Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2016] CSOH 63

CA16/15 & CA57/15

OPINION OF LORD WOOLMAN

In the cause

APCOA PARKING (UK) LIMITED

Pursuer;

against

CROSSLANDS PROPERTIES LIMITED

Defender:

and

CROSSLANDS PROPERTIES LIMITED

Pursuer;

against

APCOA PARKING (UK) LIMITED AND ANOTHER

Defender:

 Sandison QC;  Brodies LLP (for Apcoa Parking (UK) Limited)

 D Thomson; Pinsent Masons LLP (for Crosslands Properties Limited)

29 April 2016

Introduction

[1]        Kingsgate Shopping Centre (“the Centre”) is located in Dunfermline.  It was built in 1985 and renovated in 2002.  Several years later the owner added a multi-storey car park.  It is now in a state of disrepair.  The waterproof coating on the top deck has failed.  As a result the concrete has broken down at several locations.  That in turn has led to water penetrating down through the car park levels to the retail areas below. 

[2]        The present proceedings relate to liability for the necessary repairs, which are estimated to cost between £500,000 and £700,000 exclusive of VAT.  The owner of the car park, Crosslands Properties Ltd (“Crosslands”) has raised an action contending that the occupier is liable to carry out the repairs.  The occupier of the car park, Apcoa Parking (UK) Ltd (“Apcoa”) has raised a cross action in which it makes the contrary assertion.

[3]        Liability centres on the proper construction of their bargain, which is contained in missives dated 11 October and 5 November 2007 (“the Agreement”).  The matter came before me for a debate.  Apcoa seeks a proof before answer in both actions, under deletion of certain parts of Crosslands’ written case.  Crosslands takes a more radical line.  It seeks decree de plano in its action and dismissal of the cross action. 

The Agreement
[4]        The parties entered into the Agreement before the construction of the car park.  It had three central features.  First, Crosslands would appoint a main contractor and a professional team to carry out the works.  Secondly, following satisfactory completion, Apcoa would take a 25 year tenancy of the car park on the terms of the draft lease annexed to the Agreement.  Thirdly, prior to the execution of the formal lease, Apcoa would occupy the subjects as a licensee.  I should add that there was only a slender distinction between Apcoa’s position as a tenant or a licensee.  In respect of both, it occupied the subjects on the terms of the draft lease. 

[5]        The Agreement contained provisions to ensure that the works were undertaken to an appropriate standard.  The project manager played an important role in this regard.  It had to carry out inspections before issuing:  (i) the access certificate, (ii) the certificate of practical completion, and (iii) the certificate of making good of defects (“the defects certificate”). 

[6]        Both Crosslands and Apcoa also had roles to play during the construction of the car park.  In particular, Crosslands had several obligations, which can be summarised as follows:

a.         to ensure that the main contractor carried out the works in accordance with the building contract and in a good and workmanlike manner (clauses 2.4 and 3.1);

b.         to allow Apcoa to inspect the works during the course of construction and to use its reasonable endeavours to procure that the project manager should give due consideration to any reasonable representations made by Apcoa in respect of the works (clause 4.1);

c.         to give notice to Apcoa of any inspection by the project manager prior to the issue of a certificate (clause 5);

d.         to deliver collateral warranties from the main contractor and each member of the professional team to Apcoa prior to the date of entry (clauses 2.5 and 9.1); and

e.         to use all reasonable endeavours to procure that the main contractor made good all defects brought to its attention by Apcoa during the defects liability period (clause 9.2).

[7]        I shall say more about the procedure that had to be followed before the issue of the defects certificate: 

i.          Crosslands had to give Apcoa at least 10 working days’ notice that the project manager intended to carry out the final inspection of the works (clause 5.2.1).

ii.         Apcoa was entitled to attend the final inspection on site and to make representations about any additional works to be carried out or any defective works to be remedied before the final certificate was properly issued (clause 5.2.1).

iii.        Crosslands was obliged to make good all defects and have regard to all written representations made by Apcoa (clause 5.2.2).

iv.        If either Crosslands or Apcoa contended that the final certificate had not been properly issued, it could refer the matter for determination by an independent chartered surveyor.  He had power:  (a) to direct the main contractor to carry out additional works or remedy defects;  and (b) to fix the date of the final certificate (clause 5.2.1).

[8]        Two other provisions in the Agreement bear on liability.  Clause 5.4 gave the project manager an unfettered right to issue a certificate “when in its professional judgement it is appropriate to do so”.  Clause 9.3 stated that:

“subject to [Crosslands] implementing its obligations under Clauses 2.5 and 9.1 … [it] shall have no liability whatsoever and howsoever arising under this Agreement after the issue of the [defects] certificate … under the Building Contract in relation to the Works save in connection with any claim or proceedings commenced prior to that date.”

The Facts
[9]        Crosslands engaged Mivan Ltd (“Mivan”) as the main contractor for the works.  Crosslands also appointed the various members of the professional team, including Cyril Sweett Ltd (“Sweett”), the project manager.  The works were duly carried out and in late 2008, Apcoa occupied and operated the car park.  No formal lease has ever been executed so it remains in occupation as a licensee.

[10]      On 30 September 2008 Crosslands delivered the collateral warranties from Mivan and the members of the professional team to Apcoa.  On 15 June 2012 Sweett issued the defects certificate.

