OUTER HOUSE, COURT OF SESSION
[2010] CSOH 173
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A15/09
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OPINION OF LORD EMSLIE
in the cause
PEACOCK GROUP plc
Pursuers;
against
RAILSTON LIMITED
Defenders:
and
WM MURCHLAND & COMPANY LIMITED
Third Parties ________________
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Pursuers: Wolffe QC, Watson, solicitor advocate; Simpson & Marwick
Defenders: Cowie; Balfour + Manson LLP
Third Parties: Haldane QC; Dundas & Wilson CS LLP
24 December 2010
Introduction
[1] The pursuers are a retailing company whose business premises in and after 2000 included a Unit in Kilmarnock. On 6 July 2001 the premises were flooded when a mains water connection failed at first floor level. According to the pursuers, that failure and the resulting loss and damage were caused by breach of contract on the part of the main contractors by whom shop-fitting works had been carried out. Convened as defenders in this action, the main contractors have tabled a claim to what they call "indemnity" from their sub-contractors under third party procedure, and it is these third parties who now take the lead in seeking dismissal of the action on various grounds.
[2] Without going into unnecessary detail, the pursuers allege that the mains installation at the locus included a connector by which respective lengths of plastic and copper pipe were joined together; that the connector embodied a metal gripper ring with teeth which, when tightened, should have engaged physically with the copper pipe; that the connector came adrift from the copper pipe because it was never properly tightened by the third parties; and that this was evident from the absence of (i) any gripper ring marks where the connector had been in contact with the copper pipe and (ii) gouge marks such as would have been caused if a properly tightened gripper ring had been pulled from the copper pipe. On these grounds the pursuers claim damages from the defenders for breach of their implied contractual obligation (through the third parties) to carry out the plumbing element of the shop-fitting works with reasonable care and skill.
[3] In reply the defenders, without admitting the sequence of failure alleged, maintain that any breach of contract on their part was brought about by the third parties' equivalent breach of the relevant sub-contract. The third parties, for their interest, do not dispute that they were under an implied obligation to carry out the plumbing works with the skill and care to be expected of contractors of ordinary competence. That said, however, they flatly deny having breached any such obligation.
[4] Against that background, it might be thought that a proof should now take place on the disputed issues as to (i) how and why the connection failed, and (ii) whether, in the circumstances, either the defenders or the third parties or both were in breach of their respective contractual obligations. There are, however, complications. First, the failure of the pipework did not occur until some eleven months after the relevant works were completed, leading the third parties to maintain that the connection could not have been defective as alleged. According to them, an inadequately tightened connection would have failed immediately, or very soon, upon normal mains water pressure being restored.
[5] Second, the present action was raised in early 2009 following the dismissal, two years earlier, of a previous case having substantially the same characteristics. Unusually, that previous case was dismissed because the actual connector and the copper piping from which it parted - physical productions, evidence of whose condition would be of crucial significance to the determination of the claim - had been borrowed out and apparently lost by the pursuers' agents in November 2003. By that stage, unfortunately, the third parties were newly convened into the process and, unlike the pursuers and defenders, had had no opportunity to have the connector and copper piping examined by any relevant expert. Somehow, the disappearance of these important items did not come to light until the latter part of 2005, and it was after that (following a preliminary proof as to the circumstances and consequences of the loss) that the action was dismissed. According to the Lord Ordinary at that time, the prejudice to the third parties was so severe and irremediable, by reason of crucial primary evidence being unavailable for expert inspection on their behalf, that the action could not fairly be allowed to proceed against them or against the defenders whose right of relief had been rendered inoperable.
[6] The pursuers acquiesced in this decision, and it was only on the chance rediscovery of the missing items in December 2008 that the prospect of raising fresh proceedings arose. The present action was signetted without delay on 15 January 2009; the third parties were again brought into the process by the defenders in February 2009; and since then the action has followed a fairly unremarkable course leading up to the present diet of debate. In the interesting discussion which has now taken place before me over two days, significant reliance has been placed on the two complicating factors to which I have referred, and certain major disputed issues have been focused for the court's determination. For convenience I propose, in the paragraphs which follow, to deal with each of these disputed issues in turn.
