the parties would remain contractually bound
indefinitely by the ROM contract. It
did, however, illustrate the various ways in which the parties might formulate
a defects liability provision with different consequences. Clause 51 of the ROM contract, it was
submitted, was truly an allocation of risk clause. The wording of its provisions, senior
counsel for the pursuers submitted, showed that the parties were not using the
word "defect" to cover both cause and effect.
Clause 51.5 provides as follows:
"Contractor to Search
If any defect,
shrinkage or other fault in the Works appears at any time during the Defects
Correction Period, the Employer's Agent may instruct the Contractor to search for
the cause thereof. The cost of the work
carried out in searching as aforesaid shall be borne by the Contractor and it
shall remedy such defect, shrinkage or other fault in accordance with the
provisions of Clauses 51.2 to 51.4 inclusive."
Clause 51.5 had a purpose when
one turned back to look at clause 51.3.
There was no equivalent provision in the Construction Contract. The reason for that was obvious. There was no intention, in that provision, to
allocate the risk by reference to a cause.
[22] The pursuers' case, as pled in Article 4 of Condescendence
was that, where as here, one requires to lay a road in a series of layers, it
is essential that these layers are bonded together. The pursuers do not know why the two layers
have not been bonded together. There may
ultimately be a dispute to be resolved as to whether in fact there is a defect
but the pursuers' contention was that, in the meantime, they need only offer to
prove that there was a defect. If they
have identified and notified to the defenders a defect during the maintenance
period, the risk of dealing with it passes to the defenders. This, it was contended, made perfect sense in
that a defect was a symptom not a cause.
It may not be possible to discover the cause. Someone has to bear the cost, at least until
the remedial work is performed. A provision
which had such an effect, while onerous, was not entirely exceptional. There simply were a variety of ways in which
parties to a Construction Contract might allocate this kind of risk. For example, they might approach matters as
was done in clause 51 of the ROM contract, where the contractor only bore
the risk of defects arising from breach of his own contractual
obligations. Another type of provision
might oblige the contractor to remedy on instruction, all defects, however
arising, and only if he could show that he was not in breach of contract, would
he be paid for the remedial works.
Another possibility would be that the contractor was required to rectify
defects during the maintenance period but would be paid the costs thereof if it
was proved that the defects arose because of the employers' breach of contract.
Lastly, it was perfectly possible for
parties to agree that the contractor would remedy the defects at their own cost,
whatever the cause thereof. The last
type of agreement was the absolute liability example referred to in Hudson. Clause 51.1, in the present case, was
not in that last mentioned category. It
fell into the third kind of possibility, referred to above, because there was
the right to recover the cost of remedying the defect if the defect had risen
by reason of the employer's fault. While
it was an onerous obligation, it was not an absolute one and simply arose from
an agreed allocation of risk between the parties.
[23] The fact that the parties to the ROM contract, by clause 51,
employed one means of allocating risk, and used a different formulation in
clause 51 of the Construction Contract showed that they were discriminating in
respect of allocation of risk.
Clause 51 in the ROM contract set out the machinery whereby the
employer's agent was to discover whether the defect arose from a breach of
contract by the defenders or not. This
prevented delay in addressing the question.
The defenders' position in relation to clause 51.1 of the Construction
Contract appeared to be that they had no obligation to rectify matters at all
during the maintenance period, unless and until it could be shown that any
reported defect had arisen because of their fault. Put another way, the defenders were putting
in issue whether they needed to carry out work at all under clause 51 because
they were contending, in effect, that unless the pursuers showed that the
problem, whatever it was, arose from the defenders' fault, it could not be
described as a "defect" in terms of the contract. If the pursuers' approach was correct,
however, the defenders were bound to rectify defects and then claim the cost of
doing so if the defect had been due to the employer's fault. This, it was submitted, made for perfect
commercial sense when it may be impossible to identify the cause of the defect
until the remedial work was carried out.
