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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord KingarthLord EassieLord Menzies |
[2009] CSIH 14 CA23/2006OPINION OF THE COURT delivered by LORD KINGARTH in causa AUTOLINK CONCESSIONAIRES
(M6) PLC Pursuers and Respondents; against (FIRST) AMEY CONSTRUCTION
LIMITED AND OTHERS Defenders and Reclaimers: _______ |
Act: Dean of
Faculty, Mure; Fyfe Ireland
Alt: Currie,
Q.C.,
[1] In this action the pursuers and respondents ("the
respondents") seek inter alia
declarator that the defenders and reclaimers ("the reclaimers") are liable in
terms of clause 51 of the contract between the parties dated 30 April
1997, described as the Construction Contract M6 DBFO Project (the "Construction
Contract"), to remedy certain alleged defects said to exist between road base
courses in the New Scottish Motorway (as defined in the said Contract), being
an extension of the M6 Motorway. By
interlocutor dated
Relevant Contractual Provisions
[2] It is
convenient to begin by setting out, so far as relevant and referred to in the
course of the reclaiming motion, the contractual background to the parties'
dispute.
The DBFO Agreement
[3] By agreement
dated
"special
road to be constructed in
(Part 1 of Schedule 1
of the DBFO Agreement). The New Works
Requirements are set out in Schedule 2, being a detailed specification in
respect of the operations to be undertaken, the nature of which will be
considered more fully later in this opinion.
The Construction Contract
[4] Significantly
for the purposes of the present action, on 30 April 1997 the reclaimers,
trading together in a joint venture, undertook in the Construction Contract to
carry out part of the operations which the respondents had agreed to perform in
the DBFO Agreement.
(i) Certain general provisions
[5] In the preamble, it is stated, inter alia:
"(E) The Employer
has reached agreement with the Contractor whereunder the Contractor undertakes
and each member of the Contractor jointly and severally undertakes that it will
design, construct, test, complete and maintain the Works in accordance with
this Contract to enable the Employer to discharge its obligations to the
Secretary of State for Scotland in respect of the Works in accordance with the
terms of the M6 DBFO Agreement and the Employer undertakes to exercise any
right or power granted to it under the M6 DBFO Agreement, on request by
the Contractor, which may be necessary to enable the Contractor to discharge
its obligations to the Employer in accordance with the terms of this Contract."
In the definition
clause (1.1) the "Works" are defined as including "the New Works". The "New Works" are defined as having the
meaning given in clause 10(a) of the DBFO Agreement and include the
design, construction and completion of the New Scottish Motorway. The Works also include "Maintenance" under
clause 51, more particularly referred to later, and certain planned
maintenance work along the line of the "New Works". It is enough for present purposes to note
that this planned maintenance work was to be carried out in accordance with, so
far as relevant, the specification set out in detail in Schedule 4 of the
DBFO Agreement, referred to as the "O&M Requirements".
[6] Clause 6 provides (so far as relevant):
"6.1 Responsibility
6.1.1 The Contractor
shall be responsible for the design, construction, completion, commissioning
and testing of the Works, which shall be carried out in strict accordance with
the New Works Requirements, the Certification Procedure, the Review Procedure
and all other requirements of this Contract.
6.1.2 In performing
its obligations under Clause 6.1.1 the Contractor shall design the Works
(including the specification of materials and Plant where required) with
reasonable skill and care and in accordance with practice conventionally
accepted as appropriate at the time of the execution of the Works having regard
to the size, scope and complexity of the Works."
By virtue of the definition
clause, and Schedule 2, the New Works Requirements are, so far as relevant
and applicable, the same as those in Schedule 2 of the DBFO Agreement.
[7] In clause 9 the reclaimers, as contractors, gave certain
warranties. These, so far as relevant,
are:
"9.1 Warranties
The
Contractor without prejudice to any other warranties and undertakings expressed
elsewhere in this Contract or to any warranties and undertakings implied by law
hereby warrants and undertakes that:
9.1.1 it has fully
considered and understood and will comply with and meet the New Works
Requirements and (to the extent applicable to the obligations of the Contractor
under this Contract) the O&M Requirements;
...
9.1.3 the Works when
constructed and the Maintenance when completed will comply in all respects with
the New Works Requirements; ...
9.1.9 It will carry
out, and shall procure that each Sub-Contractor and any other sub-contractor of
any tier will carry out, the Works so that upon acknowledgement of the Final
Completion Certificate for a Phase by the Secretary of State under
clause 14.3(b)(ii) of the M6 DBFO Agreement the Works in respect of
that Phase will be fit for the specific purposes set out in the M6 DBFO
Agreement including, for the avoidance of doubt, the New Works Requirements; ...