Relevancy and remoteness
[7] In challenging the validity of the claim which they faced, the third parties maintained (i) that no relevant breach of contract was averred against them on Record, and (ii) that the particular risk which transpired, namely an escape of mains water nearly one year after the completion of their work, was not one which they could fairly be held to have assumed at the time of contracting. By reference to a line of authorities including Koufos v C Czarnikow Limited 1969 1 AC 350, Transfield Shipping Inc v Mercator Shipping Inc 2009 1 AC 61; Donoghue v Greater Glasgow Health Board and another 2009 CSOH 115 and Upton Park Homes Limited v Macdonalds, solicitors 2009 CSOH 159, it was argued that the limits of contractual liability were much narrower than for delictual acts or omissions; that these limits depended on what the contracting parties must reasonably be held to have had in contemplation at the material time; and that mere forseeability of a given head of loss, while essential, was not a sufficient basis for liability in itself. Prima facie any unusual and potentially significant future loss would fall outwith the reasonable and proper limits of a contracting party's responsibility for breach of contract, and here it was unrealistic to suppose that the third parties could, in 2000, have undertaken an open-ended and potentially unlimited liability for any failure of the installation which might materialise months, or even years, after completion of the relevant works. As explained by Lord Hoffmann in Transfield, at para. 15, the key question was "...whether the loss for which compensation is sought is of a "kind" or "type" for which the contract-breaker ought fairly to be taken to have accepted responsibility." Lord Hope's observations at para. 32 were to a similar effect, and in addition his Lordship stressed that "...the more unusual the consequence, the more likely it is that provision will be made for it in the contract if it is to result in liability".
[8] On a more technical note, it was said, no term could sensibly be implied into the relevant sub-contract regarding the use of particular tools for plumbing work, and no obligation of "indemnity" could in the circumstances be implied either. A further problem was that the pursuers made no relevant averments to support their suggested mechanism whereby the connector came adrift from the copper pipe. Over a period as long as eleven months, the integrity of the pipework might have been adversely affected in various ways of which the activities of other tradesmen was an obvious example. Where no attempt was made to exclude extraneous factors of that kind, both the cause of the flooding and the identification of any relevant breach of contract were left in a speculative and uncertain state.
[9] In response, the defenders and then the pursuers sought to support the relevancy of the claim against the third parties. On the technical matter of implied terms, the defenders' fifth plea-in-law confirmed that no contractual "indemnity" as such was in issue. Their complaint was simply one of breach of contract in failing to exercise the degree of care and skill to be expected of ordinarily competent plumbing contractors, and it was significant that the existence of that implied obligation was expressly admitted by the third parties. The content of that obligation was also satisfactorily averred, going no further than the basic tightening of connections with appropriate plumbing tools. Similarly, according to the pursuers, there were ample averments of the facts and circumstances necessary to demonstrate how and why the connector came adrift from the copper piping, and thereby to establish basic plumbing failures as the underlying cause. In particular the averments at pp 8/9 of the Record gave fair notice of what the pursuers offered to prove, namely an absence of any of the tell-tale marks which would have been present on the copper piping if the connector had ever been properly tightened in the first place. All necessary inferences could be drawn from expert evidence as to the ascertained state of the components after the flood, and in all the circumstances it was unnecessary for the pursuers to go further and exclude extraneous events such as vandalism, earthquakes or contractor activity.
[10] As regards the extent of the risk to be brought home against the defenders or third parties, there was again no real problem. It was obvious that a breach of contract in failing to tighten joints in mains pipework might well lead on to disconnection and consequent flooding. That flooding and its resultant loss and damage must have been in contemplation as the ordinary and natural product of any such breach of contract, and there was no special loss of an unusual or unforeseeable kind or type which might fall to be excluded. The authorities cited for the third parties were thus not directly in point, since (a) they all concerned the scope of contractual liability for extraordinary losses, and (b) in none of them did the alleged breach of contract involve a simple failure to exercise reasonable care and skill. It would be strange indeed if plumbers failing to tighten a mains water connection were somehow absolved of liability for a resulting flood just because the connection had fortuitously held for a matter of weeks or months.