[24] Senior counsel for the pursuers referred to the definition of "defect"
in the Construction Contract and emphasised the words "howsoever arising" which,
he contended, showed that it required to be construed in the widest possible
sense. It was not synonymous with the words
"loss or damage". A defect, it was said,
was "a failing or a flaw or imperfection - a lack or absence of a desired
quality". If the parties had wished to
limit the scope of the wording "defect", for the purposes of the contract, to
problems arising from the contractor's breach of his contractual obligations,
then the first line of the definition would have been written to the effect
that "defect means any defect arising from any breach of the contractor's
obligations". Instead of that the
parties used the words "any defect howsoever arising including without
limitation". The use of the words
"howsoever arising" clearly argued against the defenders' main contention that
any defect must be something capable of being defined by reference to a
specific standard. It was clear that the
cost allocation process provided for by clause 51 of the ROM contract was
different from that set out in clause 51 of the Construction Contract, yet
the defenders were, in effect, arguing that the approach of the ROM contract
provisions should be applied to the Construction Contract provision. It was highly unlikely that parties, like the
present parties, contemporaneously sought to achieve exactly the same end in
these contractual arrangements by using quite different language. Clauses 8 and 9 which set out the defenders'
contractual obligations and clause 21 in the Construction Contract were
not incompatible with the pursuers' construction of clause 51. The provisions of clauses 8 and 9
were addressing the question of the standard of performance which the defenders
had to reach in carrying out their obligations.
Clause 21 was really concerned with damage to the works arising out
of an external event, not a defect in
those works. The provisions in
clause 53 regarding variations were not incompatible with the pursuers'
construction of clause 51. Rather
they supported it because there could be no variation after final
completion. Clause 51.1 was
addressing the situation after final completion.
[25] Senior counsel for the pursuers maintained that
clause 50.5 did not support the defenders' approach to the construction of
clause 51.1. It was to be noted
that the word "defect" in clause 50.5 appeared in the lower case while in
clause 51 it appeared in the upper case.
In the definition clause it also appeared in the upper case. So, it was argued, it was not a defined term
in clause 50.5. The clause was
concerned with a defect which became apparent after the expiry of the
maintenance period. A defect which
became apparent after the expiry of the maintenance period was not one which
the employer could have given notice under clause 51. Clause 50.5 was dealing with situations
in which the contractor's liability had not been triggered under clause 51.1
at all. In that event, damages might be
available. It was a non-specific
implement clause and the damages may be limited as specified in the clause.
[26] Senior counsel for the pursuers invited the court to refuse the
defenders' motion for dismissal and to put the case out By Order for discussion
of further procedure.
[27] Senior counsel for the defenders, in reply, adopted the
submissions of junior counsel. Senior
counsel focused on the absence in the pursuers' pleading of any averment
referring to any standard or contractual term which the defenders were alleged
to have failed to comply with, in a situation where the Construction Contract
contained highly elaborate and detailed requirements designed to ensure that
the works were properly carried out.
Reference in this respect was made, for example, to the definition of New
Works requirements, schedule 2 of the Construction Contract and
schedule 2 of the DBFO Agreement.
There should, therefore, be no difficulty for the pursuers identifying
any contractual standard which they claimed had not been met. The construction placed by the pursuers on
clause 51.1, produced a very onerous burden on the defenders. Senior counsel, however, accepted that that
construction could not be said to produce an absurdity and it did produce an
intelligible and commercially sensible result for the pursuers. The pursuers' approach, however, was
misconceived because it had conflated cause of the defect, with contractual
standard. It was not necessary for the
pursuers in order to make a claim, to investigate or establish the cause of the
missing bond - they merely had to aver that it was not there and then
point to what in the contractual provisions required that it should be there.
