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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> WEST REG STREET (PROPERTY) LIMITED AGAINST CENTRAL DEMOLITION LIMITED [2018] ScotCS CSOH_98 (12 October 2018)
URL: http://www.bailii.org/scot/cases/ScotCS/2018/[2018]_CSOH_98.html
Cite as: [2018] CSOH 98, [2018] ScotCS CSOH_98
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Page 1 ⇓
OUTER HOUSE, COURT OF SESSION
[2018] CSOH 98
CA11/18
OPINION OF LORD DOHERTY
In the cause
WEST REG. STREET (PROPERTY) LIMITED
against
CENTRAL DEMOLITION LIMITED
Pursuer
Defender
Pursuer: Lord Davidson of Glen Clova QC; DAC Beachcroft Scotland LLP
Defender: Barne QC; Pinsent Masons LLP
12 October 2018
Introduction
[1] The pursuer carries on business as a property developer. The defender is a
demolition contractor. In 2016 they entered into a contract for the defender to demolish
three adjacent buildings (a 1960s building, a Victorian building, and a Georgian building
with a Venetian façade (“the Venetian building”)) at 28-52 West Register Street and 15-19
South St Andrew Street, Edinburgh. During the course of the demolition the 1960s building
and the Victorian building were found to contain asbestos. The parties are in dispute as to
who should bear the cost of the removal of that asbestos.
Page 2 ⇓
2
[2] In this action the pursuer seeks declarator that the defender is obliged to remove and
dispose of any asbestos encountered during demolition without the need for any variation
to be instructed and without any additional payment being made in respect of that removal
and disposal. The defender maintains that such asbestos removal and disposal is outwith
the scope of the work which it contracted to perform, and that a variation requires to be
instructed and paid for. The matter came before me for a proof before answer on the
commercial roll.
[3] The pursuer led evidence from two witnesses, Scott Castle and Ian Rodger. The
defender called three witnesses, Allan Bell, Colin Peat and John Hunter. Mr Castle, Mr Bell
and Mr Peat prepared signed witness statements and Mr Rodger and Mr Hunter prepared
reports (Mr Rodger’s being 6/2 of process and Mr Hunter’s 7/20 of process). The witness’s
statement or report was treated as being the substance of his evidence-in-chief (subject to
each party reserving the right to object to the admissibility of certain of the contents of each
report).
[4] Mr Castle is a quantity surveyor and project manager who is employed as a director
of the firm of Thomas & Adamson (“T & A”). In terms of the contract T & A were the
Contract Administrator, Quantity Surveyor and CDM Co-ordinator. Mr Castle was in
overall charge of the project for T & A. His evidence was mainly directed to discussions
which took place with representatives of the defender during August 2016 when proposed
amendments to the standard contract conditions were being negotiated. He also spoke to
subsequent events.
[5] Mr Peat is a director of the defender. His evidence focussed on the discussion which
took place with Mr Bell and Mr Castle about the inclusion in the contract of clauses 2.1C
and 2.1D.
Page 3 ⇓
3
[6] Mr Bell is the defender’s contracts manager. He gave evidence as to the background
to the contract; the discussions with Mr Castle about the inclusion of clauses 2.1C and 2.1D;
contract instructions 5 and 6; and subsequent events.
[7] Mr Rodger and Mr Hunter are both chartered surveyors with considerable
experience of construction contracts, including demolition contracts. Their reports and their
oral evidence concentrated on the Standard Method of Measurement of Building Works
(7th ed) (”SMM7”) and its bearing on the contract.
[8] In terms of a joint minute of admissions (no 20 of process) certain matters were
agreed, including a chronology of events. In addition, much of the evidence was not the
subject of any material disagreement. It is unnecessary to rehearse the various sources of
that evidence. It is sufficient simply to narrate my findings in relation to it.
[9] The most contentious evidence concerned the discussion between Mr Castle, Mr Bell
and Mr Peat about incorporation of clauses 2.1C and 2.1D. There was also some
disagreement between Mr Rodger and Mr Hunter about SMM7’s role and significance in the
contract.
The background to the contract
[10] In April 2015 T & A asked the defender to provide an informal budget price for
proposed asbestos removal works, demolition, and façade retention at 28-52 West Register
Street and 15-19 South St Andrew Street (“the combined works”). The defender was
provided with a bill of quantities for the proposed works which included a bill item C21:
“C21 TOXIC / HAZARDOUS MATERIAL REMOVAL
Site generally
Remove and dispose of all asbestos material
identified in the Asbestos Survey reports 15-17 (sic)
South St Andrews Street ref HLAD34033/010R and
Page 4 ⇓
4
28-52 West Register Street ref FYAD32786/001R
generally
ITEM”
The defender was given copies of the aforementioned survey reports. The report relating
to 28-52 West Register Street (ref FYAD32786/001R) set out the findings of an intrusive
refurbishment/demolition survey which had been carried out by RPS Consultants (“RPS”)
between 10 and 20 November 2014. It indicated that certain asbestos containing materials
(”ACM”) had been identified or were assumed to be present. It specified the relevant
locations. It noted certain areas which had not been accessed. The report for 15-19 South
St Andrew Street (ref HLAD34033/010R) set out the results of a non-intrusive pre-demolition
survey which had been carried out by RPS on 17 and 18 November 2014. It indicated that
certain ACM had been identified or were assumed to be present. It specified the relevant
locations. It highlighted that certain areas had not been accessed and that intrusive
investigation into the building fabric had not been possible. It concluded that all areas
should be subject to a fully intrusive demolition survey prior to any works commencing.
Each of the reports contained the caveat:
“Whilst the surveyors made every reasonable effort, RPS Consultants cannot
guarantee that all ACM had been identified, hence some ACM could be present in
the building that may only be discovered when the building is demolished or is
subject to major refurbishment.”
The defender submitted an informal budget quotation for the combined works.
[11] In June or July 2015 T & A asked the defender to submit a tender for asbestos
removal and soft strip work only (ie not including demolition). Bill no 2 in that tender
document repeated the C21 item which had been contained in the tender bill for the
combined works. The defender tendered for the work but its tender was not accepted. The
contract was awarded to another contractor, GCM Services.
Page 5 ⇓
5
[12] On 22 and 24 July 2015 RPS revisited 28-52 West Register Street and prepared an
updated asbestos report (ref FYAD32786/002R). The same caveat as was in the earlier
reports was repeated. It seems that the defender was not provided with that report.
[13] In early January 2016 the defender was asked by T & A to tender for demolition
work at 28-52 West Register Street and 15-19 South St Andrew Street. The contract was to be
on the terms and conditions of the SBCC Standard Building Contract without quantities for
use in Scotland (SBC/XQ/Scot), 2011 edition, incorporating the JCT New Rules of
Measurement Update, August 2012. Although the contract was to be a without quantities
contract, the draft tender documentation prepared by the pursuer contained three
documents which were in the form of bills of quantities. Bill no 1 dealt with preliminaries.
Bill no 2 dealt with demolition work. Bill no 3 related to temporary works. The
Pre-construction Information issued to tenderers was a revised version of the
Pre-construction Information which had previously been prepared for a proposed tender for
the combined works.
[14] The defender put prices against the items ‘A54 Provisional Work/Items’ and
‘A55 Dayworks’ in Bill no 1. In Bill no 2 it inserted a single global figure of £360,000 for all of
the listed demolition items for the Victorian building and a single global figure of £540,000
for all of the listed demolition items for the 1960s building. It priced Bill no 3 at £60,000.
[15] On 9 March 2016 T & A emailed the defender’s Mr Bell and asked him to confirm
inter alia the following matters (shown in ordinary font below). The following day Mr Bell
replied by annotating the email of 9 March 2016 in red (shown in bold below):
“...
2. Confirmation that leaving the asbestos felt and roof tiles on the 1960s and venetian
buildings (currently included in GCM Services ongoing soft strip and asbestos
removal contract) can be included within your works and have nil cost or
Page 6 ⇓
6
programme impact. If not please advise on cost and/or programme impact. There
will be a cost of £6,000 but the programme will not be affected.
