SHERIFFDOM OF LOTHIAN & BORDERS AT LINLITHGOW

 

KELVIN HOMES LIMITED Against RITCHIE BROTHERS

(PUBLIC WORKS CONTRACTORS) LTD

Represented by Mr Paul O'Brien, Represented by Mr Kenneth Hogg,

Advocate Solicitor

PURSUERS DEFENDERS

 

 

Linlithgow, 21st August 2006

The Sheriff, having resumed consideration of the cause, FINDS IN FACT as follows:

 

1.      The pursuers are building contractors working from premises in Coatbridge. The defenders are public works contractors working from premises in Bathgate.

 

2.      The parties worked together as principal contractor/ groundworks contractor respectively on a number of contracts prior to 1999. Early that year the pursuers, having been appointed as principal contractors in a building project at Old Monklands, Coatbridge, approached the defenders to work with them as subcontractors. The project concerned the building of 80 dwelling houses for Clyde Valley Housing Association.

 

3.      The houses were to be of timber frame construction on a brick base and the defenders were inter alia to build the foundations, brick walls up to ground floor level and the ground floors themselves. The timber frames, outer skin of brickwork and all other parts of the houses would then be built onto this base by the pursuers. The defenders submitted a quotation in the form of a Bill of Quantities. Negotiations proceeded and further information was provided by both parties. On 7^th May 1999 the engineers appointed to the project, Messrs Halcrow Waterman, issued to the pursuers a detailed drawing specifying the manner in which the ground floors of the houses should be formed. On the concrete strip foundations the defenders were to build walls consisting of inner and outer "skins" of brickwork, the outer to continue upwards to form the outer wall of the building and the inner to support firstly the outer edge of the concrete floor slab and on top of that the timber frame. The concrete floor slab in the case of the houses to which this claim relates was to be 150 mm thick incorporating steel reinforcement and was to be cast in situ. Floor levels were to be between 900 and 1200mm above the Final Ground Level outside the house. The void below the floor and the solum was to be filled with a particular type of bottoming material known as "type (1) hardcore" compacted in layers of 150 mm. The primary support for the floor was provided by its resting on the inner brick wall, although it would also in the longer term derive some support from the filling material beneath it. A further function of the filling material was to provide a flat horizontal surface on which to cast the floor slab.

 

4.      The parties wished to work together and work commenced on site on 11^th May. At that stage it was arranged that in the interests of progress the defenders would start work on the basis that overall terms between the parties would shortly be agreed. Negotiations continued, and by that stage it was known exactly what the defenders had to do, but there was a substantial difference between the parties on price. A meeting was therefore arranged for 18^th May 1999. Present at that meeting were the pursuers' estimator David Earlie, their contracts manager Gordon Nicholls, and the intended site manager John Allan. Representing the defenders were their managing director David Ritchie and their contracts manager Derek McAllister.

Of those present some were not present during the whole meeting. No written minutes of the meeting were taken.

 

5.      Both parties were keen to reach a deal on price and they discussed ways in which they could work together to cut costs. One large cost element was the expense of removing spoil from site. It was particularly acute as this was a brownfield site with heaps of spoil from houses which had been demolished. Two solutions were suggested. Firstly, the 150mm layers of hardcore referred to in the engineer's drawing could be limited to one layer and beneath that layer spoil either from the demolished buildings or dug from the site itself could be substituted. This was not in clear contravention of the terms of the drawing as the depth of the solum on which the hardcore was to be placed and the number of layers was not specified. The solum could therefore be raised with spoil. The pursuers stated that the spoil would be suitable for this purpose. Secondly, the level of the floors themselves could be raised to accommodate spoil. In these ways, it was the pursuers' position that the defenders by employing both these solutions would not have to remove any spoil from site, and the defenders agreed on that basis that they would delete the charge for that exercise from their quotation. It was not entirely predictable if all the spoil could be disposed of in this way, as the extent to which the houses could be raised depended on the topography of the ground, and there was an element of risk to the defenders that they would have to pay to remove some spoil. The final agreement on the price of £830,000, however, reached during the meeting, was reached on the basis that the defenders would be permitted to dispose of spoil in the two ways described and were unlikely to have to remove spoil from site.