[28] Senior counsel for the defenders faced up to the point, put to
him by the court, that the defenders' approach to the construction of
clause 51.1 meant that there was no scope for a defect in terms of that
clause which arose from neither the defenders' breach of contractual
obligations nor the pursuers' fault. For
any such eventuality, the parties' intentions had been, it was suggested, that
it would be dealt with under the Major Maintenance Call-Off Contract or the ROM
contract.
[29] Senior counsel for the defenders submitted that the practical matters
about identifying by whose fault the defect had arisen could be dealt with by
virtue of the provisions of clause 39 of the Construction Contract which
provided for inspection and testing on behalf of the employer. In addition, clause 41 provided also for the
removal of improper work materials or plant.
The argument made by the pursuers that the provision was designed to
prevent protracted disputes during the maintenance period was reduced in its
effect at least, by virtue of the provisions of clause 66 of the Construction
Contract which provided for an expedited dispute resolution procedure.
[30] Senior counsel for the defenders turned to address the
difference in wording between clause 51 in the ROM contract and
clause 51 in the Construction Contract.
It was pointed out that clause 51 of the ROM contract had a defects
correction period of 12 months from certification of completion and was to
apply only to works carried out under a works order. Senior counsel submitted that, at the time
the ROM contract was entered into, the nature and extent of work that might be
carried out under that agreement and, in particular, under a works order would
not be known. On the other hand, the
defects to be corrected under the Construction Contract would only be those
arising in the works which were contracted for.
These differences were enough to show that the scope and purpose of
clause 51 in the ROM contract was different from the scope and purpose of
clause 51 in the Construction Contract.
In any event, it was contended, one should simply not attach too much
significance to different words in different contracts.
[31] The argument for the pursuers had, it was said, relied strongly
on the suggestion that the critical question was, who was going to pay for the
remedial works. But, senior counsel for
the defenders argued, it was important not to evade the prior question under
clause 51.1 as to whose breach of contract had resulted in the particular
problem because otherwise one might be led to the conclusion that the
allocation of cost had been addressed under the Construction Contract alone,
rather than by resort to one or other of the other contracts. Senior counsel, however, accepted that there
was no complete contradiction between the pursuers' approach to the
construction of the provisions of clause 51 of the Construction Contract
and the provisions of the other agreements.
The Major Maintenance Call-Off Contract, in particular, it was submitted,
was an important component in the contractual network. It was specifically recognised in the Construction
Contract itself in the definition clause and clause 8.5. The fact that in clause 1.1.4 of the Major
Maintenance Call-Off Contract, there was exclusion from the works to be carried
out thereunder, defects repairs under the Construction Contract was entirely
consistent with the defenders' approach, because it envisaged that there was a
category of Major Maintenance which was not a defects repair. Senior counsel, however, was constrained to
accept that the exclusion in clause 1.1.4 was equally consistent with the
pursuers' approach to the construction of clause 51 in the Construction
Contract. However, he contended, that if
the pursuers were correct, it was difficult to see what was the purpose of the Major
Maintenance Call-Off Contract during the 5 years maintenance period. His attention was, however, drawn to the fact
that clause 1.1.4 in that contract referred to "Major Maintenance" as
meaning "all works of repair, and maintenance and any improvements", whereas
clause 51.1 is confined to the remedying of defects. That, he accepted, showed that there was no
necessary complete overlap between the two contracts in relation to work which
might be carried out in terms thereof.
[32] In a brief reply, senior counsel for the pursuers pointed out
that it was not correct to state, as senior counsel for the defenders had done,
that the machinery in the ROM contract for identifying defects had its
equivalent in the provisions of clause 39 of the Construction Contract. The ROM contract had a clause 39 in
exactly the same wording as that of clause 39 in the Construction Contract. So to clause 66 in the ROM contract had
its equivalent in clause 66 of the Construction Contract. Clause 51 in the ROM contract, on the
other hand, was a very different piece of drafting from clause 51 in the Construction
Contract. There was indeed, contrary to
what was suggested by senior counsel for the defenders, content for the Major
Maintenance Call-Off Contract which was different from what was provided for in the Construction
Contract, because the former contract was to apply to the entire motorway and
not just the New Works. It would apply
to defects appearing after the maintenance period in the Construction Contract
had expired. The Construction Contract
was a phased contract and completion of it was determined according to phases
with maintenance periods applied to each phase, which expired at different
dates. The Major Maintenance Call-Off
contract was also to deal with "improvements".