3. A recent intrusive survey to satisfy ourselves that there is no asbestos materials
within the external wall build-up of the 1960s building has identified very minor
asbestos residue above the window heads in the new section of this building (as per
the attached photo). It is believed that this is the result of some asbestos overspray to
the steel beams. I attach a couple of photographs which hopefully helps to identify
the residue in question (note - the area in question is restricted to the brickwork
immediately above the steel plate as confirmed by the asbestos analyst). We have
agreed with GCMS that the best option for dealing with this is to infill these areas
with expanding foam to encapsulate the asbestos residue within a matrix of
expanding foam for future removal. I seek confirmation that the removal of this
expanding foam can be included within your works and have nil cost or programme
impact. If not please advise on cost and/or programme impact. There will be a cost
of £5,000 but programme will not be affected.
...”
[16] On 18 May 2016 Coal Consultants carried out a refurbishment and demolition survey
of the buildings for T & A. The survey took place after completion of the soft strip and
asbestos removal contract by GCM Services. The survey noted small quantities of asbestos
in two locations. None of the other representative samples taken from any of the other
locations included asbestos. The report recommended (para 5.2) that further inspection,
sampling and testing be carried out in areas which had not been covered by the inspection
work. It highlighted areas excluded from the survey (para 5.3). The report contained a
number of other caveats. For example, paras 1.17 and 6.0 - 6.1 provided:
“Representative Sampling
1.17 Every attempt has been made to ensure that representative samples of
materials suspected of containing asbestos have been recovered for
testing purposes. Nevertheless, where the laboratory results of analysis
indicate that no asbestos has been detected, caution should be exercised
in extrapolating the same conclusion to the parent material. Where doubt
remains, further sampling and testing should be carried out.
...
6.0 Caveats
6.1 All reasonable steps have been taken to ensure that the contents and
findings of this report are true and accurate. Though as stated below,
further undetected ACM's may still be present within the premises. The
client should therefore be aware of his responsibilities for identifying,
locating, removing and/or managing all ACM's within the premises, and
Page 7 ⇓
7
for notifying the appropriate authorities where necessary.”
The report was provided to Mr Bell by T & A on 14 June 2016.
[17] The defender carried out work on the contract for a number of months before the
contract was signed by either party. T & A issued contract instructions 1, 2 and 3 to the
defender on 19 April 2016, 13 June 2016 and 16 June 2016. On 1 August 2016 Mr Peat signed
the contract on behalf of the defender. However, at that stage the parties were still in
discussion as to the contents of a schedule of proposed amendments to the standard contract
terms and conditions. On 12 August 2016 a meeting took place between Mr Castle, Mr Peat
and Mr Bell. At the meeting all of the proposed amendments were agreed apart from
proposed clauses 2.1C and 2.1D. There is a dispute as to what Mr Castle said at that
meeting. There was further discussion of those clauses during a telephone conference call
on 17 August 2016 between Mr Castle and a solicitor acting for the pursuer on the one hand
and Mr Bell on the other hand. At the end of that call Mr Bell indicated he was content with
the clauses but he would have to obtain confirmation from Mr Peat and Mr Ross Craig
(another director of the defender). By email to Mr Castle of 19 August 2016 Mr Bell
confirmed the defender’s acceptance of the clauses:
“Scott,
Confirmation that we will accept the clauses as written for this contract mainly due
to the fact that we are not removing or disturbing the basement but will require
alteration for the ISG contract if or when they get signed up.
...”
It was anticipated that ISG were to be contractors in a follow on contract. On 23 August
2016 T & A issued contract instruction no 4 to the defender. The schedule of contract
amendments was signed by both parties on 26 August 2016. The contract was signed on
behalf of the pursuer on 2 September 2016.
Page 8 ⇓
8
The contract
[18] An explanatory note at the beginning of the printed standard form indicated that it is
appropriate:
“for larger works designed and/or detailed by or on behalf of the Employer, where
detailed contract provisions are necessary and the Employer is to provide the
Contractor with drawings; and with either a specification or work Schedule to
define adequately the scope and quality of the work and where the degree of
complexity is not such as to require bills of quantities”.
[19] The Articles of Agreement included the following Recitals and Articles:
“Recitals
Whereas
First the Employer wishes to have the following work carried out:
Complete demolition of the 1960s building to existing basement level.
Complete demolition of the Victorian building to existing basement level.
Venetian building temporary infill works and left standing in a protected
state. Existing sub-station to be protected and remain live.
at 28-52 West Register Street and 15-19 South St Andrew Street, Edinburgh
(‘the Works’) and has had drawings and either a specification or work
Schedule prepared which show and describe the work to be done.
Second the drawings are numbered/listed in Part 9 of the Schedule annexed to this
Contract (‘the Contract Drawings’)...
Third
...
...
the Contractor .... :
...
(B) has stated the sum he will require for carrying out the Works shown on
the Contract Drawings and described in the Specification, that sum being
the Contract Sum stated in Article 2, and has supplied to the Employer a
Contract Sum Analysis or a Schedule of Rates on which that sum is based
(‘the Priced Document’)...
Articles
Now it is hereby agreed as follows
Page 9 ⇓
9
Article 1: Contractor's obligations
The Contractor shall carry out and complete the Works in accordance with, and the
rights and duties of the Employer and the Contractor shall be regulated by, these
Articles of Agreement together with the contract particulars forming part of this
Agreement (the 'Contract Particulars') and the schedule annexed hereto (the
‘Schedule’) including, without limitation, the Contract Documents as defined in the
conditions bound in with this Agreement at Pages 20 to 74 (inclusive) (the
‘Conditions’) and listed in the Schedule Part 9 all of which Contract Documents are
hereby incorporated in and form part of this Agreement.
Article 2: Contract Sum
The Employer shall pay the Contractor at the times and in the manner specified in
the Conditions the VAT- exclusive sum of ... £1,010,795.63 ... (‘the Contract Sum’) or
such other sum as shall become payable under this Contract.
...
Article 11: Modifications – Amendments to Contract
This Contract shall be interpreted subject to the terms of the amendments set out in
Schedule Part 10 as annexed as relative hereto (‘the Schedule’), and the provisions of
this Contract and the Conditions are hereby modified accordingly.”
[20] The Contract Particulars and the Conditions provided:
“Contract Particulars
Part 1: General
...
Third Recital The Pricing Option that applies is ... Pricing Option B
The Priced Document is ... the Contract Sum Analysis
...
Conditions
Section 1 Definitions and Interpretation
Definitions
1.1 Unless the context otherwise requires or the Agreement or these Conditions or
the Schedule specifically provide otherwise, the following words and phrases, where
they appear in capitalised form in the Agreement or these Conditions or the
Schedule, shall have the meanings stated or referred to below:
Page 10 ⇓
10
Word or phrase
...
Agreement:
Meaning
the Articles of Agreement consisting of the Recitals,
the Articles and the Contract Particulars all as
amended by Schedule 10 as annexed hereto.
...
Contract Documents:
the Contract Drawings, the Agreement, Schedule and
these Conditions and any other Contract Documents
referred to in the Schedule of Contract Documents
forming part of the Schedule to include:
...
Site:
...
Works:
(where applicable) the Employer's Requirements, the
Contractor's Proposals and the CDP Analysis; ...
(where Pricing Option B applies) the Specification;
the site comprising the Works at 28-52 West Register
Street and 15-19 South St Andrew Square, (sic)
Edinburgh
the works briefly described in the First Recital
(including, where applicable, the CDP Works), as
more particularly shown, described or referred to in
the Contract Documents, including any changes made
to those works in accordance with this Contract.
...
Interpretation
Reference to clauses etc.
...
Agreement etc. to be read as a whole
1.3 The Agreement, these Conditions and the Schedule are to be read as a whole but
nothing contained in the Specification/Work Schedule or the CDP Documents, nor
anything in any Framework Agreement, shall override or modify the Agreement or
these Conditions or the Schedule. In the event of any conflict or ambiguity between
the terms of the Conditions and /or the SBCC Standard Form (including the
Schedule), as amended by Schedule Part 10, and any other provision of this Contract,
the provisions of the Conditions and/or the SBCC Standard Form (including the
Schedule), shall take precedence.
...
Section 2 Carrying out the Works
Contractor's Obligations
Page 11 ⇓
11
General obligations
2.1 The Contractor shall carry out and complete the Works in a proper and
workmanlike manner and in compliance with the Contract Documents, the
Construction Phase Plan and other Statutory Requirements, and shall give all notices
required by the Statutory Requirements.
