Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 174
CA50/04	OPINION OF LORD DRUMMOND YOUNG in the cause CASTLE INNS (STIRLING) LIMITED t/a CASTLE LEISURE GROUP Pursuers; against CLARK CONTRACTS LIMITED Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuers: Lake; Dundas & Wilson CS LLP

Defenders: Higgins; MacRoberts

22 December 2009

[1] The pursuers are the proprietors of premises at 6-8 South Methven Street, Perth. Those premises were originally a school, built in Victorian times; subsequently they were converted into council offices. They were acquired by the pursuers with a view to converting them into licensed premises. The work of conversion took place in two stages. The first stage consisted of shell construction works, comprising downtakings, demolitions, the formation of new structural floors and stairs and the construction of new walls, roof works and below ground drainage. The second stage consisted of the work of fitting out to enable the building to be used as licensed premises comprising bars, a restaurant and other rooms. The two stages were referred to in the contract documentation as phase 1 and phase 2. The pursuers were appointed contractor for phase 1, the shell construction works. The fit-out contractor for phase 2 was a company called Dimension Shopfitters. The contract architect for both stages was Davidson Design Partnership Ltd. The phase 1 contract between the pursuers and the defenders was contained in a tender by the defenders dated 26 January 2001 as revised by a further letter dated 12 March 2001. It incorporated the terms and conditions of the Scottish Building Contract Without Quantities Contractors Design Portion (January 2000 Revision), subject to certain amendments and modifications.

[2] The contract works began on 7 May 2001. Disputes arose between the parties in the course of the works, and as a result two separate referrals to adjudication were made by the defenders. Thereafter the pursuers raised the present proceedings against the defenders, in which they originally claimed for a series of declarators and decrees for payment relating to the contract works. The defenders counterclaimed for payment of retention monies. Following sundry procedure, including two debates, all of those claims except one have been settled. The only remaining matter in dispute is a claim by the pursuers for loss of profits caused by the fact that the opening of the premises was delayed by 28 days; the pursuers aver that that delay was caused by breaches of contract on the part of the defenders. The present opinion is concerned solely with that claim.

[3] The dispute that remains live is not particularly well focused in the pleadings, which are largely concerned with other issues, but as they emerged in evidence the pursuers' allegations can be summarised as follows. First, stonework performed by the pursuers' masonry subcontractor had been delayed and had caused delay and disruption to the fit-out works. Secondly, the defenders' workmen had left debris on site, which had to be cleared by Dimension Shopfitters to enable them to proceed with the fit-out works. That too had caused delay and disruption at the start of Dimension's time on site. Thirdly, the underground drainage works carried out by the defenders both inside and outside the building had not been executed properly. Inside the building it is said that the drains failed testing and in consequence had to be replaced. Outside the building the intention was to retain the existing Victorian drains with new connections added, but the drains had been damaged in the course of the works carried out by the defenders. As a result substantial remedial works were required, including the relaying of the drainage outside the building. That caused delay and disruption to Dimension Shopfitters because they had to arrange for all of the necessary remedial work and that work delayed their own contract. The defenders deny that the drainage work was carried out defectively apart from a small number of minor matters that were easily remedied. The defenders further deny that any of the matters complained of delayed Dimension to any material extent. Finally, the defenders claim that the pursuers have failed to prove that any amount has been lost as a result of the alleged delay. The three principal issues that arise are accordingly: (1) whether there were any material defects in the drainage works carried out by the defenders; (2) if there were any such defects, whether they caused material delay in the completion of the phase 2 contract and the opening of the premises; and (3) if there was such delay, whether loss has been proved in consequence. I will deal with each of these matters in turn. Before doing so, however, it is appropriate that I should say something about the general evidence led in the case.

Evidence

[4] For the pursuers evidence was led from Mr Stewart Davidson, the principal director of the contract architect and the individual who was responsible for the architectural aspects of the project, and from Mr Peter Graham, a chartered accountant with Grant Thornton UK LLP, who prepared a report on the losses claimed by the pursuers. For the defenders, evidence was led from Mr David Cooper, the defenders' construction director, Mr Iain Reid, who had been the defenders' project manager, and Mr John Keenan, a civil engineer who was now a contracts manager with the defenders but at the time of the contract had been seconded as a consultant by his then employers, Bullen Consultants. Mr Keenan had been site engineer and manager between July 2001 and January 2002, leaving after all the major construction works by the defenders were complete.

[5] In addition to the oral evidence, extensive documentation relating to the contract was lodged in process. This included a comprehensive set of minutes of site meetings, which contains a detailed record of events, and also the correspondence relating to the parties' dispute. As with almost any building contract, the issues in dispute involved a large number of points of detail, and on such matters the contemporaneous record contained in site minutes and correspondence is obviously likely to be more reliable than the unaided recollection of any witness. For this reason I have generally relied on the documentation in reaching a view as to what happened. I have, however, taken into account the fact that the site minutes were prepared by Mr Davidson, whose evidence was not in all respects satisfactory; consequently I have used the minutes with some circumspection, especially in relation to whether any defects were present in the work carried out by the defenders. The minutes were nevertheless of great assistance in determining whether any defects in the drainage work caused the completion of the phase 2 works to be delayed. The evidence of the witnesses was of assistance in giving a general view of events and guiding me through the details of the documentation. In addition, I should record that documentary evidence was not available as to the testing carried out by the defenders on the drainage in about January 2002. On this matter I have accepted the evidence of Mr Keenan, who was present during the testing and whose evidence on the matter seemed to me to be both clear and reliable.