9.1.10 the Works will
comprise or use only materials or Plant which are of sound and merchantable
quality and have been manufactured or prepared in accordance with the New Works
Requirements to the extent applicable to the obligations of the Contractor
under this Contract and with the quality assurance procedures established
pursuant to Clause 28 and all workmanship shall be in accordance with
sound construction practice at the time of construction. ..."
[8] Clause 12 provides:
"The
Contractor shall be deemed to have satisfied itself before entering into this
Contract as to the correctness and sufficiency of the Contract Sum to cover all
its obligations under and in relation to this Contract and all matters and
things necessary for the proper completion of the Works including, without
limitation, the carrying out of the design, construction, commissioning and
testing of the Works."
The effect of clause 57
and clause 60 is that the contract sum is to be paid in monthly instalments
over a period of some 32 months ending effectively on the date of the anticipated
completion of the works.
[9] Clause 21 provides for the care of the works and force majeure
as follows:
"21.1 Care
Subject
to Clause 21.4, the Contractor shall be responsible for and shall take the
full risk in the care of the Works and materials and Plant for incorporation
therein from the date of execution of this Contract or, if earlier, the date
when it commences manufacture of materials or Plant until the date of issue of
the Permit to Use when such risk and responsibility in the relevant part of the
Works shall pass to the Employer or Local Person or the Secretary of State
provided that the Contractor shall take full responsibility for the care of and
risk in:
21.1.1 any Maintenance
and materials and Plant for incorporation therein during the Maintenance
Period; and
21.1.2 any Works to be
carried out in respect of a Phase remaining to be completed between the issue
of the respective Permit to Use for that Phase and the acknowledgement by the
Secretary of State pursuant to clause 14.3 of the M6 DBFO Agreement
and by the Employer pursuant to Clause 50.3.2 of the corresponding Final
Completion Certificate and any materials and Plant for incorporation therein
until such Final Completion Certificate is issued.
21.2 Responsibility to rectify Loss or Damage
If
any loss or damage happens to the Works, or any part thereof, or materials or
Plant for incorporation therein, during the period for which the Contractor is
responsible for the care thereof in accordance with Clause 21.1, from any
cause whatsoever, (subject to Clause 21.4) the Contractor shall, at its
own cost, rectify such loss or damage so that the Works conform in every
respect with the provisions of this Contract to the satisfaction of the
Employer's Agent."
Clause 50.1 provides in
effect that the employer is to issue a Permit to Use when there had been substantial,
albeit not final, completion of any phase of the New Works.
[10] Clause 32.4 provides:
"32.4 Operations
Change in Law
The
occurrence of an Operations Change in Law after 19 November 1996, or the
upgrading or amendment of any non-statutory standards which the Contractor is
required to comply with in accordance with this Contract, of which the Employer
could not have reasonably been expected to be aware prior to that date shall be
deemed to be equivalent to the making of a Secretary of State's Variation to
the New Works Requirements prior to Substantial Completion of any Phase of the
New Works or the O&M Requirements, as appropriate, requiring the Contractor
to implement such Operations Change in Law, or to comply with such upgraded or
amended standards as the case may be and Clause 53.3 shall apply thereto."
Clause 53 provides for
possible variations by the Secretary of State to inter alia the New Works Requirements, with consequential addition
to, or reduction from, the contract sum.
[11] Clause 50.5 provides as follows:
"50.5 Continuing
Liability
Subject
to the requirements of this Clause 50 and Clause 51 the Contractor's
liability under this Contract for any failure to comply with this Contract
which becomes apparent after the end of the Maintenance Period or for any
defect in the Works which becomes apparent after the end of the Maintenance
Period shall be in damages. Such
liability shall be limited to ...:"
(ii) The critical provision
[12] Clause 51,
of central importance to the dispute between the parties, provides as follows:
"51. MAINTENANCE
PERIOD
51.1 Rectification of Defects
The
Contractor shall complete the work, if any, outstanding on the date in the
Permit to Use as soon as practicable after such date and remedy to the
Employer's reasonable satisfaction, and within such reasonable time as the
Employer may specify having regard to the nature of the Defect, all Defects
(whenever arising or manifesting themselves) in the New Works insofar as notified
to the Contractor by the Employer within 60 months of Final Completion of
all Phases of the Scottish Works and of the English Works part of the New Works
(each of which 60 month periods are referred to in this Contract as the 'Maintenance
Period' ...
