Legal round up
NEGLIGENCE Copthorne Hotels (Newcastle) v Arup Associates Copthorne engaged Arup as engineer, architect and quantity surveyor for construction of a hotel. Copthorne withheld fees and Arup terminated its contract. It was alleged that Arup had given inaccurate cost estimates, and had failed to design within the construction costs estimated or advised, control costs, co-ordinate the work and supply prompt information.
Arup counterclaimed for the fees owing. The Official Referee directed that the trial should deal with particular issues. Part of the statement of claim read as follows:
'At a meeting held in mid-April 1988, attended by Norman Cooke and Kenneth Hunt of the plaintiff and Peter Foggo, Michael Lowe and Dick Lee of the defendant, the defendant confirmed that the hotel to be designed by the defendant could be completed for the sums proposed by the plaintiff with a margin of +/- 5 per cent, namely, an overall cost of £12 million, of which sum the construction costs would be £8 million, approximately.'
In fact, the overall cost was £21.2 million and the construction cost £15.2 million. Copthorne placed some reliance on this, but the judge thought otherwise. He pointed out that although the word 'confirmed' was used, there was no previous statement to be confirmed, so he concluded that it should be understood as meaning 'stated'. He placed significance on the fact that there was no use of terms such as 'represented', 'advised' or 'warranted'.
Arup had no contractual relationship with Copthorne at that time and therefore what was said at the meeting was not professional advice under a contract.
Copthorne alleged that Arup had subsequently failed to advise that the original figure could not be achieved. The judge said that there was a duty to inform of facts which falsify what was originally a true statement. However, in the first step in proving the case - proving the allegations about the mid-April meeting - Copthorne failed to prove its contention about the meeting and, therefore, failed to prove liability.
It was alleged that Arup had only allowed for £425,000 for piling works, but should have allowed £930,000. The judge said that it was not enough simply to point to the gap between estimate and tender to establish Arup's negligence.
Arup had based its estimate on a particular size of piles. The successful tenderer based its price on a different design, but Copthorne offered no evidence to indicate that Arup should have used some other size as the basis of the estimate.
This sort of allegation is relatively common and architects and QSs alike chill at the thought that a tender will be significantly outside the estimate. The judge's words will give some comfort. He said that there were many possible reasons for the discrepancy, apart from culpable under-estimation. He noted that the successful tenderer was not the lowest, the contractor may have over-specified through caution, or to obtain greater profit or to suit the drilling rig available.
Market conditions may have changed or they may have been subject to some distortion outside the knowledge or foresight of a reasonably competent professional advisor.
A large difference between the actual and estimated costs is not necessarily the liability of architect or QS.
Building Law Information Subscriber Service 1997 issue 40 pages 11-15. Judgment: 1 October 1996
Opat Decorating Service (Aust) Pty v Hansen Yuncken (SA) Pty This is an important case from Australia which would be persuasive in English courts. It deals with the necessity to give notice in accordance with the time schedule in the contract. The sub-contractors entered into a sub-contract which provided that if the sub-contractor suffered a delay for which he was entitled to an extension of time, the sub-contractor should give written notice to the contractor not later than 14 days after the cause of the delay arose. In addition, a claim must be lodged not later than 14 days prior to the issue of the final certificate. The contract stipulated that the contractor would not be liable unless the procedure was followed.
The sub-contractor failed to give notice on time and subsequently the matter was referred to arbitration. The arbitrator and the trial judge on appeal found that the notice provisions were mandatory and that a failure to adhere to them was fatal to the sub-contractor's claim for an extension of time.
On further appeal, the court held that no other case could be taken as being relevant. What was relevant was the wording of this particular contract. There was no reason to curtail the scope of the words. Their purpose was to ensure that a notice was given at an early stage to allow the contractor to investigate the situation properly and to consider its position.
When inserting the clause into the contract, the parties must have contemplated that situations might arise for which the sub-contractor might require an extension of time, and had decided that the sub-contractor should give notice within 14 days. They would have been aware of all the practical issues, but they had intended the clause to be binding. It was binding and mandatory and failure by the sub-contractor to follow its provisions barred the claim for extension of time.
There are many notice provisions in JCT contracts together with time periods. The time period in clause 26.1 of JCT 80 is mandatory, but not in clause 25 in the sense that the architect is still charged with reviewing extensions of time after practical completion whether not ices have or have not been g iven.
Failure to give notice within the stipulated time will deprive the contractor of any benefits which are stated to follow the notice.
Building and Construction Law (1995) volume 11 pages 360-364. Judgment: 8 December 1994
Beaton Thomas Partnership v Ladkarn Holdings Ltd and Dollar Bay Developments Architects often receive less than they think they deserve. There must always be a clear contract setting out the conditions of engagement, the amount of fees and the way in which they are to be paid.
Dollar appointed Beaton as architect for a project which depended on funding from a third party. To obtain planning permission and enterprise zone approval, it was agreed that Beaton should design the whole of the three-phase development. Funding was obtained for phase 1, but the other phases were never built. A design-and-build contract was entered into between Costain and Dollar for the three phases. No phase was to start until Dollar gave the instruction. Beaton's agreement with Dollar was novated to Costain for only one phase. On completion, Costain paid Beaton for the design work for that phase. In due course, Dollar lawfully terminated its agreement with Beaton and Beaton claimed fees for phases 2 and 3 which Dollar refused to pay.
Part of the agreement between Dollar and Beaton said that the fee for each phase would not become due and payable unless and until Dollar had given a notice to proceed with the phase.
It was agreed that Dollar never gave notices for phases 2 and 3. Another part of the agreement said what was to happen in the event of termination.
The court held that the termination provisions did not override the notice provisions for each phase. Unless notice had been given, no fee became due. The court considered that it was not unusual to link payment for design work to securing funding. It was not necessary to imply any terms, for example under the Supply of Goods and Services Act 1982.
The court found it particularly significant that there was a clause in the agreement which prohibited Dollar from using any material belonging to Beaton until there was a notice to proceed.
The court will rarely intefere with the bargain made between two parties in a contract.
Construction Law Digest (1997) series 15 volume 10 page 26. Judgment: 9 May 1997