[6] I found all of the defenders' witnesses to be clearly both credible and reliable. Mr Cooper and Mr Keenan had a good recollection of events and gave clear evidence. Mr Reid was perhaps less clear, but frankly admitted occasions when he could not remember what happened. I had greater doubts about Mr Davidson, whose evidence appeared to change as it developed. This can be illustrated by four issues that arose in the course of his evidence. First, during examination in chief he stated that delay had been caused by the need to complete the stonework and to carry out remedial works where it had been defectively performed by the defenders' subcontractor, Balmoral Stone. That was in accordance with the pursuers' pleadings. In cross-examination, he was taken through the documentation, and conceded that the works carried out by Balmoral were relatively small in relation to the total works. Ultimately, the site minutes revealed that the scaffolding had come down according to the contract programme and that Balmoral were progressing the works and not causing difficulties for phase 2. Finally, the minutes of the site meeting that occurred on 18 June 2002 indicated that the quantity surveyor was to speak to Balmoral to ensure completion by 24 July. At this point Mr Davidson accepted that the stonework was not critical to progress and would not stop the opening of the premises to the public. That itself indicates that Mr Davidson's initial position was unsustainable. Secondly, further problems arose in relation to Mr Davidson's evidence regarding a critical path analysis that he had prepared in connection with the contract. Initially, he suggested that the critical path analysis indicated that the defenders' breaches of contract had produced a delay of three to four weeks. Subsequently, however, the extended this to four to five weeks. There was no obvious reason for this extension in the period of delay that is said to have been disclosed by the critical path analysis. The actual critical path analysis was not produced, although in evidence Mr Davidson said that he had looked at it in connection with the extension of time claim. In these circumstances I do not think that reliance can be placed on the evidence relating to the critical path analysis, and the whole exercise to some extent undermines the general reliability of Mr Davidson's evidence. Thirdly, a considerable amount of evidence was led in relation to causes of delay other than drainage work, stonework and the clearance of debris. When he was asked about these Mr Davidson was inclined to minimize their significance, on occasion describing them as "snagging". It became clear, however, that the other delays were highly significant, and it seems to me that the tendency of Mr Davidson to discount them cast considerable doubt on his reliability as a witness. Fourthly, in relation to the clearance of debris, Mr Davidson started by suggesting that a delay of one week had been caused, but was ultimately forced to concede that the work involved was minor. I deal with this matter at paragraph [10] below. I should add that counsel for the defenders invited me to hold that Mr Davidson was not a credible witness. I found no indication in his evidence that he was doing anything other than attempting to tell the truth, and accordingly I decline to make such a finding. Finally, in relation to Mr Graham, I found him to be a credible and generally reliable witness, although there were serious problems with the information that was made available to him and some parts of his calculations were opened to criticism; I deal with this aspect of his evidence when I discuss the issue of quantum.

[7] Next, I must deal with an objection that was taken to certain evidence for the defenders. Witnesses, in particular Mr Keenan (day 10, 2.50), gave evidence of a video survey of the external drainage system that was carried out by a firm called Martin at the outset of phase 1 of the contract works. The video itself was not produced, and no explanation was given as to why it was unavailable. Nevertheless a report (production 158) was available in which a firm of engineering consultants, Bullen Consultants, compared that video with a report based on a subsequent video taken at the start of the phase 2 works by a firm called Drain-Cure. Mr Keenan (who was employed by Bullen) gave evidence based on the Bullen report and stated that he agreed with it. Objection was taken to any reference to the contents of the video and to the report based on it on the basis that these were not the best evidence; not only was the video unavailable but the maker of the report was not available to be cross-examined. The Bullen report is highly qualified. Thus in part 1.0 the author states that the Drain-Cure hardcopy report cannot be relied on without the backup of video evidence, which was not available. At paragraph 2.0 it is pointed out that the two video surveys travelled in opposite directions, which meant that a direct comparison was impossible. Nevertheless, the author was able to state that in general the two surveys appeared to show the drain in a similar condition. Ultimately, however, at part 3.0, the author stated that the existing sewer appeared to be in very poor form structurally as most of the joints were either displaced or open. It seems to me that the Bullen's report might be of value in demonstrating that the Victorian drain was in poor condition. It does not, however, appear to me to be of any real assistance in determining the critical question of whether the condition of the drain had deteriorated in the course of the phase 1 works. For that reason I do not think that the objection is ultimately of great significance. Nevertheless, I am of opinion that it is well founded; it seems to me that the video taken by Martin is the primary evidence, and without it the Bullen report is only secondary. This is exacerbated by the fact that the author of the Bullen report did not give evidence. Consequently I sustain the objection. I should add, however, that counsel for the defenders did not rely on the Bullen report in her submissions, and she pointed out that the lack of the video simply made it more difficult to prove that deterioration had taken place during the phase 1 works; to that extent excluding the video favours the defenders rather than the pursuers. I am inclined to agree with the latter observation. Counsel for the pursuers attempted to rely on a passage in the evidence of Mr Davidson where he stated that the defenders had passed him the Martin video and stated that it showed the drain to be clear at the start of the phase 1 works. For the reasons given in paragraph [19] below, however, I do not think that any such admission can be relied upon; on this matter I accept the evidence of Mr Cooper in particular that the defenders did not examine the video but merely passed it on.

[8] I will now turn to the three main topics that form the subject matter of the proof, starting with the question of whether there were any material defects in the work performed by the defenders and their subcontractors. Although ultimately the main issue was whether there were any defects in the drainage work, the pursuers' original case involved delays caused by alleged defects in the stonework and the need to clear debris from site, which was said to be a breach of the contractual obligation to leave the site in a clean and tidy condition. In his submissions counsel for the pursuers suggested that I should allow one or two days delay for the clearance of debris. I will accordingly deal briefly with these before turning to the question of the alleged defects in the drainage work.

Stonework and debris.

[9] The stonework forming part of phase 1 was carried out by the defenders' subcontractors, Balmoral Stone. The relevant work was about 1/13 of the overall contractual works and, while some delay does appear to have occurred, it was clear that the scaffolding was taken down on programme. This was important, because the scaffolding would obviously have had an impact on the ability of the pursuers to open the premises. Moreover, the minutes of the site meeting held on 18 June 2002 indicated that the stonework should be completed by 24 July. At that point the stonework was clearly not critical to completion and would not stop opening of the premises.

[10] In relation to debris, Mr Davidson gave evidence that the defenders had left the site in an untidy condition at the end of phase 1, and that this would cause delay at the outset of phase 2. He appeared to indicate that that had resulted in delay to the whole of the phase 2 works. The minutes of the site meetings, however, indicated that the clearance of debris was not a major issue. At the phase 2 pre-contract meeting, held on 21 February 2002 (production 27, paragraph 3.3 .1), Mr O'Donnell, the individual principally involved on behalf of Dimension Shopfitting, stated that he had carried out an inspection of the site. There was no mention of debris, however, which would be unusual if the problem was serious. At site meeting no 2, held on 12 March (production 29, paragraph 20.1), Mr O'Donnell mentioned that site setup procedures were now completed, and once again there was no mention of debris. The work involved in clearing any debris appears in the quantity surveyor's draft final account (production 284, page 117), where it is stated that clearing building debris in the basement took two labourers two days. That contrasts with Mr Davidson's initial estimate that clearing debris delayed the works by one week. Mr Davidson eventually agreed that clearing the debris was not a big job, and that it could be done along with the other works. The entry from the quantity surveyor's account related to debris in the basement, but no evidence was led as to any delay caused by other debris. Overall I conclude that the need to clear debris was of minor significance, and did not delay completion in any way.