...
2.1C The Contractor has had full opportunity to inspect the physical and other
conditions at or affecting the Site and shall be deemed to have satisfied himself that
the Site is in all respects suitable for the carrying out of the Works thereon. As
between the Contractor and the Employer the Contractor shall not be entitled to rely
upon any survey report or other document prepared by or on behalf of the Employer
in relation to such matters and the Employer makes no representation or warranty as
to the accuracy or completeness of any such survey report or document.
2.1D Any adverse ground conditions, artificial obstructions or contamination
encountered during the execution of the Works shall be the sole responsibility of the
Contractor (whether or not the same could reasonably have been foreseen at the date
of this Agreement by a contractor exercising the standard of skill care and diligence
referred to in Clause 2.1A) and no adjustment shall be made to the Contract Sum or
to the Date for Completion in respect of such matters.
2.1E The Contractor shall ensure that the carrying out of the Works does not result in
pollution or contamination of the Site or of any land or water adjoining the site. The
Contractor shall further take all practicable steps to prevent the risk of migration of
existing pollutants or contaminants to or from the Site. The Contractor shall procure
the delivery to the Employer of any environmental surveys or Phase 2 contamination
reports it commissions in connection with the Works and/or the Site together with
further copies of those surveys addressed to the Employer and such other parties as
the Employer shall reasonably require or letter of reliance granted in favour of
Employer and such other parties as the Employer shall reasonably require.”
Clauses 2.13 to 2.15 provided:
“Errors, Discrepancies and Divergences
Preparation of Employer's Requirements
2.13 Subject to clause 2.17, the Contractor shall not be responsible for the contents of
the Employer's Requirements or for verifying the adequacy of any design contained
within them.
CDP Documents - errors and inadequacy
2.14 .1 If an inadequacy is found in any design in the Employer's Requirements in
relation to which the Contractor under clause 2.13 is not responsible for verifying its
adequacy, then, if or to the extent that inadequacy is not dealt with in the
Contractor's Proposals, the Employer's Requirements shall be altered or modified
accordingly and, subject to clause 2.17, that alteration or modification shall be treated
as a Variation.
Page 12 ⇓
12
.2 Any error in description or in quantity in the Contractor's Proposals or in the
CDP Analysis or any error consisting of an omission of items from them shall be
corrected, but there shall be no addition to the Contract Sum in respect of that
correction or in respect of any instruction requiring a Variation of work not
comprised in the Contractor's Designed Portion that is necessitated by any such error
or its correction.
Notice of discrepancies etc.
2.15 If the Contractor becomes aware of any such error, omission or inadequacy as is
referred to in clause 2.14 or any other discrepancy or divergence in or between any of
the following documents, namely:
.1 the Contract Drawings;
.2 the Specification/Work Schedule;
.3 any instruction issued by the Architect/Contract Administrator under these
Conditions;
.4 any drawings or documents issued by the Architect/Contract
Administrator under any of clauses 2.9 to 2.12; and
.5 (where applicable) the CDP Documents,
he shall immediately give notice with appropriate details to the Architect/Contract
Administrator, who shall issue instructions in that regard. Notwithstanding the
foregoing, the Contractor shall review all Contract Documents, drawings or other
subsequent information produced to amplify the Contract Documents on receipt
thereof and shall bring to the attention of the Architect/Contract Administrator any
discrepancies, or requirements for further information arising from them as soon as
practicable and on an ongoing basis (where applicable). Failure to reasonably
comply with this obligation shall prevent the Contractor from being entitled to
payment of any additional monies in respect of problems which would have been
notified had this obligation been complied with.”
Section 4 of the Conditions provided:
“Section 4 Payment
Contract Sum and Adjustments
Work included in Contract Sum
4.1 The quality and quantity of the work included in the Contract Sum shall, save
insofar as quantities are given in the Specification or Work Schedule, be that set out
in the Contract Documents taken together, provided that if work stated or shown on
the Contract Drawings is inconsistent with the description (if any) of that work in the
Specification or Work Schedule, then that stated or shown on the Contract Drawings
shall prevail. Where quantities are given for any items in the Specification or Work
Schedule, the quality and quantity of the work included in the Contract Sum for
those items shall be that set out in the Specification or Work Schedule.
...”
Page 13 ⇓
13
Section 5 made provision for variations to the Works and their valuation. Clause 5.6
provided:
“Measurable Work
5.6.1 To the extent that a Valuation relates to the execution of additional or
substituted work which can properly be valued by measurement and subject to
clause 5.8 in the case of CDP Works, such work shall be measured and shall be
valued in accordance with the following rules:
.1 where the work is of similar character to work included in the Contract
Documents the Valuation shall be consistent with the relevant rates, prices
or amounts for such work in the Priced Document and shall include a fair
allowance for any change in the conditions under which the work is
carried out and/or any significant change in the quantity of such work
from that included in the Contract Documents;
.2 where the work is not of similar character to work set out in the Contract
Documents, it shall be valued at fair rates and prices.
5.6.2 To the extent that a Valuation relates to the omission of work set out in the
Contract Documents and subject to clause 5.8 in the case of CDP Works, the
valuation of the work omitted shall be in accordance with the rates, prices or
amounts in the Priced Document.
5.6.3 In any valuation of work under clauses 5.6.1 and 5.6.2, allowance, where
appropriate, shall be made for any addition to or reduction of preliminary items of
the type referred to in the Standard Method of Measurement.”
[21] Part 9 of the Schedule to the contract contained the “Schedule of Contract
Documents”. Part (viii) of the latter Schedule comprised the “Schedule of Other Contract
Documents”. That Schedule was made up of five sections, viz. 1. Drawings 2. Tender
Document and Tender Addendums (sic) 3. Contractor’s Proposals 4. Correspondence
5. Contract Amendments.
[22] The contract drawings showed the existing layout and dimensions of each floor of
the buildings, of the external elevations, and of the roofs. The drawings did not specify the
materials which were incorporated in the buildings.
[23] The Tender Document included Conditions of Tender and Bills nos 1, 2 and 3. The
Conditions of Tender provided inter alia:
Page 14 ⇓
14
“A CLARIFICATION OF WORK SCHEDULE ITEMS: in the event that the
tenderer is unclear as to the intention or exact meaning of any particular item
he should contact the quantity surveyor and obtain clarification prior to
submitting his tender. With regard to any sections of the work schedule
where qualifications to SMM7 are made, the Contractor shall be deemed to
have made all the necessary allowances within the relevant rates in respect of
the qualifications concerned.
...
G PRE-CONSTRUCTION INFORMATION: This document accompanies the
Invitation to Tender and the Principal Contractor shall be deemed to have
taken full cognisance of the information contained therein when planning,
resourcing and pricing his submission.
H CONSTRUCTION (DESIGN AND MANAGEMENT) REGULATIONS 2015:
All matters arising are deemed to be included within the tender.”
[24] In “Bill no 1 - Preliminaries” the entries followed the numbering of SMM7. Item A12
was headed “THE SITE/EXISTING BUILDINGS”. Entries grouped under that heading
included:
“240
295
HEALTH AND SAFETY HAZARDS
• General: The nature and condition of the site/building cannot be fully and
certainly ascertained before it is opened up. However the following hazards
are or may be present:
- As detailed in Pre-Construction Information...
• Information: The accuracy and sufficiency of this information is not
guaranteed by the Employer or the Employer's representative. Ascertain if
any additional information is required to ensure the safety of all persons and
the Works.
• Site staff: Draw to the attention of all personnel working on the site the
nature of any possible contamination and the need to take appropriate
precautionary measures.
...
ASBESTOS
• A separate asbestos removal contract will be completed prior to demolition
works. The Employer has, as far as possible, removed all known asbestos
containing materials, however, cannot guarantee that all asbestos within the
building has been identified.
...”
Item A13 was headed DESCRIPTION OF THE WORK. Entries grouped under that heading
included:
Page 15 ⇓
15
“110
PREPARATORY WORK BY OTHERS
Works: Carried out under a separate contract and completed before the
start of work on site for this Contract.
Description: Asbestos removal and soft strip.
120 THE WORKS
Description: The works comprise the following:
Complete demolition of the 1960s building to existing basement level
(basement floor slab to remain).