51.2 Cost of Remedying Defects
51.2.1 All work
referred to in Clause 51.1 shall be executed by the Contractor at its own cost unless the necessity thereof
is a direct result of a wilful act or breach of this Contract by the Employer.
51.2.2 If in the
opinion of the Employer's Agent such necessity is a direct result of a wilful
act or breach of this Contract by the Employer, it shall determine an addition
to the Contract Sum in accordance with Clause 54 and notify the Contractor
accordingly."
In the definition clause
"Defect" is defined as meaning:
"... any defect howsoever arising including without limitation:
(a) any defect
that is the result of defective design or defective materials or defective
workmanship;
(b) any failure
of the New works to meet, or to continue to meet (except to the extent
permitted in the O&M Requirements), the New Works Requirements; or
(c) any damage,
destruction or other effect consequential on any such defect."
The ROM Contract
[13] On the same
date (
"...
the Planned Maintenance Works, the Minor Call-Off Maintenance Works carried out
under a Works Order and Defects Repairs and, where the context requires, any
works carried out as a Variation".
"Planned Maintenance Works"
are defined as meaning "the Routine Operations and Maintenance Works to be
carried out by the Contractor under this Contract the scope of which is set out
in Schedule 4". "Routine Operations
and Maintenance" is defined as meaning work which is "short term or cyclic in
nature and necessary to keep the Project Road in good and safe working order,
including without limitation minor repairs, minor refurbishments and any minor
improvements to all elements of the Project Road ..." Schedule 4 in effect incorporates (with
some exceptions), where relevant and applicable, the O&M Requirements set
out in Schedule 4 of the DBFO Agreement.
Paragraph 1.12 of the latter Schedule provides for the remedying of
all Defects (defined in the same way as in the Construction Contract) occurring
or manifesting themselves during the relevant 30 year period, and that
notwithstanding inter alia that any "Defect
existed, or could have been established as existing, prior to the Operations
Commencement Date ..." "Minor Call-off Maintenance Works" are defined as works of
routine operation and maintenance, other than Planned Maintenance Works, to be
carried out as specified in a Works Order.
[14] "Defects Repairs" means all work or repairs to be carried out
under clause 51. That clause provides as
follows:
"51. DEFECTS
CORRECTION
51.1 Duration of Defects Correction Period
In
this Contract, "Defects Correction Period" shall mean a period of 12 months
from the issue of the Certificate of Completion and shall apply solely in
respect of Works carried out under a Works Order.
51.2 Remedying Defects
The
Contractor shall execute to the reasonable satisfaction of the Employer's Agent
all such work of amendment, reconstruction, and remedying of defects, shrinkages
or other faults as the Employer's Agent may instruct and at such times as the
Employer's Agent may instruct the Contractor to execute either during the
Defects Correction Period or within 14 days after its expiration, as a
result of an inspection made by or on behalf of the Employer's Agent prior to
its expiration and shall agree a programme for the Defects Repairs with the
Employer's Agent.
51.3 Cost of Remedying Defects
All
work referred to in Clause 51.2 shall be executed by the Contractor at its
own cost if the necessity thereof is in the opinion of the Employer's Agent due
to:
51.3.1 the use of materials,
Plant or workmanship not in accordance with this Contract or the specific
requirements of any Works Order or
51.3.2 any fault in
design where such design has been exclusively prepared by the Contractor or
where the design was not so prepared where the Contractor could reasonably have
been expected to detect that fault; or
51.3.3 the neglect or
failure on the part of the Contractor to comply with any obligation, expressed
or implied, on the Contractor's part under this Contract; or
51.3.4 any breach of
the Contractor's warranties.
...
51.5 Contractor to Search
If any defect, shrinkage
or other fault in the Works appears at any time during the Defects Correction
Period, the Employer's Agent may instruct the Contractor to search for the
cause thereof. The cost of the work
carried out in searching as aforesaid shall be borne by the Contractor ..."
The Major Maintenance Call-off Contract
[15] On
29 April 1997 the parties also entered into a Major Maintenance Call Off
Contract. It relates to existing and new
motorways including the New Scottish Motorway.
Under it, the respondents stipulate for the carrying out, on their
behalf, of "Major Maintenance" which is defined in clause 1.1.4 as
meaning:
"all
works of repair and maintenance and any improvements required in respect of the
Project Facilities other than defects repairs under the Construction Contract or routine operation
and maintenance to be performed under the Routine Operations and Maintenance
Contract".