Defects in drainage work

Internal drainage

[11] The drainage work performed within the premises and that performed externally were distinct, in that the internal drainage was entirely new whereas the external drainage works sought to make use of the existing drains so far as that was possible. The work was carried out by a subcontractor, Dicon. Its later stages were supervised by Mr Keenan, whom I found to be a convincing witness and I accept his account of what happened. He gave evidence that he had left the site in January 2002, prior to final snagging. He had not been aware of any complaints regarding the internal drainage. The whole of the internal pipes had been tested successfully. Those tests were witnessed by Mr Tainsh, the official of the Building Control Department of Perth and Kinross Council who was responsible for approval of the drainage system, and he had approved of them. Mr Tainsh had marked up a plan of the drainage with records of his site visits. Mr Keenan had asked Mr Tainsh for a copy of that plan, but Mr Tainsh had declined to provide one; he gave evidence (and Mr Cooper concurred in this) that documentation and certification would not normally be given until the completion of the entire project, not merely phase 1. In correspondence that passed after the start of the phase 2 works (for example, production 294, page 10) Mr Davidson had suggested that he had been told by Mr Tainsh that one section in the north wing, where the pipe was suspended under a floor, had not been tested in Mr Tainsh's presence. This was put to Mr Keenan both in chief (day 10, 11.59) and towards the start of his cross-examination (day 10, 3.25), and he was adamant that that section was tested and the tests were witnessed. Mr Tainsh did not give evidence. On this matter I accept the evidence of Mr Keenan. Consequently I conclude that the whole of the internal drainage had been satisfactorily tested prior to the point when Mr Keenan left the site in January 2001.

[12] In February and March 2001 the handover to phase 2 took place. The question of drainage was raised by Dimension Shopfitting at the pre-contract meeting for phase 2, held on 21 February 2001, and was discussed at the site meetings that took place thereafter. In the minutes of the first contract meeting for phase 2, which was held on 5 March 2002 (production 28), it was noted (by Mr Davidson, at paragraph 20.2.1.1) that the external drainage connections were in poor condition, particularly where new pipework was connected to the existing manholes. In relation to the internal drainage, it was noted (paragraph 20.2.1.1) that testing was currently taking place to ascertain the extent of the works required to rectify the drainage system. At the second phase 2 contract meeting, held on 12 March 2002 (production 29), it was reported (paragraphs 27.11 and .12) that the drainage lines were not standing to test. A number of alleged defects in the drainage system were recorded. On 13 March Mr Davidson wrote to the defenders (production 284, pages 12 and 13) expressing highly critical views on the drainage; he stated that the system had been tested on 12 March by the phase 2 plumbing subcontractors and the system had failed. Mr Reid, the recipient of that letter, then contacted Mr Tainsh (production 296, page 26) and obtained his confirmation that he was satisfied with the drainage system apart from the need for rebenching at two external manholes. The rebenching was a procedure that was fairly easily carried out; one manhole was rebenched on 21 March and the other required to be realigned to satisfy building control and was rebenched at that point; the realignment was not in any way attributable to the defenders' work (Mr Cooper, day 7, 2.30). Mr Reid also gave evidence that he had contacted Mr Keenan at this point and Mr Keenan had told him that the whole system had been satisfactorily tested before he went off site.

[13] Thereafter Mr Cooper and Mr Keenan visited the site on 18 March. Both Mr Cooper and Mr Keenan gave evidence that Dimension had started opening up sections of the existing drains, in particular sections where it ran through or under concrete floors (day 7, 2.52; day 10, 12.14). That caused both men great concern, because in order to obtain access to a pipe running under concrete it was necessary to use jackhammers and electric saws. That was likely to cause significant damage to the pipes. Indeed, Mr Davidson in cross-examination (day 6, 12.27-12.35) accepted that, if jackhammers were used to remove concrete and the concrete was bonded to the drainage pipe, that would cause damage to the pipe. He further agreed that the areas exposed by Dimension were in the area of the pop ups (sections of pipe coming through the floor with a view to connection to sinks, wash hand basins, lavatories and the like); those were areas where the floor was concrete. Despite those concessions, Mr Davidson's view was that the work carried out by Dimension was performed carefully and would not have caused damage to the drainage system. On this matter I prefer the evidence of Mr Keenan and Mr Cooper, who both clearly thought that damage would be caused. That seems to me to be obvious, in view of the vibration that devices such as jackhammers set up. Mr Cooper and Mr Keenan further give evidence that it became apparent to them that additional branches to the drainage system had been added by Dimension, and that that might further compromise its integrity (day 10, 12.19).

[14] Mr Davidson gave evidence that, by the time of the visit by Mr Cooper and Mr Keenan on 18 March, the drainage had not been worked on. In view of the clear evidence of Mr Cooper and Mr Keenan I reject that evidence. Moreover, the contract programme for phase 2 (production 319) makes clear that first fix plumbing was scheduled to start on 4 March. Dimension's site set up took longer than was originally anticipated, and consequently that date probably slipped by some days. Nevertheless, it seems clear that the plumbing works would have started prior to 18 March, and there was no suggestion that there had been a particularly late start with the first fix plumbing. Furthermore, Mr Davidson made reference to the testing carried out on 12 March, but he did not take part in those tests and no evidence was led from anyone who did in fact conduct the tests. The failure to lead such evidence clearly prejudiced the defenders, because they were unable to cross-examine anyone who took part in the testing. For these reasons I am unable to attach weight to Mr Davidson's evidence about those tests. I prefer the defenders' evidence, that by 18 March significant work had been carried out on the drainage system and that that work had given rise to a major risk that the integrity of the system would be compromised.