Complete demolition of the Victorian building to existing basement level
(basement floor slab to remain).
The Venetian building is to be retained and left standing in a protected
state.
Protection of the existing sub-station to be left in place at end of contract.
All associated temporary works.
...”
Item A30 was headed “TENDERING/SUBLETTING/SUPPLY”. A sub-heading was
“PRICING/SUBMISSION OF DOCUMENTS”. Entries grouped under that sub-heading
included:
“210
...
310
...”
PRELIMINARIES IN THE SPECIFICATION
The Preliminaries/General conditions sections (A10-A50 inclusive) have
been prepared in accordance with SMM7...
TENDER
General: Tenders must include for all work shown or described in the
tender documents as a whole or clearly apparent as being necessary for the
complete and proper execution of the Works.
Item A34 was headed SECURITY/SAFETY/PROTECTION. A sub-heading was “PROTECT
AGAINST THE FOLLOWING”. Entries grouped under that sub-heading included:
“...
370 ASBESTOS CONTAINING MATERIALS
Duty: Report immediately any suspected materials discovered during
execution of the Works.
Do not disturb.
Agree methods for safe removal or encapsulation.
371 DANGEROUS OR HAZARDOUS SUBSTANCES
Duty: Report immediately suspected materials discovered during
execution of the Works.
Do not disturb.
Page 16 ⇓
16
Agree methods for safe removal or remediation.
...”
Appendix 2 to Bill no 1 provided:
“Qualifications of the Rules of the SMM and Definition of Terms
Standard Method of Measurement of Building Works: Seventh Edition;
Incorporating Amendments 1, 2 & 3
1. GENERALLY
(1)The Code of Procedure for Measurement of Building Works (SMM7
Measurement Code) which accompanies SMM7 should be read in conjunction
with SMM7.
(2)Where measured items refer to specification clauses the Contractor will be
deemed to have included for all matters given in the specification reference,
unless there is a specific mention in the measured item that some matters that
are listed in the specification reference are included elsewhere.
...”
There followed certain qualifications of the General Rules and further qualifications to
certain of the specific rules including some of the rules grouped under the heading
“C Demolition/Alteration/Renovation”.
[25] Bill no 2 was headed “C EXISTING SITE/BUILDINGS/SERVICES.” The sub-heading
was “C20 Demolition”. Under that sub-heading there were entries relating to the demolition
of each of the buildings. The first entry was a note:
“Note: The 1960s and Victorian building are to be demolished down to the existing
basement level (basement floor slabs and retaining walls to be retained) and arisings
removed from site; refer to Will Rudd Davidson drawings”
The Bill items relating to demolition were also preceded by the following narrative:
“Demolition works; carefully dismantle and take down existing structures;
maintain stability of frame at all times; provide temporary supports and bracing as
necessary; break up and remove arisings off site”.
For each of the Victorian and 1960s buildings there were then separate items for stripping
the roof and each of the floors, for demolishing the external walls, and for processing and
Page 17 ⇓
17
clearing arisings. There were a smaller number of items relating to the Venetian building.
The following entry was towards the end of the Bill:
“Additional cost items
Contractor to include here any additional items that may be required in order to
comply with the tender drawings and preliminaries
1.
ITEM
2.
ITEM
3.
ITEM”
[26] The Tender Document also included Pre-construction Information (rev 3) dated
22 December 2015. Section 2.0 was headed “Description of the project”. Paragraph 2.1
provided:
“2.1 Project description and programme details
This project is for the demolition of an existing office building and retail area with a
section of listed building and facade being retained; prior to the construction of new
office and retail building. This phase of the project is for Demolition only; full
details of the works to be carried out are included within the project brief issued by
the Client as part of the tender package and within the Demolition and Sequencing
Plan issued by the project Structural Engineer.
The scope of works includes but is not limited to;
...
• Review existing asbestos register and liaise with the Project Manager to ensure
any residual asbestos is identified prior to demolition and removed safely in
accordance with Health and Safety Guidance.
...
• Demolition and protection of buildings as identified on the scope of demolition
works plan.
2.1.1 Demolition of existing buildings:
The Victorian stone built and 1960s steel framed buildings are to be demolished
down to basement level and all excess arising's removed from site. Following
detailed surveys a demolition strategy will be developed to ensure buildings are
taken down in a safe manner in accordance with BS 6187-2011. Given the close
proximity of the building being demolished and the Venetian building being
retained to adjacent buildings, and, to ensure the safety of the public and site
operatives, demolition works must be carefully planned and carried out complying
with the Health and Safety at Work Act and all other legislation at all times.
...
2.1.4 Note:
* Asbestos removal works will have been completed as part of the previous phase
of works. On projects of this nature the chance of finding additional asbestos during
demolition is high; the PC must take this into account in their method statements
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and risk assessments to ensure that operatives and local residents are not put at risk
during demolition work.
...
2.6 Extent and location of existing records and plans
...
Asbestos Register/Surveys:
• Further asbestos survey and removal works are being carried out at the time of
producing this Pre Construction Information. Updated asbestos information will be
available from the Client prior to work commencing on site.
...”
[27] Section 4.0 of the Pre-construction Information was headed “4.0 Environmental
restrictions and existing on-site risks (safety & health hazards)”. Paragraphs 4.5, 4.6 and 4.7
provided:
“4.5 Asbestos, including results of surveys (particularly where demolition
involved)
Prior to site start a full Asbestos Refurbishment and Demolition Survey was carried
out and all known asbestos removed. If the Principal Contractor or Contractors find
any material suspected to be asbestos whether or not they have been identified
within an asbestos survey, work must stop and further asbestos survey work carried
out to identify the suspected material. All asbestos materials must be removed in
accordance with CAR 2012 and HSG264; operatives must be made aware of the
above as part of their site induction.
4.6 Existing structures containing hazardous materials
The only hazard material contained in the building structure was asbestos which will
all have been removed prior to the building being demolished.
4.7 Pollution control and waste management
The Principal Contractor should produce an environmental risk assessment as part of
their construction phase plan and ensure that waste and pollution are avoided,
carefully controlled and monitored. All waste leaving the site must have the relevant
waste transfer notes; the Principal Contractor is responsible for carrying out relevant
checks on waste carriers...”
Section 5.0 was headed “Significant design and construction hazards”. Paragraph 5.4
provided:
“5.4 Materials and operations requiring particular precautions via RAMS
• Asbestos.
...”
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19
RAMS is an acronym for Risk Assessment Method Statement. Section 6.0 was headed “The
Health and Safety File”. It provided:
“Clients, Designers, Principal Contractors, other Contractors and Principal Designers
each have legal duties in respect of the Health and Safety File:
6.1 Principal Contractors and the Principal Designer must prepare, review, amend or
add to the file as the project progresses, and submit the file to the Client at the end of
the project;
...
6.5 The contents of the Health and Safety File:
...
b) any residual hazards which remain and how they have been dealt with (for
example surveys or other information concerning asbestos; ...
This information should be recorded as works proceed in order that the Client and
team are made aware of anything not previously known.
...”
Section 9.0 was headed “Design Risk Management Information”. It provided:
“...
9.3 Asbestos Information
All known Asbestos will have been removed prior to the start of demolition;
updated information will be provided prior to the commencement of work on site.
...”
[28] The Schedule of other Contract Documents also contained the Contractor’s
Proposals, which included the Bills as priced by the defender. In addition it contained
correspondence, including the email exchange of 9 and 10 March 2016 already referred to.
The Schedule of Contract Amendments appears to have been included both in the Schedule
of other Contract Documents and as Part 10 of the Schedule to the Contract. Those
amendments included the insertion of clauses 2.1C, 2.1D and 2.1E in the Contract
Conditions.
SMM7
[29] General rules 1, 2, 10 and 11 of SMM7 state:
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20
“1. Introduction
1.1 This Standard Method of Measurement provides a uniform basis for measuring
building works and embodies the essentials of good practice. Bills of quantities shall
fully describe and accurately represent the quantity and quality of the works to be
carried out. More detailed information than is required by these rules shall be given
where necessary in order to define the precise nature and extent of the required
work.
1.2 The rules apply to measurement of proposed work and executed work.
2. Use of the tabulated rules
Generally
2.1 The rules in this document are set out in tables. Each section of the rules
comprises information (to be) provided, classification tables and supplementary
rules. …
2.2 Horizontal lines divide the classification table and supplementary rules into
zones to which different rules apply...