6.      After the meeting, the work continued. The verbal agreement reached on 18^th May as to disposal of the spoil was not reduced to writing. By Purchase Order Form dated 7^th June 1999 and the letter which enclosed it the pursuers agreed to pay the defenders £830,000 for the supply and fitting of all siteworks as per the conditions of the "domestic subcontract". The terms of the principal contract with Clyde Valley Homes, in accordance with one of the SBCC styles was also incorporated, but no formal written subcontract was executed. The contractual arrangements between the parties consisted of the Purchase Order Form with its attached conditions and its covering letter, all as accepted by the pursuer's permitting the defenders to continue with the work after its issue. There was no written acceptance. In addition to these terms, however, and unknown to the client, the parties had verbally agreed the special arrangements about the disposal of spoil already referred to.

 

7.      The lack of writing on the issue of disposal of spoil was reflected also in the lack of an altered engineer's drawing or written instruction to incorporate the arrangements. The on-site representative of the engineers, an engineering technician named Crawford Anderson, was aware that spoil was to be put under the floors. He did not have sufficient qualifications to agree to the changes himself, and did not pass details to his employers. He nevertheless acquiesced in the change in the specification.

 

8.      At some time during the early progress of the sitework, after 18^th May 1999, a further change to the specification was agreed between the parties. As already described, the edges of the concrete floor slabs in the houses were to rest on the inner of the two "skins" of brickwork. During the process of casting the floors for the first three houses it became clear that the provision of wooden shuttering to support the outer edges of the slabs during the pouring and curing process presented technical difficulties. On another similar contract in which the parties had worked together, a similar problem had arisen and the solution had been to cast the floor within the inner brickwork skin, using it as a shutter, This had the result that the floor did not overlap the brickwork and derived no support from it. It altered the nature of the floor from a "suspended" floor to a "slab on solid" floor. It would be supported entirely by the material beneath it. This solution was discussed with Crawford Anderson and agreed between the parties. There was no altered drawing prepared, and Mr Anderson did not tell the engineer responsible for overseeing the drawings of the change.

 

9.      This further change to the specification made it all the more important that the material on which the floors were resting was suitable and well compacted, as that material was now performing a structural function.

 

10.  The houses were built and occupied. In 2001 Clyde Valley Housing informed the pursuers that in a number of the houses the floors had sunk respective to the walls, leaving gaps at the skirting boards. The particular houses were numbers 5,7,9,13 and 17 Portree Avenue and 7,11 and 18 Iona Walk, all in Coatbridge. They required the pursuers to provide a remedy.

 

11.  The floors were examined by experts. Bore holes at the sunken areas showed that at least in these areas the material to a depth of 1.5 to 2.5 metres below the floor was soft sand and clay. It was made ground, that is it had been dug out from somewhere else rather than being the original solum. The supporting strength of the material became greater with depth but for a material proportion of the total depth in all the affected floors was well below the "N5" rating which would have been the minimum to support the floors. In addition in most of the houses where sinking had occurred there were voids below the floor slab. The voids could have been caused by the nature of the material, its shrinking after being placed in position when wet or by its having been inadequately compacted before the floors were cast. The floors had sunk at these points as they had no support and the concrete was to a limited extent flexible. There was no hardcore present.

 

12.  The pursuers were legally obliged to remedy the defects and did so at a reasonable cost of £67592.44.

 

13.  The pursuers were aware that the defenders were using spoil to fill the voids below the floors and that the spoil was not as reliable a supporting material as type 1 hardcore. They were aware that the floors were not supported by the walls. They were aware that the changes to the specification had not been formally agreed with the engineers. They did not formalise the changes as they did not wish to inform the clients in case they did not agree.