[11] In my judgment the third parties' challenge to the relevancy of the claim against them is not soundly based and must be repelled. The obligation to exercise reasonable care and skill in carrying out plumbing works, including the formation of joints, is conceded. That obligation must in my view include inter alia the appropriate use of standard plumbing tools and equipment, and the pursuers offer to prove that a connector of the type which failed required tightening with a wrench or something similar. It is true that the obligation to use standard plumbing tools is pled as if it were an implied term of the sub-contract in its own right, rather than a particular aspect of the implied obligation to exercise reasonable care and skill, but I am not prepared to hold the averment to be irrelevant on such a tenuous distinction. It is, I think, quite clear what the defenders have in mind, and the same applies to the various references to "indemnity" which follow in Answers 4 and 5. As the defenders' fifth plea-in-law demonstrates, their claim against the third party is not for a contractual indemnity at all, but simply for damages occasioned by the third parties' breach of contract. The word "relief" might possibly have been used in such circumstances, but in the end (echoing the terms of Rule 26.1(1)(b)(ii) of the Rules of Court) I am inclined to read these averments as going no further than asserting that the third parties are "...liable to the defender in respect of a claim...in connection with the liability, if any, of the defender to the pursuer". Along similar lines, I am not inclined to make too much of the fact that some of the defenders' criticisms are expressed with reference to the "expected lifespan" of the fittings. In another context this might perhaps carry implications of a contractual warranty of some kind, but here I do not think that it has that effect. The defenders' main complaint remains a simple one, that the connection which failed was not made to a normal and durable standard of tightness.
[12] Turning to the remoteness aspect, the third parties have in my opinion failed to identify any particular feature of this case which would lend itself to the application of principles such as those discussed in Koufos, Transfield, Donoghue and Upton Park. These cases were all very different from the present, involving neither basic failures of reasonable care and skill nor basic and obvious consequences. On the contrary, they concerned special and unusual economic losses where the defending party's breach consisted of delay or some discrete non-performance, and it is not perhaps surprising that liability was in each case held to stop short of the full amount claimed. Here, I can see no reason why the averred flooding and associated losses should not have been in contemplation as natural and obvious consequences of any breach of the third parties' obligation to exercise reasonable care and skill in basic joint formation. For this purpose, as it seems to me, the time lapse before the failure occurred is of no significance. No doubt, as the third parties assert on Record, the fact that the joint took so long to fail might possibly yield an inference that it cannot have been defectively fitted in the first place. However, in the event of defective fitting being established as the cause of the failure, it cannot in my view matter that the defective joint happened to survive for a period measured in days, weeks or months.
[13] For all of these reasons, I conclude that the pursuers' case against the defenders, and also the defenders' case against the third parties, must be regarded as sufficiently relevant and specific to go to proof. More accurately, applying the well-known standard test for relevancy, I am not persuaded that on proof of all of the challenged averments the various claims must yet necessarily fail.
Delay
[14] As a result of the crucial connector and copper piping having been mislaid in November 2003, and not found again until December 2008, the pursuers' claim has now been pending for a very long time. It is already more than nine years since the date of the flood; nearly eight years since the first action was raised; and nearly four years since the first action was dismissed. Moreover, as counsel for the third parties pointed out, it is unlikely that any proof in this matter could take place before 2012. According to counsel, the element of delay was here unconscionable and excessive, and was in large measure attributable to fault on the part of the pursuers' agents. Over and above that, the third parties were severely prejudiced by what had happened. The condition of the connector and copper piping had inevitably changed to some degree during their five-year sojourn in the interior of a filing cabinet, and the result was that the third parties' expert was now disabled from examining items in the same condition as had been seen by the pursuers' and defenders' experts many years ago. There was not now, and could never be, a level playing field, and the combination of inexcusable delay and severe prejudice should lead to the immediate dismissal of these proceedings.
[15] The court's power to take that course was not in doubt. It was common ground that the test for dismissal in such circumstances was to be found in Tonner v Reiach and A & D Hall 2008 SC 1, as most recently endorsed and further explained in Hepburn v Royal Alexandra Hospital NHS Trust 2010 SLT 1071. Inordinate and inexcusable delay was the first essential criterion, but that would never be sufficient by itself. There must always be an added ingredient, namely an element of unfairness in the particular context, and in the words of the Lord President in Hepburn, at para 32:
"The dismissal of an action for want of prosecution...is a draconian step. The unfairness in question must...be such that a "fair trial" is no longer possible - or at least that there is a substantial risk that it is no longer possible".
According to counsel for the third parties these requirements were satisfied in the circumstances of this case. The delay was extraordinary; the prejudice irremediable; and a fair trial could not now take place.