...
10. Procedure where the drawn and specification information required by these
rules is not available
...
10.2 Where work cannot be described and given in items in accordance with these
rules it shall be given as a Provisional Sum and identified as for either defined or
undefined work as appropriate.
10.3 A Provisional Sum for defined work is a sum provided for work which is not
completely designed but for which the following information shall be provided:
(a) The nature and construction of the work.
(b) A statement of how and where the work is fixed to the building and what
other work is to be fixed thereto.
(c) A quantity or quantities which indicate the scope and extent of the work.
(d) Any specific limitations and the like identified in Section A35.
10.4 Where Provisional Sums are given for defined work the Contractor will be
deemed to have made due allowance in programming, planning and pricing
Preliminaries. Any such allowance will only be subject to adjustment in those
circumstances where a variation in respect of other work measured in detail in
accordance with the rules would give rise to adjustment.
10.5 A Provisional Sum for undefined work is a sum provided for work where the
information required in accordance with rule 10.3 cannot be given.
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21
10.6 Where Provisional Sums are given for undefined work the Contractor will be
deemed not to have made any allowance in programming, planning and pricing
Preliminaries.
11. Work not covered
11.1 Rules of measurement for work not covered by these rules shall be stated in a
bill of quantities. Such rules shall, as far as possible, conform with those given in this
document for similar work.”
[30] Rule C of SMM7 is headed “Demolition/Alteration/Renovation”. The first table
relates to C10 Demolishing structures and C30 Shoring. For demolition of structures the Bill
should give a description sufficient for identification of what is to be demolished, the levels
to which they are to be demolished, and items showing “6 Toxic or other special waste.”
The second Table relates to C20 Alterations - spot items. The requirements are similar to
those for C10/C30. The corresponding Bill item for toxic or other special waste is item 4.
Contract instructions 5 and 6
[31] On 31 August 2016 at T & A’s request the defender obtained a quotation from
another contractor, Enviraz, for the removal of asbestos from three specified areas. The total
quoted cost was £13,020 excluding VAT. On 1 September 2016 T & A instructed the
defender to proceed with that work (contract instruction 5).
[32] On 6 September 2016 at T & A’s request the defender obtained a further quotation
from Enviraz for more substantial asbestos work involving the removal and disposal of
concrete façade panels and associated asbestos debris. The total quoted cost was £61,870
excluding VAT. On 8 September 2016 T & A instructed the defender to proceed with that
work (contract instruction 6).
[33] The work instructed in each of those contract instructions was included in interim
valuations certified by T & A. However, in November 2016 T & A decided that asbestos
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22
removal work was included within the Works which the defender had contracted to
perform and a pay less notice relating to the instructions was issued to the defender.
The material contentious matters of fact
What, if any, assurances were given by Mr Castle?
[34] As already indicated, the most contentious factual issue is the terms of the discussion
between Mr Castle, Mr Peat and Mr Bell relating to the proposed incorporation of
clauses 2.1C and 2.1D.
[35] Mr Castle indicated that at the meeting on 12 August 2016 Mr Bell and Mr Peat had
been very concerned about the possibility of contamination below the sub-structure slab.
The dialogue had been about contamination “in the broadest sense”. It had not focussed on
asbestos. Mr Castle believed he assuaged the concerns about contamination below the slab
by pointing out that the Works did not involve breaking the slab. He recalled there also
being a brief discussion about how any “new asbestos” would be treated contractually. He
had said to Mr Bell and Mr Peat that in his opinion the matter would depend upon whether
or not “contamination” in clause 2.1D included asbestos. If it did, the defender was at risk
in that regard under the clause. If it did not, any asbestos removal would probably be
treated as a variation. He had had no fixed view on the matter and he had not expressed
any concluded opinion either way. He had not been authorised by the pursuer to express
any such concluded view. He was clear that he did not confirm that asbestos removal
would be paid for as a variation. On 17 August 2016 he had a telephone conference call with
Mr Bell to discuss clauses 2.1C and 2.1D. At the end of the call Mr Bell indicated that the
defender was content with the clauses but that he would have to confirm this with Mr Peat
and another director. Mr Bell’s email of 19 August had followed. That email had referred to
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23
an understanding that the works did not include removing or disturbing the basement.
There had been no mention in the email of any understanding that asbestos was not a
contaminant or that if asbestos was discovered it would be a variation. There had been no
mention of any such understanding at subsequent meetings with representatives of the
defender, or in correspondence from the defender after the pay less notice.
[36] Mr Bell indicated that he and Mr Peat had been concerned that the acceptance of
clause 2.1D should not make the defender responsible for contaminants in the ground or for
asbestos. Mr Bell’s main concern at the time had been the possible presence of oil or other
hydrocarbons in the ground, but he had also raised the question of asbestos. Mr Castle had
said that as the works did not involve breaking into the basement slab the risk to the
defender was minimal. He had agreed with Mr Bell that asbestos was not “contamination”
in terms of clause 2.1D, and he had said that any further asbestos found would be a
variation. The defender had relied on these assurances in reaching its decision to agree to
the clause 2.1C and clause 2.1D amendments.
[37] In his witness statement Mr Peat indicated that the discussion with Mr Castle had
taken place on 26 August 2016 when Mr Peat had signed the schedule of contract
amendments. In his oral evidence he accepted that he must be mistaken as to the date of the
discussion. He and Mr Bell had been concerned that the defender would not become
responsible for any hydrocarbons which might be in the ground. They also aired their view
that the reference to “contamination” in clause 2.1D did not include any asbestos which
might be discovered during demolition. Mr Castle said that the clause related to the
possibility of ground contamination under the basement slab. He indicated that as the
basement slab was not to be broken into by the defender and was to be left in situ, the
defender was not at risk in relation to hydrocarbons. He also said that “contamination” did
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24
not include asbestos. He confirmed that if the defender encountered asbestos during the
demolition it would be treated as a variation. It had been because of Mr Castle’s assurances
that Mr Peat had signed the Schedule of Amendments to the contract on 26 August 2016.
Subsequent events
[38] Mr Castle indicated that at the time he issued contract instructions 5 and 6 he had not
applied his mind to the provisions of the contract. His concern had been that progress
should be made with the contract works so that there was no delay to completion or to the
start date of the follow-on contract. However, when he did subsequently consider the
matter and discuss it with colleagues he concluded that the asbestos removal work was
indeed within the scope of the Works and was not a variation. Accordingly, the pay less
notice had been issued.
The evidence of Mr Hunter and Mr Rodger
[39] Both witnesses agreed that the form of contract which had been used anticipated that
it would be executed without the need for a fully itemised bill of quantities describing the
work for which the agreed contract sum was payable. They concurred that SMM7 appeared
to have been followed at least to some extent in Bill no 1 and Bill no 2. Both also agreed that
in the JCT with quantities standard form contract compliance with SMM7 was mandatory
unless the contract contained a stated departure from the rules (clause 2.13.1). Mr Rodger
also explained that clause 2.14.1 of the with quantities standard form provides that where
there is an unstated departure from SMM7 the departure or error is to be corrected, and
clause 2.14.3 provides that the correction, alteration or modification shall be treated as a
variation. Mr Hunter agreed with those two propositions in cross-examination. He
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25
maintained, however, that when SMM7 was being used but there was a departure from it, it
was normal practice to explain that expressly. Mr Rodger also noted that in the with
quantities version the direct cost of such a variation would be recoverable by the contractor
(clause 4.3.1.1), it would be a relevant event for the purposes of the award of an extension of
time (clause 2.29.1), and it would be a relevant matter for the recovery of loss and expense
(clause 4.24.1). In the without quantities version there was no obligation to use SMM7, and
any unstated departure from SMM7 in a specification was not an error falling to be
corrected. Mr Hunter agreed with Mr Rodger that the without quantities version of the
standard form did not contain provisions which mirrored those of clauses 2.13.1, 2.14.1
and 2.14.3 of the with quantities version, but he pointed to the terms of clause 2.15 of the
without quantities conditions which in his view might be relied upon by the contractor in
similar circumstances.