[15] In the course of the visit of 18 March Dimension's subcontractor carried out certain testing, which disclosed a failure in one section of pipe. The defenders wanted to carry out their own testing, and returned to site on 21 March to do that. The system of testing used by the defenders' representatives was different from that used by the pursuers' representatives. The defenders' representatives used balloons filled with air to block off sections of the system for testing. The pursuers' representatives, by contrast, used plastic stoppers. The defenders' witnesses were adamant that plastic stoppers were not a satisfactory means of isolating sections of the system because they did not achieve a particularly tight connection and leakage was liable to occur (for example, Mr Cooper, day 6, 2.50; Mr Keenan, day 10, 12.25). I accept the defenders' evidence on this matter; it seems to me that a balloon is likely, because of its inherent flexibility, to achieve significantly tighter connection than a plastic stopper. This is a further reason for doubting the results of tests carried out by the pursuers' representatives. The result of the tests carried out by the defenders on 21 March was that every section of internal piping bar one passed the test (Mr Keenan, day 10, 12.21). Mr Keenan and Mr Reid indicated that the intended to return in order to investigate that section further. They returned to site on 27 March accompanied by Mr Tainsh, but by then Dimension had already started to replace the internal drainage.

[16] The decision to replace the whole of the internal drainage had been taken by Mr Davidson by 19 March at latest. The matter is mentioned in the minutes of the phase 2 contract meeting held on that date (production 30, paragraph 33.11), where Dimension were instructed to proceed with an amended and realigned system as discussed with the Architect and with their plumbing subcontractor. It is further apparent from a fax of 20 March that Mr Davidson sent to Dimension (production 105), in which Dimension were instructed to "commence with the agreed strategy to relay the system". Mr Davidson gave evidence (day 6, 11.30) that the strategy to relay the system was adopted because the tests had been unsatisfactory; if the defenders' tests had been satisfactory he would not have proceeded with the instruction to relay. He did not suggest that relaying was the only option open to the pursuers, and he further agreed in cross-examination that the defenders had not been given sufficient time to remedy the position. Mr Davidson further gave evidence that the phase 2 plumbing subcontractor had carried out a test on 27 March, which had shown the system to fail. In this case, however, it is clear that the test was carried out after the opening up of the drainage, and no witness was called who carried out that test. As with the earlier testing, the failure to call such a witness prevented the defenders from cross-examining on what actually took place. For these reasons I am of opinion that no weight can be placed on the testing on 27 March.

[17] The defenders accepted that some defects existed in the internal drainage system. As already mentioned, two manholes where the internal system connected with the external drainage required rebenching; one of these required a new cover. In one area pea gravel had been omitted under a run of pipe, and some work was required on suspended pipe underneath a timber floor. The defenders offered to repair or pay for the repair of all of these. It was a matter of agreement that not much work was involved in any of these tasks (for example, Mr Davidson, day 6, 1.57-2.25), and that the work of repair would not take long. Apart from these matters, I am of opinion that the pursuers have failed to prove any defects in the internal drainage system. I reach this conclusion for two reasons: first, no evidence was led from anyone who was actually involved in the tests carried out on 12 and 27 March, and secondly, it is likely that significant work had been carried out on the system by Dimension's subcontractors prior to those dates and that such work was likely to cause defects to emerge in the system. Once the work of opening up had started, I am of opinion that no reliance can be placed on any testing because it was probable that the work carried out to concrete floors, using jackhammers and the like, would produce cracking in the system.

External drainage

[18] The external drainage work made use of an existing Victorian fireclay pipe which ran to the east of the building and connected to the public sewer in Mill Street. Connections were to be made to the existing manholes, but one of these was to be replaced. In addition, work was required on a section to the north of the property, running between manholes 1 and 2. The pursuers' case on the external drainage was in summary that in May 2002 it was discovered that a significant number of defects existed. Some of these were said to have arisen from new connections made into the drain by the defenders, which were said to be faulty. Others involved cracks and displaced joints in the existing drain, which were said to have been caused by the phase 1 works, and in particular by heavy plant which crossed the line of the drain.

[19] At the start of the phase 1 works Mr Davidson instructed the defenders to obtain a camera survey of the existing drain (minuted in production 5). The defenders did so, and provided a copy to Mr Davidson. Mr Davidson's evidence was that, when the video was handed over, the defenders told him that the drain was intact and clear. The evidence of Mr Cooper, however, was that no one at the defenders had actually watched the video. It had been obtained from a specialist firm, Martin, and all that the defenders did was to obtain the survey and pass the results to Mr Davidson (day 7, 12.16). On this matter I prefer the evidence of Mr Cooper; I think that he is more likely to recall whether or not the defenders actually looked at the video. Moreover, Mr Davidson's evidence was not supported by any reference in the documentation, whether in the site minutes or elsewhere. Mr Davidson also gave evidence (day 6, 2.25) that he had seen the video and had been satisfied with the condition of the drain. The video itself was not produced.

[20] When the phase 2 works were under way, it became apparent that a new section of external drain laid between manholes 1 and 2 had slumped; this was accepted by the defenders and remedial work was in due course carried out. As a result of this defect, a further video survey was commissioned from Drain-Cure. A copy of this was sent by Mr Davidson to the defenders on 26 May (production 284, page 34). It was accompanied by a lengthy fax in which Mr Davidson set out the defects that he thought the video revealed in the drainage system. No witness from Drain-Cure was led to speak to the report, and the accompanying video was not available. Mr Davidson had not inspected the drain himself; he had relied entirely on interpretation of the Drain-Cure video. For this reason Mr Davidson's evidence on this matter must, I think, be approached with some care.

[21] The fax of 26 May indicated that the connections between the internal and external drainage were defective. In relation to this matter, the only evidence available for the pursuers was that of Mr Davidson, who, as explained in the last paragraph, relied entirely on the Drain-Cure video. Mr Keenan, however, gave evidence that Mr Tainsh had inspected and approved all the connections with the existing drain; moreover, when those connections were made, Mr Keenan himself had not been aware of any damage to the drain. On this matter I prefer the evidence of Mr Keenan, who was a careful witness and who had been directly involved in the works at first hand.