 

FINDS IN FACT AND LAW as follows:

1.      The parties contracted that the defenders carry out the groundworks at this site and the elements of the agreement relevant to this case were the nature of material to be used beneath the floors and the manner in which that material should be put in place. It was agreed that the defenders could dispose of spoil material on site by placing it on the natural solum area within the substructure walls with the effect of raising that solum to a level only 150 mm below the underside of the concrete slab floor. The spoil material could be either from the heaps already on site from demolition work or newly dug from the site. The only qualification to this was an implied duty that wholly and obviously unsuitable items like large boulders should not be put under the floor. The defenders used the material they were instructed to use. There was no evidence of any breach of the qualification. As to the manner in which the material was put in place, the defenders had a contractual duty to compact the spoil in accordance with the standards of reasonably competent construction workers. They also had a duty to top it with a 150mm layer of hardcore or granular material.. They failed in both these aspects in most areas immediately below the sections of the floors which have subsided.

2.      The groundworks were completed and the houses constructed. The floors referred to have subsided and the pursuers were contractually obliged to make good the defects. They have carried out the repair work at a cost of £67592.44, a sum admitted to be reasonable, and have accordingly suffered loss and damage to that extent.

3.      Whether the failure of the defenders to correctly compact the material below the floors and cover it with a layer of hardcore caused the floors to subside is not established.

 

Therefore, repels the pursuer's pleas in law and sustains the defender's third plea in law. Assoilzies the defenders from the crave of the Initial Writ and continues the cause until 2006 for the consideration of expenses.

 

 

W. Donald Muirhead.

Sheriff of Lothian &Borders at Linlithgow.

 

 

 

 

NOTE: I heard evidence in this case from representatives and experts from both sides.

 

For the pursuers the first witness was David Earlie. He was the pursuer's chief estimator and a qualified quantity surveyor. He was also the son of the chief shareholder of the company. He explained the various stages leading up to the crucial meeting on 18^th May 1999. He explained how the engineers had issued their specification for the work required up to the floor level of each house. The drawing had two sets of detail, slightly different depending on whether the difference in levels between the finished ground level and the floor was more or less than 900 millimeters. The houses in which problems arose all had this greater difference. The void beneath the floors was to be filled with layered hardcore and the floors were to be cast overlapping and resting on the brickwork.

He then described the meeting on 18^th May. He was vague about the details. He said that he attended along with a Gordon Nicholls, a Jim Ritchie and a John Allan. Under cross examination he accepted that a Derek McAllister had been present. He said that there were discussions to reduce the price. It was agreed that the defenders could dispose of spoil material in gardens and communal areas. He denied that there had been agreement to put spoil under the houses. He accepted that this had happened but said that the defenders had broken their contract in doing so. On the other hand he accepted that he had agreed to the change from "suspended" floors to "slab on solid" floors.

 

The second witness for the pursuers was Gordon Nicholls. He was the pursuers' construction manager. He gave similar evidence on the uncontroversial early stages of the negotiations. As to the crucial meeting, he again was vague on the details. He said that it had been agreed to permit the defenders to dispose of spoil in non-structural areas. He said that Derek McAllister was not present. He said in examination in chief that he had been party to the decision to change the floors from suspended slabs to slab on solid, then in cross examination said that he had not been, although he was sure that the engineer Crawford Anderson had been.

 

The third witness for the pursuers was Crawford Anderson. He had worked as an engineering technician with Halcrow-Waterman from 1995 to 2000, and had been their representative on the Old Monklands contract. He had prepared the drawings showing the detail under the floors, although the specification had been checked by a qualified engineer. He had attended regular site meetings during the course of the contract. He denied knowing about the use of spoil in the floor voids and said he only vaguely remembered talk of changing the floors from suspended to slab on solid. He denied having approved the change, saying that he would not have had the qualifications or the authority to do so and that it would have been necessary to arrange solum tests to check if the underlying ground was suitable.

 

The fourth witness was John Allan. He was the pursuers' site manager. Asked in cross examination about the meeting on 18^th June, he said firstly that Derek McAllister was definitely not there, later that perhaps he was. He confirmed that they were all trying to achieve savings. He explained how David Earlie made it clear that the defenders had licence to lose as much of the hardcore as they could to make the deal work. It was his view that it was agreed that spoil from the site could be used to fill the voids under the houses. He said that as the job progressed he watched the filling of the voids from time to time, and could remember making sure that the defenders did not put big boulders into the voids. He said that a layer of hardcore had to go on top of the spoil and to be compacted. He accepted that the core results showed that in these particular areas the spoil was not suitable and had not been compacted. Asked about the change from suspended floors to slab on solid, he remembered the engineer being aware of this and saying that he would prepare another drawing, although they went ahead without it. He pointed out that there had been a number of supervisors watching over the subcontractors as well as himself, namely the clerk of works representing the clients, Mr Anderson from the engineers, the defenders' site manager David Coleman, and from time to time their contracts manager Derek McAllister.