In terms of this contract,
the respondents are obliged to pay for the carrying out of any Major
Maintenance.
The Pleadings
[16] In
Condescendence 3 the respondents aver that the reclaimers began operations
on site in about July 1997. The
construction of the New Scottish Motorway was split into two phases, and Final
Completion of both phases took place on
[17] In Condescendence 4, it is averred:
"COND. 4. Since the Final Completion of the Phases
of the New Scottish Motorway, the pursuers have identified major and important
Defects within the pavement of the road, namely the absence of a, et
separatim the inadequacy of the, bond between the upper and lower roadbase
courses. The performance, structural
integrity and longevity of the pavement depends upon the stiffness of the
roadbase within it. The stiffness of a
roadbase is proportional to the thickness of the roadbase. The roadbase having been laid in two layers,
its performance and longevity depend upon there being maintained an intimate
and long-lasting bond between the upper and lower roadbase layers. In the absence of any such, et separatim
such adequate, bond, the performance, structural integrity and longevity of the
pavement are severely compromised. The
pavement of the New Scottish Motorway comprises four principal elements. The foundation is a sub-base comprising
crushed rock, namely Type 1 granular sub-base material. The next layer is the lower roadbase course,
comprising heavy duty macadam with bitumen.
There is then the upper roadbase course, also comprising heavy duty
macadam with bitumen. Finally there is
the uppermost course, namely surfacing comprising stone mastic asphalt. The pavement design for different parts of
the New Scottish Motorway set out specific grades and thicknesses for the
various courses. Between 2002
and 2006, 320 core samples were taken from the pavement at many
different locations within the New Scottish Motorway. Some 94% of these cores exhibited an
absence of bond between the upper and lower roadbase courses. In a report dated 11th October
2005 prepared for the fourth defender by Ian Baker following inspections of and
repairs to the pavement, the author observed (at page 6):-
'[In]
areas where there are obvious signs of distress, there was no significant bond
between the surface course and the upper road base or between the two road base
layers and that moisture was present at the interface between the asphalt
layers. [....]
Investigations carried out earlier
in the life of the pavement also indicated the lack of significant bond between
the road base layers but had showed the surface course and upper road base to
be bonded. [....].
In the absence of a satisfactory
bond between the main structural layers the deflection under load of the
pavement as a whole and the upper road base and surface course in particular
and the stress experienced, would be greater than anticipated.'
This
absence of bond increased surface deflexion, as demonstrated by Falling Weight
Deflectometer tests carried out on the pavement. Moreover, it also multiplies by a factor of
three or four the stresses experienced within the pavement. As a consequence of the increased deflexion
and stresses, pavement failure is accelerated, greatly reducing the residual
life of the pavement. The importance of
such a bond between roadbase courses has been recognised in the road-building
industry for many years, since long before 1997. Full bond between roadbase courses is
implicitly assumed in specifying design and construction requirements for such
pavements, and is expected to be a characteristic of completed pavements. The Design prepared for the New Scottish
Motorway implicitly assumed full bond between roadbase courses. The absence, et separatim the
inadequacy, of such a bond in the pavement of the New Scottish Motorway is a Defect
in terms of Clauses 1.1 and 51.1 of the Contract. Reference is made to the Report by
Professor John Knapton dated
[18] In Article 6 of Condescendence it is further averred:
"The Defects have to date caused visible
problems in several areas of the New Scottish Motorway, necessitating repair
works, and will continue to do so until such time as the Defects themselves are
remedied in terms of Clause 51.1.
The Defects have caused a very significant reduction in the residual
life of the pavement."
[19] The first and second conclusions of the Summons are in the
following terms:
"1. For declarator that the defenders are
liable in terms of Clause 51 of the contract between the parties dated 30th April
1997 ("Construction Contract M6DBFO Project") to remedy the lack of et
separatim inadequacy of, bond between the upper and lower roadbase courses
in the New Scottish Motorway (as defined in the said Contract).
2. For an order ordaining the defenders to
remedy the lack of, et separatim inadequacy of, bond between the upper
and lower roadbase courses in the New Scottish Motorway (as defined in the said
Contract) at their own cost and to the pursuers' reasonable satisfaction, and
that within the period of two years from the date of decree to follow hereon,
or within such other reasonable period as to the Court shall seem fit."