[22] Further defects identified in the fax of 26 May were displaced joints and circumferential cracking. The pursuers submitted that these resulted from inadequate protection of the drainage during the phase 1 works, which was a breach of the contractual duty to protect the existing drainage. In his evidence Mr Davidson gave evidence to that effect; he suggested in particular that excessive loading had been placed on the drains as a result of plant brought on to site by the defenders. It is notable, however, that in the documentation relating to the phase 1 works there is no indication that that Mr Davidson at any time commented on the loadings on the drain, or claimed that there was inadequate protection from such loading. Moreover, in cross-examination (day 6, 2.10) Mr Davidson explained his view as based on an attempt to explain the difference between the two camera surveys. He took the view that the plant used in carrying out the works, including lorries, contributed to the defects in the second survey. He was asked whether there was inadequate protection at that stage and replied that it was difficult to say, as he had only been on site once per week. Nevertheless, the works were major; the whole car park at the front of the building had been covered with plant and spoil heaps and had been very congested. He was asked whether he was aware that the works were without adequate protection and replied that he was not looking for that and was not aware of it. He felt that he would probably have said something if he had noticed it. Against that background, it seems to me that Mr Davidson's evidence on this matter is essentially speculation; a difference existed in the condition of the drain in the two surveys; there must be an explanation; and the only possible explanation was loading with plant. Moreover, Mr Davidson's evidence must be set against clear evidence from Mr Cooper and Mr Keenan (day 10, 2.31) to the effect that there was no major loading above the drain. The drain was at a depth of between 1.5 and 2.5 m, and when cranes were on site appropriate protection was provided above it, in the form of spreader plates which came with the crane. These were used on top of timbers. That evidence appeared to me to be very clear, and I prefer it to that of Mr Davidson. On that basis, I find that it has not been proved that anything occurred during the phase 1 works that might involve undue weight on the old fireclay pipes; instead, I conclude that the defenders took proper steps to protect the pipes from plant. On this basis I am unable to draw the inference that the phase 1 works caused damage to the old pipes. In an appropriate case it is clearly possible to draw an inference of causation from the fact of damage. In the present case, however, there was uncontested evidence (Mr Keenan, day 10, 2.42, 3.02), that the condition of fireclay pipes deteriorates with age, and that in a Victorian pipe defects are likely to exist to some extent. It seems to me that that factor makes it difficult to draw any inference of causation from the existence of damage and in view of the evidence that I have accepted about the care that the defenders took to protect the pipe I find such an inference to be unwarranted.

[23] In any event, the evidence relied on by the pursuers as showing damage to the pipe was the comparison of the two videos, that taken by Martin at the start of the phase 1 works and that taken by Drain-Cure at the start of the phase 2 works. Neither of these was produced, although the report that accompanied the Drain-Cure video was available. Nevertheless, it is the comparison between the two that is critical to the pursuers' case. As mentioned above at paragraph [7], counsel for the pursuers objected to any evidence about the contents of the Martin video, on the basis that anything other than the video was not best evidence, and I have sustained that objection. Nevertheless, as mentioned at paragraph [7], it seems to me that if anything the absence of the video undermines the pursuers' case, because a comparison of the two videos would be the most convincing evidence that deterioration had occurred. In fact, the only evidence that suggested that the Victorian drain was in good condition at the start of phase 1 was the evidence of Mr Davidson that he had been told by the defenders' representatives that the drain was intact and clear. This was contrary to the evidence of Mr Cooper, and I have declined to find that any such statement was made. I am accordingly of opinion that the pursuers have failed to make out a critical element in their case, namely that at the start of the phase 1 works the Victorian drain was intact. I reach this conclusion without any reference to the report from Bullen Consultants (production 158) based on a comparison of the Martin video and the Drain-Cure survey report (see paragraph [7]).

[24] In the foregoing circumstances I conclude that the pursuers have failed to establish that any deterioration in the condition of the Victorian drain occurred during the course of the phase 1 works. I further conclude that, even if there was any such deterioration, the pursuers have failed to establish that it was caused by the actings of the defenders. Indeed, for the reasons explained previously, I consider that the defenders took reasonable care to protect the existing drainage line during the phase 1 works.

Delay

[25] The second main issue in the case is whether, if the pursuers have established that defects existed in the drainage system, such defects caused material delay in the completion of the phase 2 contract and the opening of the premises. For the pursuers it was submitted that I should find that the opening of the premises was delayed by four weeks or such lesser period as could be attributed to the delays caused by defects in the internal and external drainage. The premises in fact opened 28 days later than was provided for in Dimension's phase 2 programme (production 319). In my opinion the pursuers have wholly failed to make out this aspect of their claim, for three main reasons. First, it is very clear from the minutes of the site meetings for the phase 2 contract that major delays occurred as a result of the performance of two contractors employed directly by the pursuers, Arthur McKay, who were the electrical contractors, and The Music Company, who were responsible for installing sound and lighting systems in the premises. Even if some delay resulted from the drainage works, it was insignificant compared with the delays caused by the work of those two contractors. Secondly, further delays occurred as a result of the installation works carried out by Dimension Shopfitters during the phase 2 contract. These related to a number of matters, notably the kitchen equipment. It is obvious that none of the foregoing delays was in any way attributable to the defenders. Thirdly, the pursuers have failed to provide any systematic analysis of the effect that the various causes of delay had on the date of opening of the premises. This is important in view of a submission by the pursuers that the court should apportion the losses sustained by the pursuers among the various causes of delay in the manner suggested in John Doyle Construction Ltd v Laing Management (Scotland) Ltd, 2004 SC 713, at paragraphs [16]-[20]. If that is to be done, it is important that there should be some sort of evidential basis for the apportionment exercise, and in my opinion this was wholly lacking in the present case.

[26] I propose first to consider the minutes of the site meetings relating to the phase 2 project in order to explain how delays caused by Arthur McKay and The Music Company and delays in Dimension's own work impacted on the progress of the works. Thereafter I will consider the pursuers' analysis of delay, including its relationship to the events disclosed in the site minutes. In considering the site minutes, what is in my opinion of great significance is, first, the relatively small number of references to the drainage works, which disclose that the drainage was complete well before the end of the phase 2 works, and secondly, the large number of references to delays caused by the matters mentioned in the last paragraph.