 

The next witness from the parties was James Ritchie of the defenders. Asked about the meeting of 18^th June, he said discussion had centred on cost savings and in particular on the expense of removing spoil. The pursuers had suggested that floor levels could be raised to make room for spoil. Under cross examination he accepted that this had been agreed, and that the spoil would be used in such a way as to make sure that none had to be removed from the site. The pursuers considered that as the spoil was from a brownfield site it would be suitable. If they were changing the levels of the solum the defenders would use spoil material duly compacted.

 

The next witness from the defenders was Derek McAllister. He had been their contracts manager and conducted much of the negotiation up to the stage of calling in Mr Ritchie when the final "horse trading" over price had to be done. He accepted that the arrangements were not reduced to writing and that therefore best practice had not been used. He described the meeting on 18^th June, which he had definitely attended. He described how it was agreed that suitable spoil would be put in the voids under the houses, and the levels of the houses could be adjusted to make more room for the spoil. The impression was given at the meeting by the pursuers that there would be no opposition to this from the engineer, indeed that they seemed to have control over him. He accepted that perhaps the material should have been tested.

 

David Coleman was the last "domestic" witness. He had been the defenders' site agent. He accepted that the voids were to be filled with spoil with 150 mm of "scalpings" on top. This was a material similar to hardcore. The filling was to be finally finished with sand or a similar fine material. If necessary, the material under the floors was to be mechanically compacted. He accepted that the material under the floors as disclosed by the boreholes was not in accordance with the agreement between the parties.

 

I have given more detail than usual of the evidence given by these witnesses as the manner in which the evidence came out was most unusual. It became clear that the pursuer's witnesses were most reluctant to give a clear and true picture of the agreement as they were well aware that it was reached without the client's consent in a manner designed to benefit themselves and their chosen subcontractor. The whole object of building contract law is to vertically tie the workforce however remote in contractual terms to the agreement with the clients, and to make sure that the professional advisors working for the clients are consulted wherever appropriate. By reaching a private deal with the defenders and failing to reduce it to writing the pursuers were making sure that the clients knew as little as possible of what was happening. The defenders were of course complicit in this. The role of the engineers' representative I would describe as "murky". He was evasive in giving evidence and there seemed no doubt by the end of the proof that he knew a great deal more about the changes in the specification than he admitted to. On the reasons why he did not properly exercise his responsibility to his firm's clients I do not wish to speculate.

As it was, the pursuers' witnesses were much more guarded than the defenders' as to what was agreed, although the site manager Mr Allan accepted that the deal over putting spoil under the houses was reached, entirely contrary to the recollection of his boss Mr Eadie. By the time we reached Mr McAllister, the position was becoming very clear, and he was the most relaxed and candid of those giving evidence. Mr Coleman, too, was prepared to tell the court something close to the true picture. Mr Eadie, Mr Nicholls and Mr Anderson were being very careful what they said.

 

These facts being reasonably clear, I had to decide if the changes to specification were changes in the contract. Perhaps the contract being apparently in writing could not be altered by informal agreement and I would have to move to consider issues of personal bar. This was canvassed with Mr O'Brien during his submissions. He accepted that as far as the change from suspended to slab-on-solid was concerned, either there was a change in the contract or his clients were personally barred from holding the defenders to the original specification. Not too helpful! On the other hand, he accepted that the written Purchase Order Form of 7^th June 1999 embodied the terms of the verbal agreement reached on 18^th May. Accordingly as that form with the conditions attached to it is only a written expression of the agreement between the parties, and it was not in fact accepted in writing, this is not a true written contract and I am prepared to accept that the arrangements as to the use of spoil reached on 18^th June are part of it. Personal bar does not have to be invoked.

