MP BURKE TRANSPORT LIMITED AGAINST CHARLES SCOTT & PARTNERS LLP
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 67
CA186/15
OPINION OF LORD TYRE
In the cause
MP BURKE TRANSPORT LIMITED
Pursuer
against
CHARLES SCOTT & PARTNERS LLP
Defender
Pursuer: Sanders; Anderson Strathern LLP
Defender: McKinlay (Solicitor Advocate); Brodies LLP
20 April 2017
Introduction
[1] The issues for Preliminary Proof in this action were defined by Lady Wolffe’s interlocutor dated 15 November 2016, namely “the scope of the defender’s instructions and duties”. The point is a short one and largely one of fact. It has accordingly been possible to prepare and issue this opinion ex tempore.
Factual Background
[2] In 2010 the pursuer, a road haulage company, was desirous of extending the services provided to its clients to include storage. The pursuer identified two warehouses in Abercorn Street, Paisley, belonging to Chivas Brothers Ltd, as possibly affording suitable premises. Chivas agreed in principle to the sale of the warehouses. A purchase price of £500,000, subject to survey, was agreed. The pursuer required to finance the purchase by borrowing from the Bank of Scotland.
[3] The bank instructed a valuation report by Graham & Sibbald, Chartered Surveyors. The property was inspected on 23 July 2010 and a valuation report dated 6 August 2010 was produced. That report valued the subjects at £550,000. However, the report stated at paragraph 6.02:
“The property generally appeared to be in a reasonable condition commensurate with age; however we did note during the course of our inspection that there were a number of cracks located at various points of the former bonded stores together with steel structural bracing to the rear of Unit 7C. We recommend that a structural survey is undertaken to determine the full extent of the cracking and to ascertain whether this is of a structural or progressive nature.”
[4] The purchase transaction was dealt with on behalf of the pursuer by Mr Martin Burke, one of its directors. Mr Burke gave evidence at the preliminary proof and I accept his evidence as credible and reliable. Mr Burke’s evidence was that, in the light of the Graham & Sibbald report, the bank refused to advance any funding until a structural survey in satisfactory terms had been obtained. In particular, they wanted inquiry into the cracking in the walls and the reason why steel beams had been erected. Mr Burke received a recommendation (not from the bank) to engage the defender to provide a report.
Instruction of the Defender’s Report
[5] Mr Burke telephoned the defender on or about 9 August 2010 and was put in contact with Mr Stephen Hughes, one of the defender’s directors. No written record of that telephone conversation exists. Due to the passage of time, neither Mr Burke nor Mr Hughes, who also gave evidence which I accept, had a clear recollection of the detail of the call. What is not in doubt is that Mr Burke instructed Mr Hughes to provide a structural report, and specifically mentioned the issues – namely the cracking and the steel beams – that had been raised by Graham & Sibbald. Mr Burke’s recollection was that having mentioned those matters, he simply asked for a structural report on the building and was quoted a price for it. He did not place a restriction on the scope of the inspection to be carried out. He did not expect the inspection to be restricted to the two matters identified. He expected the inspection to extend to the roof. He could not recall whether he had received a copy of the Graham & Sibbald report before making the call.
[6] Mr Hughes described the call as a routine one by a new client calling out of the blue to request a structural survey. He could not recall exactly what was said. However he was left with a clear understanding that Mr Burke was instructing a report restricted to the wall cracking and the associated matter of the steel bracing. It was very unusual for a structural survey to be instructed in general terms. He inferred that the pursuer needed a report on the matters identified by Graham & Sibbald in order to secure bank lending. He asked for a copy of the Graham & Sibbald report in order to confirm what issue was to be addressed.
[7] On 9 August 2010, Mr Burke sent an email to Mr Hughes in the following terms;
“Hi Steven
Following our conversation can you carry out a structural report on the chivas buildings on Abercorn st paisley. The survey has been done by graham and sibbald contact [details supplied]. The contact at chivas is [name and contact details supplied]…”
[8] Mr Hughes obtained a copy of the Graham & Sibbald report. He noted the paragraph that I have quoted above and made arrangements to visit the premises. He did not require to revert to Mr Burke for further instructions. He visited the premises twice, on 10 August and 7 September 2010, on the second occasion with a colleague. On each occasion he carried out a walk round inspection of both the exterior and interior of the warehouses. He focused his attention on the wall cracking and the structure of the back of the building. He noted that lighting inside the warehouses was poor and that racking from floor to ceiling made a full inspection of the interior impossible. He did not consider that it fell within the scope of his instructions to inspect the roof, and did not inspect it.