[27] At the beginning of the phase 2 contract Dimension's programme was delayed by one week because an extra week was required as lead-in time, and all dates in that programme have to be adjusted accordingly. The programme contemplated that first fixed electrical work would be completed by 28 April, adjusted to 5 May; the second fixed electrical work by 22 May, adjusted to 29 May, and sound and light by 26 May, adjusted to 2 June. Mr Davidson agreed that the work of the two direct contractors dealing with these items, Arthur McKay and The Music Company, was a cause of the ultimate delay in opening (day 2, 2.59). Moreover, as early as 28 March Dimension had given notice under clause 25 of the contract (production 108) that the progress of the works was likely to be delayed, and identified the work by Arthur McKay and The Music Company as causes of the delay, as well as the drainage works. At site meeting no 5, held on 2 April, Dimension's site manager, Mr O'Donnell, stated that Dimension were maintaining their programme despite drainage issues, but expressed concerns at the progress that was being made by Arthur McKay and The Music Company, and in particular the hours that were being worked by those contractors (production 31, paragraph 46.9.1). That entry forms the pattern for a number of subsequent site minutes. In these it became clear that Dimension were greatly concerned at the progress that was made on site by Arthur McKay and The Music Company, and at the failure of the employees of those companies to work full site hours. That concern was shared by Mr Davidson. For example, on 3 April he wrote to Dimension (production 110) to state that both he and the pursuers were stressing the importance of the contract programme to the pursuers' directly employed contractors and that both Arthur McKay and The Music Company had been advised to rectify their manpower levels on site. At the next site meeting, held on 9 April (production 32), concerns were raised by Dimension regarding the programming and working practices of Arthur McKay (paragraph 53.1.4). Dimension also stated that they had lost time because both The Music Company and Arthur McKay were behind their respective programmes (paragraph 55.8.1). Arthur McKay were not working site hours, and The Music Company had started one week late; delays had occurred in cabling work, and the result was that wall and ceiling sheeting trades were prevented from working properly. This indicates the way in which the electrical and sound and light work carried out by Arthur McKay and The Music Company was critical to the overall programme. The problems with the hours worked by Arthur McKay and the consequent delay to the general site programme were highlighted again at paragraph 57.2.1. The manpower available on site from The Music Company was also criticised at paragraph 52.1.6.

[28] At the next site meeting, held on 16 April (production 33, paragraph 61.2.4), it was noted that The Music Company had increased their manpower but (at paragraph 61.12.1) that delays had been caused by lack of manpower on the part of both Arthur McKay and The Music Company, with the latter contractor being a week late in starting on site. On 18 April Dimension wrote to the Architect to apply under clause 25 of the contract for an extension of time of two weeks (production 115). The delay was attributed to both lack of progress by Arthur McKay and The Music Company and the additional drainage works. Two weeks delay was attributed to the former and 11/2 weeks to the latter, the two obviously running concurrently.

[29] At site meeting no 9, held on 30 April, Dimension once again expressed concern at the progress being made by Arthur McKay (production 35, paragraph 72.21.1); this matter was considered at some length, and clearly provoked significant discussion. At the same meeting (paragraph 73.1.1) the issue was raised of the programme and installation dates for Stanguard, the designated supplier of certain kitchen fittings. The concern about lack of progress regarding the kitchen fittings was repeated at site meeting no 10, held on 14 May (production 37, paragraph 84.9), and at site meeting no 11, held on 21 May, it was noted (production 38, paragraph 91.8) that Stanguard was no longer involved with the project and that the quantity surveyor was to advise on the appointment of a replacement supplier of kitchen fittings. At the next site meeting, no 11, held on 28 May, the programme analysis was referred to (production 39, paragraph 97.7), and it was noted that the external works were two weeks behind schedule; it was also noted (paragraph 98.2) that the drainage system had passed tests. At the same meeting it was noted that The Music Company were having difficulty in ordering certain items of equipment, which were on a two to four week lead in time; this had implications for the programme. The following site meeting, no 12, was held on 4 June (production 40). In the programme analysis section of the minute, it was noted (paragraph, 103.7) that The Music Company would not complete on time. It was further noted (paragraph 103.19.1) that information was required regarding the refrigeration equipment and (paragraph 104.2.3) that the pursuers had to supply fittings for the lavatories. At the next site meeting, no 13, held on 11 June, the minute recorded the fitting programme for The Music Company (production 41, paragraph 109.2): television units (about 30 in total) were to be installed from 18 June onwards, and the lighting fittings were to be installed by 3 July. The stainless still fittings in the kitchens were to be installed by 23 June and the second fix of the refrigeration equipment was to be at a date still to be confirmed (paragraph 109.6). Fixed seating was still being installed (paragraph 109.8.1). It was further noted that the main drainage had now been completed and tested in full, and backfilling was taking place. Drainage was being installed to the outbuildings (a laundry) (paragraph 109.11); Mr Davidson stated that the drainage to the laundry did not cause any delay.

[30] Site meeting no 14 was held on 18 June (production 42). Arthur McKay were not represented (paragraph 114.3), which was described as "not helpful or acceptable". So far as The Music Company was concerned, it was noted (paragraph 115.2) that the programme had slipped approximately 1 week, and that this had a significant impact on the pursuers' ability to open and trade. The Music Company were directed to complete installation by 27 June and to carry out programming between 27 June and 3 July, supplementing manpower as necessary. Lifts were to be installed between 24 and 27 June (paragraph 115.5.1) and kitchen equipment was to be delivered on 21 June (paragraph 115.6.2). The date for kitchen equipment should be compared with the programme (paragraph the 19), which indicated that, allowing for one week of slippage, kitchen equipment should have been delivered by 20 May. External drainage was recorded as complete (paragraph 115.10). The site manager for Arthur McKay was once again not present (paragraph 115.16). At paragraph 115.16.3 it was recorded that Arthur McKay were now behind programme by 10 days, holding up finishing work, particularly painters. Disruption was being caused to paint finishes by wires being pulled through, incorrect locations, and holes cut incorrectly requiring patching. Areas available for completion were not being completed. Despite being behind programme, Arthur McKay were not working overtime; this was recorded as unacceptable, and Arthur McKay were instructed to issue a full report on programme. A complaint about cabling and further concerns about inadequate manpower were recorded at paragraph 115.16.4. Finally, it was recorded (paragraph 115.17.2) that another subcontractor, Bell Security, were still to fix a Redcare line (a security device which Mr Davidson thought was perhaps relevant to insurance). The following day the Quantity Surveyor wrote to The Music Company (production 133) to complain that excessive holes and damage were being caused in the walls and ceilings in a part of the building that had already been fully painted; this would cause problems with making good.