The Parties' Submissions
[20] The essence of the submissions on behalf of the reclaimers was
that, on a proper construction of Clause 51 of the Construction Contract,
their obligation thereunder to repair only arose in respect of any failure of
the New Works to meet, or to continue to meet, the New Works Requirements - and
in particular the standards provided for therein. This was the commercially sensible
construction. Since it was not averred
by the respondents that the absence, or inadequacy, of the bond between the
upper and lower road base courses amounted to such a failure, the respondents'
pleadings were irrelevant, and the action should be dismissed. In relation to the principles to be applied
in construing the contract, reference was made to Mannai Investment Co Ltd v Eagle
Star Life Assurance Co Ltd [1997] AC 749, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and BCCI v Ali [2002] 1 AC 251.
As a matter of language, ("defect" being defined in the Oxford English
Dictionary, 2nd edition, as inter
alia "a shortcoming or failing; a
fault, blemish, flaw, imperfection (in a person or thing)"), any defect required
to be measured by reference to a standard.
The defects to be remedied in terms of Clause 51 were those in the
New Works - that is, having regard to Clause 10(a) of the DBFO
Agreement, works "described and specified in the New Works Requirement". It was reasonable to read such defects as
meaning any failure to meet the New Works Requirements. The provision for the execution of repairs at
the reclaimers' own cost (save in the limited circumstances described in
Clause 51.2.2) made commercial sense if the reclaimers' construction was
preferred, but not obviously so otherwise.
There was nothing in the definition of defects inconsistent with this
approach. What mattered was what was
meant by "any defect" in that definition, the words "howsoever arising" simply
indicating that the defects could arise from any cause. This was not inconsistent with the
reclaimers' position. If there was a
failure to meet the standards of the New Works Requirement it was not necessary
to establish the cause. Nor were
sub-paragraphs (a) and (c) of the definition inconsistent with the
reclaimers' position; indeed,
sub-clause (c) could be said to give content to the earlier words "including
without limitation". Consideration of
the whole contractual context was important for a proper understanding of
Clause 51. The core provision so
far as the reclaimers' responsibility was concerned was Clause 6.1.1. The works were to be carried out in strict
compliance with the New Works Requirements which provided detailed
specification of the standards to be met, including in respect of the road
pavement. It would be anomalous if the
reclaimers could be required to do work, effectively at their own cost, save in
limited circumstances, without reference to any standard (which appeared to be
the respondents' position), and without, in particular, reference to the
specific standards provided for the in the New Works Requirements. In light of the warranty given in
Clause 9.1.3 it was not commercially sensible to require the reclaimers to
carry out remedial works under Clause 51 if the finished works complied in
all respects with the New Works Requirements.
Moreover, the contractors would need to know the standard to be met
before they could be satisfied, under Clause 12, of the sufficiency of the
contract sum to cover all their obligations.
Given the provisions as to payment of the contract sum, it was
inconsistent with any sensible commercial expectation that the reclaimers should
be required to execute works at their own cost if some standard different from
the New Works Requirements was not met.
Similarly, the provisions for payment in respect of instructed
variations to the New Works Requirements underlined the significance of the
standards in those Requirements and was not obviously consistent with any
suggestion that the reclaimers could be expected to return to do work without
reference to the New Works Requirements.
Clause 21 imposed the widest possible obligation on the reclaimers until
the issue of a Permit to Use - viz in
respect of loss or damage "from any cause whatsoever", but not afterwards,
whereas after the maintenance period provision was made for recovery in
relation to any failure by the reclaimers to fulfil their obligations under the
contract. The reclaimers' construction
of Clause 51 in respect of the intervening maintenance period was entirely
consistent with these provisions. Some,
albeit limited, assistance could be gained from consideration of the ROM
Contract and the Major Maintenance Call Off Contract. In particular, certain provisions of the ROM
Contract (intended to cover works of a routine or cyclical nature) (in
particular paragraph 1.12 of Schedule 4 of the DBFO Agreement, as
incorporated) could be taken to suggest that Clause 51 of the Construction
Contract was intended to cover works of a similar nature, whereas it could
reasonably be supposed that major works of repair or improvement fell to be
dealt with under the Major Maintenance Call Off Contract.
[21] In summary the respondents' submission was that the construction
of Clause 51 which the reclaimers now advanced was too narrow, having
regard to the language of that clause read in the context of the contract as a
whole. The reclaimers' position before
the Lord Ordinary (consistent with their position on Record - in
particular in Article 6) had been entirely different, namely that they
were not required to undertake remedial work unless it was claimed that they
were in breach of contract. This, as the
Lord Ordinary had found, was not tenable, inter alia having regard to the very different language (appropriate
for a similar kind of provision) adopted by the parties in Clause 51 of
the ROM Contract entered into on the same day.