[16] While conceding that delay and unfairness might, in certain
circumstances, be so obvious and severe as to warrant instant dismissal of an
action, counsel for the other parties maintained that this was not the case
here. Seen in its proper context, the delay was neither inordinate nor
inexcusable, and it certainly could not be said at this stage that any
prejudice to the third parties ruled out any possibility of a fair trial. The
pursuers could not, for example, be criticised in respect of (a) the period of
around 18 months which elapsed before the first action was raised; (b)
the ensuing year prior to the connector and copper piping being borrowed out
and lost; (c) the following two years during which none of the parties sought
to examine the missing components and their disappearance went unnoticed; (d)
the balance of the period while the components
remained lost; (e) the swift commencement of the present action once the
components were rediscovered; and (f) the dependence of this action up to the
present time. If, hypothetically, the pursuers had waited until the end of the
prescriptive period before raising the first action, and the components had not
been lost, then a proof in these proceedings would not have taken place until
the summer of 2009. The connector and copper piping would have had to be
stored somewhere during the intervening period, and the third parties' expert
would not have been in a position to examine these items until a relatively
late stage. By comparison, it could not be said that the present situation
involved that much greater delay, nor was the third parties' expert
self-evidently in a worse position than if proceedings had been raised towards
the end of the prescriptive period in mid 2006.
[17] Furthermore, there was no basis on which the court could, at this stage, properly assess the extent of any prejudice which the third parties might have suffered. On the pursuers' averments, the rediscovered components were in essentially the same condition as they had been before, and the third parties' pleadings contained no hint of any material difficulty which their expert might have encountered when the connector and copper piping were eventually examined. If any relevant prejudice emerged in evidence in the course of a proof, that might adversely affect the weight to be given to the other parties' expert evidence. Alternatively, if such prejudice was adjudged to be severe, it would be open to the Lord Ordinary to withhold decree on the footing that the third parties had been denied their right to a fair trial under article 6 of the European Convention on Human Rights. Only rarely could such issues be determined in advance of a proof at which detailed evidence could be led and considered, and the proper course here, as in other contexts, would be to allow the case to proceed to inquiry.
[18] Further guidance might, it was said, be obtained from the facts of the Hepburn case. There the defenders were sued for medical negligence in various respects, the action being raised in 1998; for six years no significant progress was made; legal aid was not applied for; medical records were not recovered; no experts were instructed; and one of the two blamed doctors died in 2002. Finally, after a change of solicitors, the pursuer intimated major changes to her case in 2007. These changes encompassed new allegations of fault against both doctors, and it was at this point that the defenders lodged a minute seeking dismissal of the action. Admittedly, the defenders themselves had for some time behaved in a way which led the pursuer to believe that her claim would be dealt with on its merits. However, despite all these adverse features of the case, the Inner House declined to conclude that the combination of delay and prejudice were so severe as to render a fair trial impossible. By comparison, the pursuers here were less blameworthy with regard to the passage of time; the present case was much simpler and had not changed at all; and it was still a matter of speculation whether any real prejudice to the third parties could be established. Even the third parties said little or nothing on that score in their pleadings.
[19] Weighing up the competing contentions as best I can, I am persuaded that the submissions for the pursuers and defenders are compelling and ought to be sustained. In my judgment the passage of time here cannot properly be described as inordinate and inexcusable, and there is currently no reason to regard the third parties as having suffered material prejudice in that connection. The lapse of time would have been little different if a single action had proceeded normally after being raised towards the end of the prescriptive period, and it is significant that the primary issues between the parties will turn on expert evidence as to the presence or absence of tell-tale marks on robust metal components. These components were examined on the pursuers' behalf before the first action was raised, and photographs taken at that time should be of value in facilitating a comparison between their original and current state. The defenders' expert then had an opportunity to examine the components while the first action was pending, and the third parties' expert has now had a chance to inspect them as well. No doubt responsibility for the five-year disappearance of these crucial items must be laid at the pursuers' door, but in the end an inadvertent human error was apparently to blame.
[20] Taking all these factors into account, I am certainly unable to hold, in advance of any inquiry, that a fair trial will not be possible, or even that a substantial risk exists in that connection. Like the defenders' complaint in the Hepburn case, it seems to me that the third parties' submissions here fall well short of justifying decree of dismissal at the debate stage. On the other hand, I consider that the third parties should remain entitled to develop the possibility of prejudice if they can, and on that basis I consider that the appropriate course is now to allow a proof before answer on the whole case with all pleas standing.
Disposal
[21] For all of these reasons I am not prepared to sustain any of the preliminary pleas which have been debated before me. A proof before answer will now be allowed on the whole case with all parties' pleas standing.