The Defender’s Report
[9] Mr Hughes’ report is dated September 2010. It is described as a report of a “Structural Inspection of Industrial Units, Abercorn Street, Paisley”. At paragraph 1.01, the report narrates:
“Charles Scott and Partners were commissioned by Martin Burke of MP Burke Transport to undertake a non-disruptive structural investigation of the properties at Abercorn Street Paisley PA3 4WH. We were requested to make specific comment on the reported cracking of the external walls of the two warehouses at the above property. We understand that MP Burke Transport is in the process of acquiring the properties from Chivas Brothers Limited.”
The introductory section of the report also includes a note of the location of the site and a brief description of the property. Section 2 describes the “Structural Inspection” in relation to both external elevations and internal condition. Mention is made in the latter section of, inter alia, rainwater ingress at a number of locations, a number of holes in one area of the roof which appeared to have been created with a blunt instrument, possibly during an attempted break-in, and the unevenness throughout the warehouse of the concrete floor slab. Section 3, entitled “Discussion and Recommendations”, is concerned almost entirely with the wall cracking and the steel columns. A number of recommendations are made. This section finishes, however, with a sub-paragraph dealing with maintenance works required to the rainwater system to eliminate discharge of water into the warehouses. Section 4 (Conclusion) makes no specific reference to wall cracking or steel beams. It expresses the view that the warehouses are generally in a sound structural condition for buildings of their construction and age, but notes that a number of deficiencies require to be addressed in order to prolong their operational life. A detailed maintenance schedule is recommended.
[10] Following upon receipt of the defender’s report, the pursuer proceeded with its purchase of the warehouse, having negotiated a modest reduction in the purchase price. The bank withheld £50,000 pending completion of the remedial works recommended by the defender in relation to the cracked walls. It is sufficient for present purposes to state that the pursuer subsequently discovered what it considered to be significant defects in the roof of the premises.
The Pursuer’s Claim
[11] In this action the pursuer seeks payment of the estimated cost of repair of alleged structural defects in the roof, and damages for lost profits due to its inability to offer storage services to customers. The defender denies liability and contends inter alia that its duties did not include assessing the internal or external condition of the roof. As already noted, the issue for the Preliminary Proof was whether the scope of the defender’s instructions and duties went beyond reporting on the structural matters identified in the Graham & Sibbald report.
Discussion
[12] The parties are in agreement that the scope of the defender’s instructions was determined during the telephone conversation between Mr Burke and Mr Hughes that preceded the sending of Mr Burke’s email dated 9 August 2010. Nor is there any dispute about the applicable law, which may be summarised in the well-known dictum of Lord President Dunedin in Muirhead & Turnbull v Dickson (1905) 7F 686 at 694 that “…commercial contracts cannot be arranged by what people think in their inmost minds. Commercial contracts are made according to what people say”. In the present case there is clear evidence that Mr Burke explained to Mr Hughes that he wanted to instruct a structural survey because the bank required one in the light of the Graham & Sibbald report. Mr Burke made express mention of the matters identified by Graham & Sibbald. On the critical issue between the parties, Mr Burke denies having instructed Mr Hughes to restrict his structural inspection to the matters identified; Mr Hughes, on the other hand, understood that he was being instructed to report on those matters only.
[13] Having considered all of the available evidence, I feel able to make a finding, with some confidence, that Mr Burke did not instruct a survey restricted to the matters identified in the Graham & Sibbald report. Two contemporaneous adminicles of evidence provide support for this finding. Firstly, the email sent by Mr Burke shortly after the telephone conversation contains no such restriction: it simply asks Mr Hughes to “carry out a structural report”. Secondly, the defender’s report records its instruction as being “to undertake a non-disruptive structural investigation” of the premises and “to make specific comment on the reported cracking of the external walls”. That is not the same thing as an instruction to undertake a structural investigation of the cracking of the external walls. Both of these documents are consistent with Mr Burke’s account of the instructions given to Mr Hughes. They are inconsistent with an instruction restricted to the wall cracking and steel beams.
[14] I also consider that it is inherently unlikely that Mr Burke, as a lay person with no professed expertise in the assessment of the condition of property, would have given an instruction as specific as that which Mr Hughes understood to have been given. It was contended on behalf of the defender that because Mr Burke would have been willing to purchase the property without any structural inspection if the Graham & Sibbald report had not flagged up a potential problem, it should be assumed that he would only be interested in the problem identified. I see no reason to make such an assumption. As Mr Burke pointed out, it was not just the bank that had an interest in the structural soundness of the premises, and it was he and not the bank who was instructing and paying for the survey. Moreover, according to Mr Burke’s unchallenged evidence, the bank’s position was that they would not advance funding until a structural survey had been obtained, and that in particular they wanted further inquiry into the wall cracking and steel beams. Assuming that to be an accurate narration of the bank’s position, it too is consistent with an instruction to provide a structural report including, but not restricted to, an assessment of the cracking in the wall.