 

What were these arrangements? As to suitability of the material, I am satisfied that the pursuers indicated to the defenders that spoil material was suitable to go under the floors. At the time they were discussing the matter on 18^th May they were trying to persuade the defenders to take the risk that none of the spoil material would have to be dumped. It was in their interests to persuade the defenders that all the spoil material could be hidden under the buildings and therefore their price could be adjusted by deleting the cost of trucking it offsite and dumping it. To sell this to the defenders they maintained that the material was suitable. The only qualification to this was items like the boulders referred to by Mr Allan, items wholly and obviously unsuitable. Unexploded bombs and dead cats also spring to mind. Otherwise, the pursuers had specifically permitted the defenders to dispose of the spoil this way and stated that it was suitable.

 

All questions of suitability are in any event coloured by the question "suitable for what"? At the time of discussions on what was to go under the floors that material had no substantial structural function, as was explained by Mr Nimmo. Later the specification was changed to give the material a structural function but there is no suggestion that in light of that fact there was any change in the arrangements.

 

The defenders' obligations on the choice of material which could be disposed of under the floors were therefore very limited.

 

What about the manner in which the material was put in place, and the layer of hardcore on top? I will deal firstly with the issue of compaction. There was clearly no specific agreement on this, and the pursuers had to look first to their standard terms and conditions and secondly to the possible existence of an implied term.

As to the standard terms and conditions, I must consider their terms. The only relevant condition says "all workmanship and/or materials supplied must meet the requirements of the governing specification and be to our satisfaction and to that of the Architect, Engineer or Agent appointed and acting for and on behalf of the Employer under the Principal Contract" There was no evidence that there had been any such failure. The employers had a clerk of works on site and regular visits from the representative of the engineers. The pursuers had Mr Allan constantly on site. There is no evidence that the compacting of the spoil did at any time fail to meet the requirements of the pursuers or the Architect, Engineer or Agent.

 

The question of an implied term remains. I take the view that the defenders were obliged to use reasonable care in compacting the material. Two means of doing this were described. There is apparently a machine known as a "whacker" which has a steel plate on the front which moves up and down onto the material. There is also a small hand controlled roller which can be driven over the material. Once the spoil had been dumped in the floor voids, it should have been spread out evenly and compacted with one or both of these pieces of equipment to provide a reasonably solid surface on which to lay the concrete floor. There was no evidence that this was specifically discussed, it would have been so obvious to make discussion unnecessary. Unlike the suitability issue, I find that there was an implied term in the contract as to compaction.

It is ludicrous to suggest that there would have to be specific instructions in the contract governing every turn of the operatives roller. The implied term does not extend, however, to specifying how hard the spoil was to be after the men had finished rolling it. They would not be engineers. The question as to how strong the underfloor had to be has exercised a number of experts in this case. There are specific terms as to how the technical aspects of the job were to be controlled. All that could be expected of the labourers was to make sure that the spoil was strong enough to take the weight of their machines and lay the concrete on. As to the hardcore, it is clear from the drawing that at least one 150mm layer was to go on top of the solum, whether natural or raised by spoil.

 

The duties which I have found established, therefore, were a duty not to put anything extraordinary under the floors, to make sure that the spoil was sufficiently compacted to take the weight of the compacting machines and provide a base for the concrete, and to cover it with a layer of hardcore. There was no evidence that anything extraordinary was put under the floors. The engineers on the other hand gave evidence that the level of measured hardness of the underfloor material could in the areas where the boreholes were made be so limited as to be difficult to walk on, and that there was no hardcore.

 

It is established, therefore, that the defenders' operatives left areas of the underfloor material close to the walls (where the boreholes were taken) so soft that it would have been difficult to walk, and did not use the required hardcore. This was a breach of contract. Did it cause the floors to sink?

 

The pursuers' case on Record, and their instructions to their expert engineer, were based on the premise that the original specification of underfloor material as per Mr Anderson's drawing should be followed. The breach of contract was to fail to follow the drawing, and their expert was asked if the problems were caused by this failure. As the case progressed, however, it became very clear that at least in verbal terms the pursuers agreed to a departure from the drawings, and the breach of contract was a much narrower one. There seems little doubt that if the drawing had been followed the householders would have been left with good sound floors. That is not the same test, however, as that which must be used to decide on causation leading to liability.