It had no express duration but could be terminated by reasonable notice
given by either party to it. It could
not be said, therefore, that the pursuers' approach to the construction of
clause 51 of the Construction Contract rendered the Major Maintenance
Call-Off Contract redundant. If the
defenders' position was that the putting right of the problem with bonding
amounted to a variation or an improvement then it was for them to aver
that. They chose not to do so. In the light of that, they were simply
seeking to invert the wording of clause 51.2.1.
Decision
[33] The discussion in this case has, as has been seen, involved
both sides, in different ways, seeking to justify their interpretation of
clause 51 in the Construction Contract by reference to other
agreements. Neither party suggested that
such an exercise was illegitimate. Two
of the agreements, the ROM contract and the Major Maintenance Call-Off Contract,
were entered into between the same parties contemporaneously within the
Construction Contract and clearly related, in part, at least to the
construction project which was the subject of the Construction Contract. The other contracts, the DBFO Agreement and
design contracts also related to the project.
They all undoubtedly form part of the factual matrix in which the Construction
Contract was concluded. But, ultimately,
it appears to me that the wording of the Construction Contract must be
construed according to its own language unless one is clearly, by that language
itself, directed to construe any of its provisions by reference to the
provisions in the other agreements, and, if there is no ambiguity in the
language in question, it should be construed according to its plain meaning and
any other guidance contained in the agreement itself. In this connection, I think it is significant
that in the Construction Contract, clause 70.2 is in the terms which I
have stated above. I consider also that
it is significant that it was not contended, by counsel for the defenders, that
the wording of clause 51 is ambiguous.
Moreover, it was accepted, on behalf of the defenders, that the
construction put forward on behalf of the pursuers did not produce a commercial
absurdity nor was it a construction which was clearly contradicted, either by
other wording of the Construction Contract itself, or by wording in any of the
other related contracts. Ultimately the
defenders' position was very much to the effect that the construction favoured
by the pursuers imposed a very onerous burden on the defenders and that, at
least, in relation to the remedying of defects which could not be shown to be
caused by the fault of the defenders, these might be addressed by pursuers
instructing them to carry out works under other contracts whereby they would be
remunerated for that work. I am not
satisfied that either of these points come to be sufficient to overcome what
might otherwise be considered the plain meaning of the clause in question as
supplemented by the definition clause.
[34] In the present case, the parties themselves have provided their
own definition of the word "Defect". It
is expressed in the widest terms i.e. "any defect howsoever arising." The rest of the definition provides three
examples of what would be embraced in the definition but does so with the
preliminary words "including without limitation". The words "howsoever arising" in my
judgement, clearly argue against any restrictive, narrow or limiting approach
to the content of the term (compare American
Telegraph Ltd v Western Union
Telegraph Co (1950) TR 45 at page 49 per Lord Simmonds). The construction of clause 51 advanced
by the defenders, appears to me ultimately to do some violence to the
definition clause by imposing a more restrictive approach to the definition of
"Defect" than it provided for. In a
nutshell, the defenders' approach, in effect, involves the re-writing of the
definition clause and restricting it to examples (a) and (b) given
therein. Counsel for the defenders'
position was that clause 51 did not admit of a third category of defect
other than one arising from the defenders' breach of contractual obligations or
the fault of the pursuers. I do not
agree that the plain wording of the clause carries with it such a qualification
particularly having regard to the definition of "defect" provided in the
contract itself.