[15] Counsel for the pursuer placed emphasis upon the fact that the defender’s report included descriptions of and critical comments on matters not related to the wall cracking, including a description of the roof and mention of holes in one area of it. I do not for my part place weight on this aspect of the report. It was, as I understood it, common ground between the parties’ expert witnesses that it was good practice for an engineer to comment on matters observed during inspection which were considered to be significant, whether or not they fell within the scope of the engineer’s remit. Given that the defender’s position in the present case is that Mr Hughes did not inspect the roof because he was under no duty to do so, I do not regard the making of these comments as adding weight to either party’s case.
[16] I accept that Mr Hughes’ belief that the scope of the inspection was restricted to the matters identified by Graham & Sibbald was genuinely held. But, as Lord President Dunedin observed, contracts are made according to what people say, and this, in my judgment, was not what Mr Burke said. It seems to me that Mr Hughes was too readily influenced by his experience of usual practice in relation to the instruction of a structural inspection, so that on receipt of the Graham & Sibbald report he wrongly attributed to Mr Burke an intention to instruct a report with restricted scope. The uncertainty that has arisen regarding the scope of instruction could have been mitigated had Mr Hughes, in accordance with the Guidance Notes issued by the Institution of Structural Engineers (Sept 2014 edition), confirmed the terms of his appointment in writing before commencing work. Unfortunately this was not done, and although I accept the submission on behalf of the defender that failure to adhere to professional guidance does not of itself constitute negligence, it creates difficulties for the defender in asserting that the true scope of its instruction was different from, and narrower than, the scope described in its own report. As the Guidance Note observes (paragraph 8.1):
“Members should advise a client, and ensure the client understands, the limitations of the service which is to be provided prior to accepting a commission. The scope of the service including any limitations should be re-confirmed in the report.”
As nothing of that sort was done in the present case, the contract, in my view, was to carry out a structural inspection and produce a report without restriction to the matters identified in the Graham & Sibbald report.
[17] I have said very little thus far about the expert evidence led in the case. Mr Andrew Brown, a chartered structural engineer with David Narro Associates, Edinburgh, produced a report and gave oral evidence on behalf of the pursuer. Mr Graham Hunter, a chartered structural engineer with Waterman Structures Ltd, Glasgow, produced a report and gave oral evidence on behalf of the defender. Both expert witnesses were amply qualified and experienced in the matters covered by their evidence. Ultimately, however, their views were of limited assistance in relation to the issues before the court in this preliminary proof. Mr Brown gave evidence as to the scope of the defender’s duties on the assumption that its instruction was not restricted in any way. Mr Hunter gave evidence on the basis of assumptions as to what was discussed during the telephone call that the scope of the report was intended to respond to the Graham & Sibbald recommendation and was thus limited to the wall cracking and steel braces. As I have found in fact that the former was the case, much of Mr Hunter’s report must be set aside.
[18] Mr Brown’s report remains relevant in one respect. My finding that the scope of the defender’s instruction was not restricted to the wall cracking and steel braces does not of itself answer the question whether the scope extended to inspection of the roof. At paragraph 6.2 of his report, Mr Brown observed that an engineer’s report would be expected to comment on any structural issues of immediate concern, any issues that might require to be addressed in the future (including any remedial works or maintenance required), and any further investigations considered necessary. I understood Mr Hunter to agree with those observations on the hypothesis (with which he did not agree) that the scope of the instructions was unrestricted. In a supplementary witness statement provided after sight of Mr Hughes’ statement, Mr Brown expressed the view, for the reasons given in his statement, that the roof was a structural element of these premises. I accept Mr Brown’s evidence in this regard. I accordingly hold that the scope of the defender’s duty in terms of the contract with the pursuer included an inspection of the roof.
Disposal
[19] That exhausts the issues for determination at the preliminary proof. For the avoidance of doubt, nothing in this opinion should be taken as the expression of any view as to what an inspection of the roof of these premises by a reasonably competent structural engineer would or ought to have consisted of, or what it would or ought to have disclosed. If disputed, those will be matters for inquiry on another occasion.
[20] As suggested in the course of submissions, I shall hear parties on further procedure and on expenses before pronouncing an interlocutor.