[40] Both witnesses were at one that if SMM7 was applied and the removal of known
defined quantities of asbestos was to be priced, an item for removal would be included as
per the fourth column of C10 (where the contract was for demolition) or as per the fourth
column of C20 (where the contract was for alterations or spot items). Where, on the other
hand, what was to be priced was the removal of unknown asbestos which might be
discovered during demolition, in terms of General Rule 10 of SMM7 the appropriate course
would be to include a provisional sum item in the Bill.
[41] Mr Rodger’s view was that demolition contracts were generally less complicated
than construction contracts when it came to describing the work which had to be done.
Mr Hunter did not accept that proposition.
[42] Whilst disavowing the intention of giving evidence on matters of law, both witnesses
offered views as to the proper construction of the contract, in particular whether the
Page 26 ⇓
26
contract provided that SMM7 required to be used, the scope of the Works, and the meaning
of the word “contamination” in clause 2.1D. On the latter point, each witness’s view was
premised on the ordinary meaning of the word. Neither suggested that the word had a
special technical meaning.
Counsel for the pursuer’s submissions
[43] Lord Davidson submitted that the contract was a lump sum contract. While the
tender documents had included documents in the form of bills of quantities, it was a
without quantities contract and the bills did not have all of the functions of bills in a with
quantities contract. The Works included the “complete demolition” of the Victorian
and 1960s buildings to existing basement levels. The lump sum price was an inclusive price
for all work which was necessary to achieve that result (Wilson v Wallace (1859) 21D 507;
Hudson’s Building and Civil Engineering Contracts (11th ed.) at para 4-039 et seq; Emden’s
Construction Law, paras 8.14 - 8.15; Keating on Construction Contracts (10th ed.), para 4-044;
Stair Memorial Encyclopaedia, The Laws of Scotland, vol 3, Building Contracts, para 34). The
defender was aware of the risk that the buildings might contain unknown asbestos over and
above the two particular known quantities it had been asked to price separately. That risk
had been made clear in the contract documents and in the reports provided to the defender
before the contract was concluded. On a fair reading of the contract as a whole a reasonable
person in the position of the parties at the time of contracting would have understood that
all known asbestos identified in the two RPS surveys (other than the asbestos referred to in
the emails of 8 and 9 March 2016) would have been removed prior to the demolition work,
but that the defender bore the risk of other unknown asbestos being discovered during
demolition. Reference was made to Oceanbulk Shipping & Trading SA v TMT Asia Ltd &
Page 27 ⇓
27
Others [2011] BLR 1, per Lord Clarke JSC at paras 39-40. Such an understanding was plain
even if no regard was had to the terms of clause 2.1D. Clause 2.1D put the matter beyond
question. The word “contamination” in that clause had its ordinary meaning. Asbestos
encountered during demolition of the buildings was “contamination encountered during the
execution of the Works”. It was a noxious and hazardous substance which required to be
removed taking appropriate precautions.
[44] Counsel submitted that Mr Castle had impressed as a careful and measured
professional. Where his evidence differed from the evidence of Mr Bell and Mr Peat,
Mr Castle’s account should be accepted as being more reliable. It was implausible that a
careful professional like Mr Castle would have said that any asbestos discovered would be a
variation to the contract, or that asbestos would not be contamination in terms of
clause 2.1D. His account of events was more consistent with the contemporaneous
documentation and with the defender’s subsequent actings. Mr Bell’s email of 19 August
2016 accepting the clauses made no reference to the statements which it was now claimed
that Mr Castle had made. On the contrary, it explained that the defender was prepared to
accept the clauses “mainly due to the fact that we are not removing or disturbing the
basement”. When the pay less notice had been served the defender had not contended that
Mr Castle had made the disputed statements. There was no mention of the statements in a
letter from the defender’s agents to the pursuer’s solicitors dated 20 January 2017. There
was no mention of them by the defender at a meeting on 10 February 2017 to discuss the
dispute (which was attended by representatives of the pursuer, the defender, and T & A).
There was no mention of the statements in Mr Bell’s witness statement. The matter had
been introduced to the case by very late adjustment of the defences and by lodging the
witness statement of Mr Peat (19 of process) days before the proof.
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28
[45] Where the evidence of Mr Rodger and Mr Hunter differed, that of Mr Rodger should
be preferred. He had been the fairer and more open of the two. He was content to answer
questions on the basis of the hypotheses which were put to him. By contrast Mr Hunter was
reluctant to do so and was generally more combative under cross-examination. It accorded
with common sense that the description of the works in a demolition contract was usually
more straightforward than the description of the works in a construction contract. The role
of SMM7 in a without quantities lump sum contract was quite different from its role in a
with quantities contract. In the former there was no formal measurement - there was only
the lump sum.
Counsel for the defender’s submissions
[46] Mr Barne submitted that the contract was a lump sum contract to perform defined
work. Whereas in a with quantities contract the bills of quantities define the scope of the
works, in a without quantities contract the contract documents taken together describe the
quantity and quality of the work included in the contract sum (Keating on Construction
Contracts (10th ed.), at para 20-036). In terms of condition 4.1:
“The quality and quantity of the work included in the Contract Sum shall ... be that
set out in the Contract Documents taken together...”
In this case the Works were defined by the Specification and the drawings. The Specification
was the three bills which had been issued as part of the tender. The completed bills which
the defender had returned were the Contract Sum Analysis. There was provision in the
contract (clause 5 of the Conditions) for variation of the Works. The position was similar to
that in Mascareignes Sterling Co Ltd v Chang Cheng Esquares Co Ltd [2016] BLR 512,
[2016] UKPC 21. In that case, like the present, the contract was a lump sum contract but the
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29
contract documents included priced bills of quantities. In delivering the judgment of the
Board Lord Hodge observed at para 21:
“... In the present case the lump sum was made up of elements set out in the fully
priced bills of quantities which the arbitrator held were part of the contract. There
was thus a definition of the works which were the subject of the lump sum, from
which the existence of additional or substituted work could be identified.”
Reference was also made to Emden’s Construction Law, para 6.23 and C Bryant & Son Ltd v
Birmingham Hospital Saturday Fund [1938] 1 All ER 503.
[47] In the bills the Works had been described and defined using SMM7, except where the
application of SMM7 had been expressly qualified. In terms of SMM7 the removal of toxic
or other special waste was to be described and measured as a separate item. In the event of
it not being possible to do that, General Rule 10 directed that it be included as a provisional
sum. At the end of the day Mr Hunter and Mr Rodger had not disagreed that that ought to
be the result if SMM7 was applied. As Judge Thornton QC put it in Demolition Services Ltd v
Castle Vale Housing Action Trust 79 Con. L.R. 55 at para 39:
“9.3 Standard method of measurement
39. The overall purpose of SMM7 is stated to be a means of providing bills of
quantities that fully describe and accurately represent the quantity and quality of the
works to be carried out. The intention is that the bills of quantities should define the
precise nature and extent of the required work. To this end, each item of work
should be prepared in the way provided for in the rules which follow. Where a
completed structure is to be demolished, the demolition of toxic or other special
waste should be provided for in a separate item from any other work involved in
that demolition. Where the available information does not enable the work to be
fully described and accurately quantified, detailed provisions for the creation of
provisional sums for such work are set out. The relevant rules provide that such
provisional sum work is to be for either defined work or undefined work. Defined
work is work that can be described so that the scope and extent of the work can be
quantified and its location in the building can be provided for. The contractor is
deemed to have made due allowance for such work in his programming and
planning and in the pricing of his preliminaries. All other provisional sum work is to
undefined work for which no such allowance is to have been made.”
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30
[48] In so far as Mr Rodger proffered views as to the proper construction of the contract
and made comparison with the terms of the JCT with quantities contract, the objection taken
to his evidence was insisted upon. In relation to the former matter he was usurping the
function of the court, and in relation to the latter his evidence was entirely extraneous to the
judgment of Lord Reed JSC and Lord Hodge JSC at paras 38, 49 and 59).
[49] Since there was no specific item or provisional sum in the Specification for the
removal of toxic or other special waste, there had been no item against which to price
asbestos removal work or make allowance for the risk that unknown asbestos would be
discovered during the Works. The asbestos removal was not part of the Works.