In construing the provisions of any contract the language used was of paramount
importance. Reference was made to City Wall Properties (
"The
word defect in this particular context may in practice often mean the symptom
rather than the cause, which may often be difficult to establish ... until
work has been demolished, removed or uncovered or a special investigation is
carried".
In contrast to Clause 51.5
of the ROM Contract there was no provision for special investigation in
Clause 51 of the Construction Contract.
The reclaimers' interpretation, on the face of it, did not allow for
content to be given to the provisions of Clause 51.2 relating to defects
arising as a direct result of the wilful act or breach of contract by the
employer. There was nothing in any of
the other clauses of the Construction Contract upon which the reclaimers sought
to rely which suggested that the respondents' construction of Clause 51
was not commercially sensible. Nor was
there anything in the ROM Contract or the Major Maintenance Call Off Contract
which afforded the reclaimers any real assistance. On the contrary, Clause 51 of the ROM
Contract was entirely unhelpful to their position. Further, certain references to Defects in the
O&M Requirements in Schedule 4 of the DBFO Contract (incorporated so
far as relevant and applicable into the Construction Contract and ROM Contract)
were apparently inconsistent with the reclaimers' position. Reference was made inter alia to paragraph 1.12 and to pages 2-64, 2-87 (and
following) and 2-113 (and following) of that Schedule. Having regard to the respondents' averments
in Condescendence 4, and in particular their offer to prove that full bond
between road base courses was implicitly assumed in specifying design and
construction requirements for such pavements, that such bond was expected to be
a characteristic of completed pavements, and that the design prepared for the
New Scottish Motorway implicitly assumed full bond between the road base courses,
it could not be said that even if they proved all of their averments they were
bound to fail. Reference was made to Jamieson v Jamieson 1952 SC (HL) 44.
On the contrary, their averments at Condescendence 4 were plainly
sufficiently relevant to entitle them to a proof before answer.
Discussion
[22] This
reclaiming motion gives rise to a short but important question of construction
which focuses on the proper meaning of the word "Defects" in Clause 51 of
the Construction Contract. It is
important, before looking at the language of the clause, to make some general
observations.
[23] First, there is no dispute between the parties as to the
relevant principles of construction to be applied. In construing the language of any contractual
provision the search is for the intention of the parties objectively ascertained,
and that search requires due consideration of context, not only the whole terms
of the contract but also the underlying factual matrix, so far as
relevant. Care has to be taken to avoid an
overly technical, linguistic approach. In
a commercial contract which may be open to more than one interpretation the
commercially sensible construction is more likely to give effect to the
parties' intention. But while all that
is true, and important, there can be no doubt that, as has been said, the
search begins and often ends with the language of the clause itself. As Lord Hoffman said in BCCI v Ali at page 269 "But the primary source for understanding what
the parties meant is their language interpreted in accordance with conventional
usage ...".
[24] Secondly, the general purpose of defects liability clauses such
as Clause 51 was not disputed before us.
Such clauses may be said, generally, to be provisions which enable an
employer to require the contractor to put things right with the finished
structure where problems in it (using a neutral term) emerge a short time after
practical completion, even when the contractor has left the site, and which
enable the parties to allocate the costs of doing any such work as may be
required. It is clear that some such
clauses may confine the employer's entitlement to require the execution of remedial
work to situations where the contractor could be said to have been at fault. In
others, such work may be required, at no cost to the employer, even where the
contractor is not at fault at all. And
there may be many situations provided for in between these extremes. It all depends on the particular terms
chosen.
[25] Thirdly, we think it right to emphasise at the outset that the
argument of the reclaimers before the Lord Ordinary, which he rejected,
(and the only argument which features in the pleadings) was that, on a proper
construction, Clause 51 of the Construction Contract enabled the
respondents to require remedial work only where it could be said that the
reclaimers were in breach of contract.
This contention was plainly rejected by the Lord Ordinary, not
least by contrasting that provision with the obviously different language,
chosen by the same parties on the same day, in Clause 51 of the ROM
Contract (which provided expressly that the reclaimers would not be required to
execute remedial work at their own cost unless they were at fault). Before us, counsel for the reclaimers did not
seek to repeat that argument. Instead,
for the first time, they sought to argue that Defects meant any failure to meet
the standards described in the New Works Requirements. Their right to advance this argument was not
disputed, but, in our view, counsel for the respondents were correct to invite
the court to analyse with care whether, in its effect, the argument now advanced
was any different, (a consideration to which we refer later).