[35] The defenders' submissions were very much rested on the
proposition that the word "defect", to have sense and meaning, must have
reference to a standard or a condition which has not been met. That may well be the case - the standard
may be perfection - but it begs the question, in my judgment, as to
whether the alleged "defect" in the roadway for the purposes of this case, must
be a matter which involves breach of the contractual obligations imposed on the
defenders. While the question as to
whether or not they have performed their obligations will, ex hypothesi, have to be determined according to what they have
promised to perform it is, in my view, a non-sequitur
to say that the word "defect" in the specific performance clause, which is
clause 51, must be a matter which involves a failure on their part to
meet their contractual obligations or, alternatively, has been caused by the
pursuers' fault. It seems to me that the
plain meaning of the wording of clause 51, taken together with the
parties' chosen definition "Defect" means that it was intended to impose an
obligation upon the defenders to remedy, at their cost, during the maintenance
period, any notified defects howsoever they arose, with the exception of those
which arose as a direct result of a wilful act or breach of contract by the
pursuers, and that meaning and purpose are supported by the way in which the
same parties chose, contemporaneously, to address the question of remedying
defects in clause 51 in the ROM contract.
The parties entered into sophisticated contractual arrangements and I
agree with senior counsel for the pursuers that the parties can be seen to have
been careful and discriminatory in the use of the language to record what was
agreed. Had the parties' intention been
to restrict the scope of clause 51 of the Construction Contract in the way that
is argued for on behalf of the defenders, then, it seems to me, they would not
have chosen the wording they did in that clause, but that something more or
less on the lines of what appears in clause 51 of the ROM contract would
have been employed.
[36] I consider that resort to the other agreements cannot be
employed to displace, qualify or contradict what is, otherwise, the plain
meaning of clause 51 of the Construction Contract. While the ROM and Major Maintenance Call-Off contracts
overlap to some extent with the Construction Contract, they were designed for
different and additional purposes and for different periods of time. For that reason, and standing the concession
that there is no contradiction between their provisions and the pursuers'
approach to construction of clause 51 of the Construction Contract, I do
not consider it legitimate to put glosses on the provisions of clause 51
by reference to them.
[37] The construction of clause 51, to include an obligation on
the defenders to remedy defects during the maintenance period, not shown to
have arisen from breach of their obligations, can be seen, from the discussion
in Hudson cited above, not to be
unique in construction contracts. The
practical purpose for having such a provision is well explained in the passages
cited above from Hudson. The context of the discussion, as was pointed
out, is a maintenance or defects liability period. In that context the word "defect" may indeed
involve a symptom rather than the cause
"which may often
be difficult to establish (and so any consequential questions of liability),
until work has been demolished, removed or uncovered, or special investigations
carried out".
Seen in that light, the ordinary
meaning of the words employed in clause 51 does not produce any commercial
absurdity. Ultimately, the pursuers'
construction of clause 51 appears to me to be more in accordance with the
rules of construction as set out in such cases as BCC Iv Ali (2002)
1 AC 251 per Lord Bingham at page 259G, paragraph 8, Melanesiam Mission Trust Board v Australian Mutual Provident Society
(1997) 74 PNCR 297 per Lord Hope at page 301 and City Wall Properties (Scotland) Ltd v Pearl Assurance Plc 2004 SC 214 at page 229. The defenders' approach, on the other hand,
seems to me to involve an illegitimate re-wording of the provision itself to
save them from, what is accepted is, an onerous obligation.
[38] Both sides were agreed that the question at this stage was one
of relevancy. I do not accept for the
reasons given that the pursuers' case is irrelevant because it lacks certain
averments which would be needed if the defenders' construction of
clause 51 as discussed, was correct.
There may well remain difficult questions to be answered at proof as to
whether or not what is complained of is a defect but that, in my view, is another
matter for another day.
[39] I shall, in the circumstances, have the case put out By Order
for discussion of further procedure.