[50] In construing the contract the defender relied on the matrix of fact at the time of
contracting including the use of SMM7; the provision which was made for the removal of
two specific quantities of asbestos; the regulatory context (including the Control of Asbestos
Regulations 2012 (“CAR”), the Construction (Design and Management) Regulations 2015
(“the CDM Regulations”), and the HSE’s Guidance “Asbestos: The Survey Guide”
(HSG264)); and the asbestos surveys which had been provided to the defender. A number
of the entries relating to asbestos in the contract were explicable having regard to the
regulatory context and the regulatory obligations incumbent upon the pursuer and the
defender. Bill item A12/295 was an example. Those entries were directed towards
establishing processes that ensured that the pursuer and the defender fulfilled their
respective regulatory duties. On a proper construction of the contract those provisions did
not enlarge the scope of the Works. At the time of tendering the defender had not been
provided with the updated surveys following completion of the soft strip and asbestos
removal works.
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31
[51] The pursuer’s construction of the contract flouted business common sense. It
involved the defender gambling on the absence of further asbestos, running the risks of
(i) having to undertake potentially costly and time-consuming work for which no allowance
had been made in the bill items or the tender, and (ii) exposing itself to the risk of liability
for substantial liquidate damages (cf Demolition Services Ltd v Castle Vale Housing Action
Trust, supra, per Judge Thornton QC at para 42).
[52] In relation to clauses 2.1C and 2.1D, where their evidence differed the evidence of
Mr Peat and Mr Bell should be preferred to that of Mr Castle. Mr Castle’s issuing of contract
instructions 5 and 6 was consistent with Mr Peat and Mr Bell’s account of what was said. It
tended to confirm that at the time of the meeting Mr Castle did indeed consider that
asbestos removal would be a variation. It was implausible that the defender would have
agreed to the inclusion of the clauses had they not been given the assurances which Mr Bell
and Mr Peat say Mr Castle gave. In agreeing to the inclusion of the clauses the defender
relied on what Mr Castle said about asbestos not being contamination and about further
asbestos work being a variation. In those circumstances the pursuer was personally barred
from relying on the clauses. The lateness of Mr Peat’s witness statement was because it had
been introduced once it became clear that the pursuer proposed to rely upon the clauses.
[53] In any case, neither clause assisted the pursuer. Clause 2.1C concerned the contract
Works. It did not vary or extend the definition of the Works. It did not provide any basis
for maintaining that asbestos removal works were not part of the Works (cf Demolition
Services Ltd v Castle Vale Housing Action Trust, supra, per Judge Thornton QC at paras 44 - 47;
(TCC), per Akenhead J at paras 150-155). Moreover, the basis of the defender’s claim in
respect of asbestos work was not founded on reliance on any report provided to it by the
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32
pursuer. Clause 2.1D was not relevant to the issue between the parties. Asbestos within the
buildings was not “contamination”. Contamination involved defilement, being sullied,
tainted or infected by contact, especially with noxious substances (Oxford English
Dictionary). In some circumstances asbestos could be contamination, eg when asbestos
waste had been deposited on land, because then the land would be defiled. However the
asbestos had not affected the buildings in that way. Besides, the contract dealt separately
with asbestos and contamination. It was clear that they referred to different things, and that
the latter did not include the former.
Decision and reasons
[54] It is convenient to begin by providing my assessment of the credibility and reliability
of the witnesses. I am content that each of the witnesses was doing his best to assist the
court and that no issues of credibility arise. However, as will be clear from what I say
below, I am not satisfied that all of the evidence is reliable.
[55] At the meeting between Mr Castle, Mr Bell and Mr Peat the focus of the discussion
was the possibility of hydrocarbons under the basement slabs. Asbestos was mentioned
very much as a secondary matter. I am not satisfied from Mr Peat’s witness statement or
from his oral evidence that he has a clear recollection of precisely what was said during the
discussion with Mr Castle, or that such recollection as he does have is reliable. It is difficult
to reconcile Mr Peat’s absolute conviction as to the correctness of his recollection with the
content and manner of his evidence. His account in his witness statement of when the
discussion took place was plainly wrong, and he accepted that during his oral evidence. In
my view this cannot be dismissed as a mere slip as to the date on which the relevant
discussion took place. In his witness statement he also indicated that the discussion and the
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33
signing of the amendments took place on the same day. These errors reinforce my clear
impression that Mr Peat had no real recollection of precisely what was said during the
discussion. Mr Bell’s recollection of matters seemed better than Mr Peat’s. However,
ultimately I am not convinced that I ought to accept his evidence on the disputed matters.
Like Mr Peat, he expressed absolute conviction that his account of what Mr Castle had said
was correct. He was not prepared to concede that there was any possibility of any degree of
misunderstanding on his part. I find Mr Bell’s certitude difficult to accept, particularly as
the main focus of the meeting was on hydrocarbons and very little was said about asbestos.
By contrast, Mr Castle impressed me as a careful and impressive witness. The manner and
content of his evidence inspired confidence in its reliability. I find it implausible that he
would have made the incautious and unqualified statements about asbestos which Mr Peat
and Mr Bell say he did. It would have been surprising if a professional in his position had
been prepared to say the things it is suggested that he said. His evidence seems more in
keeping with the more guarded approach which I would have expected a professional
person in his position to have taken in the circumstances. I think it likely that Mr Bell and
Mr Peat’s recollections of what was said have developed with the passage of time to their
present certitude. While I do not doubt that they now truly believe that Mr Castle said that
asbestos is not contamination and that if new asbestos was discovered it would be treated as
a variation, I do not accept that that was what was said. In my view the contemporaneous
documentary evidence – Mr Bell’s email of 19 August 2016 - is more consistent with
Mr Castle’s account than with the accounts of Mr Bell and Mr Peat. If Mr Bell’s account is
correct and the suggested assurances were important and were given by Mr Castle, I find it
surprising that there was no reference at all to them in Mr Bell’s email. I also think it odd
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34
that the suggested assurances were not raised by the defender when the pay less notice was
served in November 2016, or in the discussions in January and February 2017.
[56] I am not persuaded that the issuing of contract instructions 5 and 6 undermines
Mr Castle’s reliability. I accept his account of the circumstances in which he gave the
instructions, viz that his overriding concern at the time was for progress to be made and for
deadlines to be met. I also accept that it was only later when he and his colleague applied
their minds to the contract terms that he formed the view that the asbestos removal work
was within the scope of the works and was not a variation. In my opinion, while ideally a
considered view ought to have been taken at the time, it is not uncommon that work which
has been treated as a variation in an interim valuation is later recovered as an overpayment
when its true character is determined (see eg Demolition Services Ltd v Castle Vale Housing
Action Trust, supra, at para 10).
[57] It follows that the defender has not established its case of personal bar.
[58] Both Mr Hunter and Mr Rodger sought to assist the court and to comply with their
duties as skilled witnesses. However, I agree with Lord Davidson that Mr Rodger was the
more open witness, and that he fairly accepted matters which ought to have been accepted
on the hypotheses which were put to him. Mr Hunter was less ready to make appropriate
concessions. Perhaps inevitably given the subject matter of the dispute, at times both
witnesses slipped into offering evidence as to the meaning and effect of the contract. That
evidence is inadmissible - the proper construction of the contract is a matter of law for the
court to decide - and I sustain each party’s objection to those parts of the evidence of its
opponent’s witness. However, Mr Barne’s further objection that Mr Rodger’s evidence as to
the terms of the JCT with quantities standard form is inadmissible is not well founded in my
view, and I repel it. The context in which that evidence was given was that Mr Hunter had
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raised the issue of normal practice where SMM7 applied. In those circumstances it was
legitimate for Mr Rodger to make the point that in with quantities JCT contracts the
suggested normal practice is one which has a clear contractual foundation. I reject the
contention that that evidence is entirely extraneous to the matters which the court has to
decide.
[59] That brings me to the crux of the dispute - who bore the risk under the contract if
additional unknown asbestos was discovered in the course of demolition? The answer
depends upon how a reasonable person in the position of the parties at the time of
contracting would have interpreted the contract’s terms. Given the defender’s signature of
the contract on 1 August 2016, both parties signing of the Schedule of Amendments on
26 August 2016, and the parties’ actings, I think that the relevant time is the period up to the
latter date.