[31] The next site meeting, no 15, was held on 26 June (production 43). The Music Company were now to complete by 3 July, with programming of their installation thereafter (paragraph 121.2). All kitchen equipment was to be installed by 2 July (paragraph 121.5.3). Dimension again complained that Arthur McKay were not using sufficient manpower (paragraph 121.11), and it was recorded that there was a disagreement between Dimension and Arthur McKay as to the labour required on site. The works were behind programme, and there had been difficulties on site between Arthur McKay and The Music Company. A substantial number of specific items requiring attention of Arthur McKay were recorded in paragraph 121.11. At paragraph 121.13.1 it was noted that certain work was required to complete the stairs; Mr Davidson stated (day 5, 11.54) that a certificate of practical completion would not be issued by the Building Control Department until such work was completed. Floors were still being installed, and were to be completed by 30 June (paragraph 122.2).

[32] Site meeting no 16 was held on 2 July (production 44). As would perhaps be expected at this stage in a fit-out contract, a large number of uncompleted items were discussed. The kitchen manifold and gas fitting works were to be completed by 3 or 4 July (paragraph 128.1), and the subcontractor fitting out the kitchen was to return to site on 4 July to complete its work following the manifold alterations (paragraph 128.5.1). The restaurant seating was completed and available for delivery (paragraph 128.5.3). Building Control had required that a fan be relocated in order to obtain a completion certificate (paragraph 128.8.2, explained by Mr Davidson at day 5, 12.22). Arthur McKay's progress was discussed at length at paragraph 128.10. Progress was not as agreed at the previous site meeting, and now all bars and public areas were to be completed by 5 July. The Architect further directed Arthur McKay to ensure that all works were completed by that date in order to permit follow-on trades to proceed. Concern was also expressed regarding cabling, and completed cable routes required to be addressed. Building Control had also instructed the insertion of window barriers at certain locations (paragraph 128.11.2). Arthur McKay required to relocate seven of the sounders (paragraph 128.15.1). At paragraph 129.1.1 it was noted that, because of the requirement to install additional electrical detectors and the number of outstanding items of work, the programme was currently unachievable. The cleaners who would move in on completion of the works were accordingly put off until 8 July. At paragraph 129.3 it was recorded that The Music Company were concerned at the load imposed on certain circuits that were not designed for the purpose. As a result delays would be caused, but that section of work should be complete by 5 July. The procedure for handover to the pursuers was considered at paragraph 130.1.1, where it was noted that the Architect confirmed that he would arrange a final inspection with the Building Control Officer and the Firemaster for about 9 July. For this purpose certification was required from Arthur McKay. In the event, the pursuers took possession of the premises on Friday, 12 July.

[33] Even after completion problems continued with the electrical work. On 26 July, following complaints by the pursuers, Mr Davidson wrote to Arthur McKay (production 136) to state that the electrical installation was still not complete and that defects were not being dealt with with sufficient urgency; particular defects were set out. Further correspondence passed thereafter. The pursuers employed Hawthorne Boyle, consulting engineers, to investigate Arthur McKay's work, and concerns were raised about the standard of workmanship and design of the electrical works. Thereafter they refused to make full payment to Arthur McKay for the works carried out.

[34] In evidence Mr Davidson expressed the opinion that a delay of four or five weeks was attributable to the drainage works carried out by the defenders. In my opinion that view was quite unsupported by the evidence. The site minutes and correspondence indicate very clearly that the drainage works were complete well before the end of the phase 2 works. Moreover, the latter part of the drainage works consisted of external works, where the effect on programming was clearly less than the effect of internal works. By contrast, the pursuers' difficulties with Arthur McKay and of the Music Company continued right to the end of the phase 2 works and, in the case of Arthur McKay, even beyond that. Clearly the effect of the drainage works carried out during phase 2 could still be relevant to overall completion in that it could have delayed or hindered the electrical and sound and lighting works. In the minutes, however, there is no indication that I have been referred to that any such event occurred. Had this been a significant problem, I would have expected a specific reference at one of the earlier site meetings, but there is no such reference.

[35] Moreover, if it were to be established that the drainage works in phase 2 had caused delay to overall completion, one would normally expect some sort of critical path analysis to be available. Mr Davidson indicated that he had carried out such an analysis as part of his time review process, and that that formed the basis of his view on delay (day 7, 12.49, at the end of re-examination). The difficulty with that evidence is that no critical path analysis was produced, and it is quite impossible to subject such an analysis to critical scrutiny without seeing the whole document. In particular, the linkage between activities is of crucial importance in such an analysis, and the actual delays that are recorded in the analysis must be tested against the site minutes and other documentation. Indeed, proper cross-examination of Mr Davidson on such an analysis would be wholly impossible without having the document available. In addition to that, the analysis that Mr Davidson spoke to was carried out for the purposes of an extension of time claim, which is conducted under specific contractual terms. These do not apply in their entirety to an analysis of the overall delay caused to the phase 2 contract (an analysis in which delays caused by other factors, notably the electrical works and the sound and lighting works, must clearly be taken into account). Furthermore, Mr Davidson expressly agreed at the start of his cross-examination (day 5, 2.59) that other works caused delay, and these were recorded in the site minutes; he specifically mentioned Arthur McKay and The Music Company.