[11]      Apcoa contends, however, that two other important steps in the contractual chronology did not occur.  There was no final inspection meeting.  It only saw the defects certificate for the first time after it raised proceedings in 2015.  While these are ultimately matters for proof, Mr Thomson stated that Crosslands does not have a record of a final inspection meeting.  He invited me to proceed on the basis that it did not take place.

Submissions
Crosslands
[12]      Mr Thomson submitted that the language of clause 9.3 is clear and unambiguous.  It refers to two conditions.  Both were satisfied.  Apcoa received the collateral warranties and Sweett issued the defects certificate.  Accordingly, Crosslands has no further liability.  Mr Thomson marshalled a number of other points in support of his argument, which I summarise as follows. 

[13]      First, while Apcoa and Crosslands had a voice in the certification process, Sweett had the primary role.  The parties intended that it should act as the independent certifier and determine whether the works were satisfactory. 

[14]      Second, the parties did not stipulate that compliance with the contract procedure was essential.  It is impermissible to construe the wording of clause 9.3 to mean “subject to the developer implementing its obligations under clause 5”.  That would amount to rewriting the contract.

[15]      Third, Apcoa is not left without a remedy.  It can pursue claims under the collateral warranties.  It would also be open to it to seek reduction of the final certificate on the basis that it was incorrectly issued.

[16]      Apcoa’s case is irrelevant and inspecific.  It does not plead in sufficient detail what would have happened if the correct procedure had been followed.  In particular, it does not plead that if it had made representations the problem with the waterproof coating would not have arisen.  There is also a question-mark about Apcoa’s position.  Given the importance that it now attaches to the final inspection meeting and the defects certificate, Apcoa ought to have enquired about them many years ago.

Apcoa
[17]      Mr Sandison submitted that clause 9.3 is an exclusion clause.  It provided a legal shield to Crosslands.  The parties did not intend that it should have that protection if the contractual scheme had not been followed.  That is what had happened here.  There had been no final inspection and Apcoa had not received the defects certificate.  The principle of mutuality compelled the same result.  With regard to specification, he argued that Apcoa had given full and fair notice of the facts upon which it relied. 

[18]      Mr Sandison observed that the warranties were truly “collateral” in this case.  Mivan, is in administration.  It is closely connected with Crosslands.  Both companies are under the control of the same directing mind, Joseph Ivan McCabrey.  It would be difficult for Apcoa to pursue Sweett, even if it wrongly issued the final certificate. 

Decision
[19]      The issue of the defects certificate is a significant event in the contractual arrangements.  It is the tipping point of liability.  Once issued, it has a decisive effect on the parties’ relations.  Apcoa cannot make a new claim against Crosslands in respect of the works.  Crosslands gains a corresponding immunity.

[20]      The task is to determine the parties’ intention at the time of their bargain.  That involves construing the Agreement as a whole:  Arnold v Britton [2015] 2 WLR 1593, per Lord Hodge at para 71.  I conclude that they plainly did not intend that compliance with clause 5 was optional:  Arnold per Lord Neuberger of Abbotsbury at para 2. 

[21]      To hold otherwise would produce an extraordinary result.  Crosslands could benefit from the exclusion of liability without fulfilling the contractual scheme.  With regard to certification, that scheme was an elaborate one.  It also had a distinct purpose.  It afforded Apcoa an opportunity to check and influence the construction of the works, particularly at the stage of completion. 

[22]      Clause 5.1.2 refers to the notice period for certificates being repeated until the works are “properly complete”.  Clause 5.2.2 imposes the obligation to make good defects on Crosslands, not on Mivan.  I therefore construe the Agreement as meaning that the parties had to comply with clause 5.  Absent that condition being fulfilled, there could be no valid defects certificate and no exclusion of Crosslands’ liability.  While I arrive at my result by means of construction, implication of the word “proper” before “issue” in clause 9.3 would yield the same result:  Aberdeen City Council v Stewart Milne Group Ltd 2012 SC (UKSC) 240. 

[23]      I do not regard the delivery of collateral warranties as being exhaustive of the contingencies that bring clause 9.3 into play.  It expressly mentions clauses 2.5 and 9.1 because they need not have been performed at that point.  It implicitly regarded completion of the certification process as being necessary.

[24]      The principle of mutuality produces the same result.  The parties’ obligations were inter-dependent.  Crosslands was obliged to provide the car park in a fit and proper state.  Apcoa’s counterpart obligation was to pay the rent and keep the subjects in good and substantial repair:  see Hoult v Turpie 2004 SLT 308.  In my view, the parties did not intend that Crosslands could elide its contractual obligations with impunity. 

[25]      Apcoa was entitled to participate in the certification process.  I would be slow to hold in the circumstances that it could be deprived of its right to raise an action in respect of the works against Crosslands. 

[26]      On the question of specification, I am satisfied that Apcoa has given fair notice of its case.  It is set out in detail in answer 6 in the Crosslands’ action.  It offers to prove that:  (a) the works required a waterproof membrane to the top deck;  (b) no such membrane was applied;  (c) at a final inspection meeting Apcoa would have raised this matter;  (d) it informed Crosslands about the defects in the car park at least twice within the defects liability period, which ended on 15 August 2009;  (e) Crosslands did not use all reasonable endeavours to procure that Mivan made good the defects; and (f) if Crosslands had fulfilled its obligations, the top deck of the car park would have been waterproof, concrete there would not have broken down, and the current wants of repairing the leased premises condescended upon would not exist.

Disposal
[27]      I shall arrange to have this case put out by order to determine further procedure.