[60] The contract requires to be read as a whole (clause 1.3 of the Conditions). The Works
are defined in clause 1.1 of the Conditions as being the works briefly described in the First
Recital (which description includes “complete demolition” of the 1960s and Victorian
buildings to basement level), as more particularly shown, described or referred to in the
Contract Documents. In turn, the Contract Documents are defined as being the Contract
Drawings, the Agreement, Schedule, Conditions and any other Contract Documents forming
part of the Schedule including the Specification. The relevant definition of the Specification
is the unpriced specification. I agree with Mr Barne that the unpriced tender bills are the
Specification, and that the Contract Sum Analysis is the priced bills.
[61] The court’s task is to ascertain the objective meaning of the language in which the
parties have chosen to express their agreement. This is a unitary exercise involving an
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paras 10-15).
[62] In my opinion, at the time of contracting a reasonable person in the position of the
parties would have known that, notwithstanding the soft strip and asbestos removal, there
remained a risk of further, unknown, asbestos being present within the buildings which
were to be demolished. In my view that was clear from a fair reading of the Contract
Documents as a whole. It was also clear from the terms of the surveys which the pursuer
had provided to the defender. The reasonable person would also have understood that the
scope of the work which the defender undertook to perform for a lump sum price included
the removal of any presently unknown asbestos which might be encountered during
demolition.
[63] The contract was a contract to perform the Works for a lump sum price. While the
pursuer chose to set out the Specification in three documents which take the form of bills of
quantities, they are not truly bills of quantities. The uncompleted bills provide a description
of the contract works, but it is the Contract Documents as a whole which require to be
considered. The completed bills (the Contract Sum Analysis) provide a breakdown of the
lump sum to assist the pursuer to assess the lump sum tender, but they are not to be used to
measure and value the work.
[64] The Works are described in Bill no 2 as including the complete demolition of the
Victorian and 1960s buildings to basement level with all arisings being removed from the
Site. In my opinion the ordinary and natural reading of that work description is that the
buildings are to be demolished and all the demolished materials are to be removed from the
Site. That reading is also consistent with the various provisions in the Contract Documents
which highlight to the defender the risk of the presence of residual asbestos at the Site, and
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the need for it to carry out inspection, survey and removal (see in particular paras 2.1
and 4.5 of the Pre-construction Information).
[65] I am not persuaded that the provisions in the Contract Documents which highlight
the risk of residual asbestos are merely dealing with regulatory matters or that they have no
bearing upon the scope of the works. When read as a whole, and taken together with the
other provisions of the contract, I think it clear that they do not have the limited role which
Mr Barne suggests.
[66] Nor do I think that the defender obtains any real assistance from the fact that
separate specific provision was made for the removal of the asbestos referred to in the email
exchange of 8 and 9 March 2015. That dealt with known asbestos which the tender
documents had envisaged would be removed by the soft strip/asbestos removal contractors.
It seems to me that unknown asbestos is a very different matter.
[67] Further, I am not convinced that SMM7 is as important to the interpretation of the
contract as Mr Barne (and Mr Hunter) maintained. The contract conditions here do not
include provision that compliance with SMM7 is mandatory unless the contract contains a
stated departure from its rules. That is one of the respects in which the conditions differ
from the with quantities version of the JCT standard form contract conditions (see
clause 2.13.1 of the latter conditions). Clause 1.5 of the standard form conditions in
Demolition Services Ltd v Castle Vale Housing Action Trust, supra, (JCT Intermediate Form
(1984 edn.)) was similar to clause 2.13.1 of the JCT with quantities conditions (see para 18 of
the judgment in that case). Where such provision is made in a contract the “normal
practice” (which Mr Hunter suggested was followed when SMM7 was used) has a clear
contractual basis. The context here is different. In my opinion it is necessary to bear that in
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mind when considering the effect of such references to SMM7 as there are in the Contract
Documents.
[68] It is common ground that Bill no 3 expressly states that it has not been prepared in
accordance with SMM7. On the other hand, Bills nos 1 and 2 use SMM7 headings and
numbering. Bill no 1 states that items A10 - A50 have been prepared in accordance with
SMM7. Appendix 2 to that Bill sets out qualifications of the Rules of SMM7. Those
qualifications include some qualifications of the General Rules and of Rule C. Bill no 2 itself
contains no express reference to SMM7. The reasonable inference is that SMM7 has been
used to prepare items A10 - A50 in Bill no 1 and the items in Bill no 2, but not the remaining
items in Bill no 1.
[69] In my view it is of no significance that no item for removal of hazardous material
was included in the C20 bill items in Bill no 2. Such an item would only have been
appropriate if known asbestos which could be properly described was being included
within the Works. The asbestos we are concerned with was unknown and could not be
specified at the time of contracting.
[70] If the contract had provided that SMM7 applied in respect of provisional sums listed
in A54 of Bill no 1 unless (and to the extent that) it was expressly excluded, there would
have been greater scope for arguing that unknown asbestos was not included within the
work described in the Bill. On that scenario it could have been maintained that if unknown
and undefined asbestos removal was within the scope of the work a provisional sum for it
ought to have been included. The difficulty for the defender is that the contract did not so
provide. Indeed, as already indicated, in my view the correct inference from the express
provision that SMM7 has been used to prepare items A10 - A50 in Bill no 1 is that it has not
been used to prepare the remaining items in that Bill.
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[71] I do not accept Mr Hunter’s evidence that there is a normal practice in the terms he
described where, as here, the contract is a without quantities one. Neither am I satisfied that
the reasonable person in the position of the parties at the time of contracting would have
understood the position to be as Mr Hunter maintained it to be. Nor am I persuaded by
Mr Hunter’s (rather tentative) suggestion that clause 2.15 of the contract conditions might
provide similar redress for a contractor as clauses 2.13.1, 2.14.1 and 2.14.3 of the with
quantities conditions. In my opinion it is clear that it does not. The difference of view as to
whether demolition contracts are generally more straightforward than construction
contracts seems to me to be unimportant to the determination of the issue I have to decide,
but I incline to the opinion that Mr Rodger’s view accords with common sense and is to be
preferred. For what it is worth, the introductory note to the without quantities standard
form indicates its suitability where the degree of complexity is not such as to require bills of
quantities.
[72] Clause 2.1D also points strongly towards the pursuer’s suggested construction of the
contract. In my opinion a reasonable person in the position of the parties would have
understood “contamination” to include asbestos in the buildings. I am not persuaded that
the contract treats the presence of asbestos and the presence of contamination as being
mutually exclusive matters. Whether or not the asbestos had been an integral part of the
design of the buildings, the question is whether its presence constitutes contamination. The
reasonable person would have known that asbestos is a highly noxious substance; and that
if it was present in the buildings it would require to be disturbed and removed for the
buildings to be demolished. The asbestos would present a serious hazard to the health of
those in the vicinity of the demolition work unless appropriate precautions were taken. As a
matter of ordinary, everyday language a building which is to be demolished but which
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contains asbestos is a contaminated building (cf New Ingliston Limited v The City of Edinburgh
Council [2017] CSOH 37, per Lord Tyre at paras 30 and 31). Asbestos within such a building
is one of the sorts of contamination issues which I would expect an environmental risk
assessment (see para 4.7 of the Pre-construction Information) or a Phase 2 contamination
report (see clause 2.1E of the Conditions) to refer to. Moreover, the risk of the presence of
asbestos was one of the health and safety hazards flagged up in the Pre-construction
Information. In Bill no 1 those health and safety hazards were referred to in item “A12 240
Health and Safety Hazards”. I think it is not without significance that the item goes on to
direct that the nature of any possible “contamination” and the need to take appropriate
precautionary measures should be drawn to the attention of Site staff. In my view the
contamination there referred to includes asbestos contamination.
[73] In the whole circumstances I am satisfied that the scope of the Works includes the
removal and disposal of asbestos whose existence was unknown at the time of contracting. I
am not persuaded that at that time reasonable people in the position of the parties would
have considered that it would flout commercial common sense for the defender to include
any such work within the lump sum price. It involved the defender taking a commercial
risk - but the risk was informed by its experience in demolition work including asbestos
removal, by the survey reports which were provided, and by the full opportunity that it
accepted it had had (in terms of clause 2.1C) to inspect the physical and other conditions at
or affecting the Site.
Disposal
[74] I shall put the case out by order to discuss (i) an appropriate interlocutor to give
effect to my decision; (ii) any questions relating to expenses which may arise.