[26] Fourthly, and perhaps most important of all, proper
consideration of the argument skilfully presented on behalf of the reclaimers can
only proceed upon a clear understanding of the nature of the provisions of the
New Works Requirements, with which requirements inter alia the New Scottish Motorway required to comply (as part of
the respondents' obligations to the Secretary of State under the DFBO Contract,
Clause 10(a), and also as part of the reclaimers' obligation under the
Construction Contract, Clause 6.1.1).
In our view, it is clear from even a cursory assessment of the New Works
Requirements (appearing at large in Schedule 2 of the DFBO Contract) that
they can be said to be (perhaps like any specification) a detailed, but certainly
not comprehensive, description of the standards to be met. For example, paragraph 1.1(a) of
Part 2, Section 1 provides that "all New Works materials, workmanship
and Design shall comply with the Design Manual for Roads and Bridges (DMRB) and
with the Manual of Contract Documents for Highway Works (MCHW)". By way of further example Part 2, Section 3,
paragraph 2.18, provides specification in certain respects of the culverts
to be constructed, in particular in relation to their design loading, their
location and length and the minimum verge width under the structure. In paragraph 1.6 of the same Part, there are
certain express specifications for the "road pavement" including for example a
provision that an anti-skid surface should be provided at Beattock Junction,
northbound of the slip road. However, it
is equally clear that not every matter which could be said to have been
reasonably expected in the final construction is provided for. There is no express provision that there
should, for example, be no cracking in the culverts or any other structural
inadequacy. Nor is it expressly provided
that there should be no potholes in the road pavement. Indeed, as to the road pavement, it is
expressly provided in paragraph 1.6(a)(ii) that:
"(ii) The Company
may adopt alternative pavement Design standards to those contained in
DMRBV: Volume 7: Section 2: 'Pavement Design and Construction' and
alternative material specifications to those contained in the Specification for
Highway Works: Series 900 Road
Pavements: Bituminous Bound Materials
and Series 1000 Road Pavements:
Concrete and Cement Bound Materials.
Notwithstanding the foregoing, pavement Designs incorporating jointed
reinforced concrete shall not be permitted and the requirements of
Specification Clauses 921, 1026, 1029 and 1031 shall be complied
with."
[27] Lastly, that strict compliance with the New Works Requirements is
not the limit of the obligations incumbent on the reclaimers can be seen from
Clause 6.1.1 of the Construction Contract, which refers inter alia, in addition, to "all other
requirements of this Contract". The
warranty in Clause 9.1.9 is to the effect that the works would be "fit for
the specific purposes set out in the M6 DBFO Agreement including, for the
avoidance doubt, the New Works Requirements".
The warranty in Clause 9.1.10 extends to the use of materials or
plant which are of sound and merchantable quality and to workmanship in
accordance with sound construction practice at the time of construction.
[28] Looking now to the language of Clause 51.1 (as read with
the definition of Defects), the clear indications are, we consider, that the
intention is not merely to include defects however caused (as, now at least, is
accepted on all sides); it also may be
said to point away from confining the meaning of Defects to defects of any
particular type - "any defect" is to be covered. Further, and we think of particular
importance, the language would suggest that while it is understood that failures
to comply with the New Works Requirements can be described as defects, this is
but one example, the definition referring to any defects "including without
limitation" inter alia such failures.
[29] If that is so, what other broader meaning can there be, as a
matter of language? In the course of the
argument a number of different suggestions were made at different times but the
Dean of Faculty, expressing as we understood it the final considered position
of the respondents, suggested (i) that the language was wide enough to cover,
following the dictionary definition, any shortcoming, failings, faults,
blemishes, flaws or imperfections etc emerging in the finished structure
(measured by the essential purposes of that structure or any particular parts
of it), or (ii) at least, in so far as may be said to be different, any
shortcomings etc in the quality which could be said to have been reasonably expected
of the finished construction or any part of it under the contract, even if not
expressly provided for in the specification, namely the New Works
Requirements. In our view there is force
in this contention, not least having regard to what the New Works Requirements
do and do not specify. Although it is,
strictly speaking, unnecessary for us to decide between the two formulations
advanced, we are inclined to prefer the latter.
Otherwise, on the face of it, under the first the employer could seek to
claim as a "Defect" any failure to meet a standard which could not be said to
have been reasonably expected under the contract (and thus, in effect to use
the defects liability clause as a means of requiring improvements).