[36] Both counsel referred me to the analysis of global claims in John Doyle Construction Ltd v Laing Management (Scotland) Ltd, supra, at 2004 SC paragraphs [15]-[16]. Counsel for the pursuers submitted that I should make an award of damages based on the daily loss suffered by the pursuers as a result of the late opening of the premises, apportioning that loss between delays caused by the drainage works and delays caused by other matters. It is clear from the Court's analysis in John Doyle Construction that if apportionment is to take place, two conditions must be satisfied. First, it must be possible to hold that the events for which each party is responsible are a material cause of the loss. Secondly, the causes of the loss must be "truly concurrent, in the sense that both operate together at the same time to produce a single consequence". In the present case, I am of opinion that neither of these conditions has been satisfied. The history of the phase 2 contract, as described in the site minutes and summarized at paragraphs [27]-[32] above, indicates that the dominant causes of the late opening were the delays in the work performed by the two contractors employed directly by the pursuers, Arthur McKay and The Music Company, and to a lesser extent the delays that arose during the phase 2 contract in relation to, for example, kitchen fittings. Such delay as was caused by the additional drainage works in phase 2 was, by contrast, of lesser significance and occurred at a fairly early stage in the phase 2 works. In that situation, if delay caused by drainage works is to be regarded as a concurrent cause of the final delay, some form of analysis of causation, normally in the form of a critical path analysis, is essential. It is not particularly difficult to perform such analyses; they are used commonly in the construction industry, and indeed Mr Davidson indicated that he had used one in considering an extension of time. No such analysis was available, however. In those circumstances I do not think that the pursuers have established that the drainage works were a material cause of the delay in opening. In relation to the second requirement, I consider that the pursuers have not established that delays caused by the drainage work continued to operate in the latter stages of the phase 2 contract, and have certainly not established what delay to the works was the defenders' responsibility. In these circumstances it is impossible to hold that the effect of the drainage works on the programme operated concurrently during the latter stages with the delays caused by the client direct contractors and elements in Dimension's own work. Once again, the absence of a critical path analysis is of the greatest importance; it is simply impossible to form a view on the relative significance of the various possible causes of delay. In addition, the present case as presented by the pursuers does not appear to be one of mere delay caused by the phase 2 drainage works, but rather one involving a significant amount of disruption. As indicated in John Doyle Construction at paragraph [17], disruption cases are inherently more complex than cases of mere delay. In such cases an appropriate analysis of the causes of delay is essential, but no such analysis was available. That makes the attribution of delay to the various different causes even more difficult. In all the circumstances I conclude that the pursuers have failed to establish that any delay was caused by works for which the defenders were responsible, and that in any event they have failed to provide a sufficient basis in evidence for apportioning delay between those works and other causes of delay.

Quantification of the pursuers' claim

[37] The third element in the pursuers' case is the quantification of their claim. The only evidence on this matter came from Mr Graham, who prepared a report (production 309). The report itself is a conventional calculation of loss of profits and additional and wasted costs caused by the late opening. These were calculated at £72,680, consisting of £32,726 in respect of loss of profits, £37,974 in respect of additional and wasted costs, and £1,980 in respect of financing costs. The loss of profit calculation was based on the trading figures for the premises disclosed in the management accounts for the first 11 months of trading, but excluding periods such as Christmas and the first 15 weeks of trading when conditions could not be described as normal. In that way a figure for "normal" monthly trading was obtained, and this was attributed to the period of delay, bringing out the figure of £32,726. The additional and wasted costs were the cost of employing the staff for the premises during a 28 day period of delay. This included the cost of renting a flat in Perth for the manager of the nightclub during that period and certain travelling costs. It also included costs incurred in relation to telephone rental, insurance, and heat, light and power. Finally, finance costs in relation to the two previous elements were calculated, based on the rate of overdraft interest charged to the pursuers at the time.

[38] As I have indicated, the calculation in the report is of a fairly conventional nature. Nevertheless, a number of defects became apparent in the information relied on and in certain elements included in the report. First, the loss of profit calculation was based entirely on figures derived from the management accounts of the pursuers. These had not been prepared by Mr Graham or audited by him, and he could not vouch for the accuracy of any of the figures that he used. The supporting material was not made available. The accuracy of the figures used is clearly of critical importance, and the failure to provide the necessary vouching appears to me to be a serious defect in the calculation of loss. Secondly, counsel for the defenders made various criticisms of the additional and wasted costs included in Mr Graham's calculation. In relation to the cost of employing staff, she pointed out that the premises were ready for occupation by the pursuers after they were taken over on 12 July. Mr Graham's calculation of the wasted cost of employing staff was, however, based on the period of 28 days ending on 19 July. That may have been the point when the premises were ready for opening, but staff would have been required to make them ready, and wages paid during the period between 12 July and 19 July cannot be regarded as wasted. I agree with that criticism of Mr Graham's calculation. Counsel for the defenders further criticised the fact that Mr Graham made an allowance for one month's rent on a flat in Perth occupied by the manager of the premises, on the basis that there was no information as to why he required a flat there. Nevertheless, it seems to me that a manager moving from elsewhere might well require accommodation in Perth during the set-up period, and if opening was delayed those expenses would be required over a longer period.

[39] Counsel for the defenders also criticised the travelling costs that are included for one employee, on the basis that no explanation was given as to why they were incurred. In my opinion that is correct, and the calculation would require to be amended on that ground. Criticism was also directed at the telephone charges; in addition to line rental, which the pursuers claim was incurred for a longer period than would otherwise have been necessary, telephone calls were included. It is difficult to see how those calls can be a consequence of the delay in completion; they were no doubt made for good reasons which have no obvious connection with that delay. For that reason the calls would have to be deleted from Mr Graham's calculation. Even in relation to the rental of the telephone line, it appears that it was used for calls during the relevant period. For that reason I do not think that it can be considered as wasted expenditure. I accordingly agree with this ground of criticism. So far as insurance premiums are concerned, no documentation was available, and on this ground I do not think that insurance can be a legitimate head of claim. In relation to heat, light and power, it is clear that electricity or gas was actually used, and accordingly this appears to be in the same position as the telephone calls and rental charges. In any event, no documentation was available to explain precisely what was involved in this head of claim, and that by itself is in my opinion sufficient ground for rejecting it. Finally, counsel for the pursuers intimated that he did not seek financing costs.

[40] In general, however, I am of opinion that the pursuers' calculation of compensation is not well founded. The primary ground is the lack of supporting documentation, but in addition I sustain the specific criticisms of aspects of Mr Graham's calculations that are mentioned in the last two paragraphs.

Conclusion

[41] I accordingly conclude that the pursuers have failed to make out any of the three essential elements of their claim. They have failed to establish any delay in completion of the phase 2 works resulting from defects in the drainage works carried out by the defenders; even if such defects existed, they have failed to establish that they caused any delay in the completion of the premises; and in any event they have failed to establish the amount of any loss sustained by them in consequence of the late opening of the premises. In the circumstances I will repel the pursuers' twelfth plea in law (the plea dealing with entitlement to damages as a result of the defenders' breach of contract), sustain the defenders' third and 10th pleas in law, and assoilzie the defenders from the tenth conclusion of the summons, the only conclusion in the action that remains live.