 

As far as the pursuer's evidence is concerned I was presented with an expert's report giving the answers to the wrong questions. I have to assess whether his verbal testimony was sufficiently focused on the breach to establish causation, and whether the pursuers could find any assistance in the evidence of the defender's expert Mr Henderson.

 

Mr Nimmo was a competent engineer whose testimony was of high quality. He was, still, however, being asked the wrong questions. In his report he took the view that the departure from the specification had caused the subsiding floors. In examination in chief he repeated this, and stated that the specification were to change this would would have to be in written form sanctioned by the engineer. Here he was speaking in correct contractual terms, on the assumption that the parties were following the terms of the main contract and the appropriate written form of sub contract. He was not asked in examination in chief what would be the position if there had been an informal change. In cross examination this was put to him and he simply repeated that the engineer would have to be involved. He was unable to comment on the nature of the spoil. He gave no view as to whether lack of compaction had been the cause of the problem. He also stated that if the floor had remained a suspended floor the dangers to have avoided would not have been an unstable underfloor area but vegetation growing under the floor.

As to Mr Henderson, he was a geotechnical engineer with a great deal of experience of ground problems. He had been given a wider brief. He was simply asked by the defenders to give a view on the cause of the settlement in light of the borehole results.

He gave in his report a range of factors which could have contributed. The spoil could have been unsuitable because it was too wet or too dry. It could have been insufficiently compacted. Many combinations of these factors could have cause the subsidence. He was unable to determine the actual cause.

In giving evidence, he explained in more detail than Mr Nimmo the penetration tests which had been used to assess the material used under the floors and which had resulted in the unsuitably low readings of N2 to 4. He said that it would be difficult to walk on material of that softness, and certainly difficult to use compaction machinery on it. He said that where as here material under a floor was being used for structural purposes it should be tested by a drilling contractor under the instructions of the engineer. He confirmed that the wetness or dryness of the material was crucial, as if it were too wet it could shrink on drying out and if too dry would not compact properly. He repeated the conclusion to his report, that there was certainly something wrong with the material under the floors which had caused the problem but he was not sure what it was. There were too many unknowns.

 

While therefore there was in my view a breach of duty, it was limited to the elements described above and I am not satisfied on the evidence that it caused the loss. The defenders are therefore entitled to absolvitor.

 

There were four other matters touched on in submissions with which I should deal.

1. As in my view the real cause of the problem was the manner in which both parties sought to reach a private arrangement to the exclusion of the clients, I did in fact discuss with Mr O'Brien and Mr Hogg during submissions whether as in the case of a gambling or illegal debt there might be a general rule of law rendering such a contract unenforceable. They accepted that there was not. The contract was enforceable.

 

2. There was in my view a gap in the pleadings as there were no averments as to

why the pursuers had to carry out the remedial work, thereby suffering loss.

Clearly they would have been in breach of the principal contract but there

were no averments to that effect. It was agreed that I should ignore that point.

3. The question of the thickness of the concrete floor slabs was pled as a ground

of claim with averments that the slabs had not been thick enough. Mr

O'Brien made it clear during submissions that he was not insisting in that

head for the purposes of my judgement.

 

4. The fourth issue concerned quantum. The parties agreed by way of Joint

Minute no 24 of process that invoices for remedial work totalling £67592.44

would be duly recoverable in the event of the Pursuers' success. There

remained in dispute, however, invoices referred to in paragraph 4 of the Joint

Minute. I heard evidence on this issue from Mr Earlie of the pursuers. These

particular invoices had not been agreed as they did not specify the houses to

which they related. Mr Hogg pointed out that he therefore had no way of

investigating whether they were correctly charged or not. I heard submissions

on this issue and preferred Mr Hogg's to the effect of excluding this sum of

£3493.62 from the claim in the event of success. The total due in that event

would therefore be £67592.44

 

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Sheriff of Lothian & Borders at Linlithgow.