[30] If "Defects" falls to be construed in this way then, in our
view, it plainly would not be possible to say at this stage that the respondents'
averments are irrelevant. The
respondents offer to prove not merely that the performance, structural
integrity and the longevity of the pavement was severely compromised in the
absence, et separatim having regard
to the inadequacy, of the bond between the upper and lower road base courses,
but also that full bond between road base courses was implicitly assumed in
specifying design and construction requirements for such pavements, was
expected to be a characteristic of completed pavements and that the design prepared
for the New Scottish Motorway implicitly assumed full bond between road base
courses. Indeed, as appears to us, the
reclaimers in their pleadings do not dispute that absence of slippage between
road base courses was to be achieved in some way (albeit, as we understand
their averments, by full transfer of shear strain across the interfaces between
layers), their position being that there is no evidence that the New Scottish
Motorway is in fact exhibiting slippage between the pavement layers.
[31] Against that background, we ask ourselves whether there is
anything in the other clauses of the Construction Contract which would suggest
that this would not be a commercially sensible, or would be too literal, a
construction of Clause 51.1. We
have come to the view that there is not.
[32] Clause 51.2 is not, on the face of it, helpful to the
reclaimers' position. It was accepted in
argument that, on their construction, it was difficult to think of
circumstances in which the contractor could not be said to be in breach of
contract if defects emerged within the relevant period (in particular perhaps
having regard to the warranty under Clause 9.1.3.). Nevertheless, the reasonable implication of
Clause 51.2.2 is that the parties envisaged that defects could be caused by the
wilful act or breach of contract of the employer. Counsel for the reclaimers were, it seemed to
us, unable to give any convincing examples of circumstances in which, on their
construction, those provisions would apply.
Further, given the reclaimers' apparent acceptance that it was difficult
to think of circumstances in which any defect (as construed by them) could not
also be said to represent a breach of contract by them, there is some force in
the respondents' contention that, although the reclaimers sought to disavow the
argument which did not find favour with the Lord Ordinary, the argument
now advanced would result in the clause having the same effect - namely
that, notwithstanding the apparent intention to make the reclaimers
contractually liable to do remedial works at their own cost, unless the need
for the works was caused by the wilful act or breach of contract of the
respondents, the reclaimers would be liable only when they were themselves in
breach of contract (an apparent inversion of that intention). In making these comments, we are not to be
taken, however, as agreeing that the reclaimers' construction would necessarily,
in every case, require ascertainment of the cause of any defect before they
could be said to be under any obligation to effect repair. Counsel for the reclaimers were careful, as
we understood them, to present their argument in relation to failures to meet
standards of quality laid down by the New Works Requirements. In any event, it is plain that failures to
meet, and to continue to meet, the New Works Requirements are included in the
definition of defects.
[33] In our view, there is also nothing in Clause 6.1.1 or in
the warranties given which suggests that the wider meaning which we prefer for
"any defects" could not be said to be commercially sensible, in particular in the
context of a clause allocating risk in relation to problems occurring within
the maintenance period. Indeed, it is
clear that the obligations undertaken by the reclaimers under Clause 6.1.1
are wider than compliance with the New Works Requirements, and clear also from
the provisions of Clauses 9.1.9 and 9.1.10 that the standards
reasonably to be expected under the contract are wider. Nor are we persuaded that there is anything
in Clause 12 which materially assists the reclaimers. There was bound to be uncertainty in advance,
on any view, as to when or how defects might emerge. Nor do we consider that the provisions for
payment for the contract work prior to completion or for variation (Clauses 57,
60, 32.4 and 53) materially assist the reclaimers' in relation to the very
different subject matter of Clause 51.
Equally, in our view, Clause 21 deals with the separate matter of
the allocation of risk in respect of loss and damage essentially caused by
external events or agencies (it does not relate to defects "arising"). And Clause 50.5 deals with the different
matter of how, and with what restrictions, breaches of contract can be enforced
after the relevant 5 year period.
[34] The reclaimers themselves, in the event, did not, it appeared,
seek much assistance from the other contracts, and, in so far as we understand
the arguments advanced, we do not find them persuasive. (Nor, as it happens, are we persuaded that
much assistance can be gained by the respondents from consideration of
references to defects in the different context of Schedule 4 of the DFBO
Agreement - notwithstanding its incorporation, so far as relevant, for the
purposes of planned maintenance under the Construction Contract).
[35] In these circumstances, we shall refuse the reclaiming motion,
adhere to the interlocutor of the Lord Ordinary and remit to him to proceed
as accords.