[New search]
[Printable RTF version]
[Help]
Case No: QBENI 99/1082/A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE TECHNOLOGY AND
CONSTRUCTION COURT (HH JUDGE HICKS QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Monday 10 April 2000
B e f o r e :
LORD JUSTICE STUART-SMITH
LORD JUSTICE WARD
and
LORD JUSTICE BUXTON
|
THE
ROYAL BROMPTON HOSPITAL NATIONAL HEALTH SERVICE TRUST
|
Respondent
|
|
-
and -
|
|
|
WATKINS
GRAY INTERNATIONAL (UK)
|
Appellant
|
__________________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
Marcus Taverner (instructed by Messrs Fishburn Morgan Cole for the
Appellant)
Antony Edwards-Stuart QC & Mark Cannon (instructed by Messrs Masons
for the Respondent)
__________________________________
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE STUART-SMITH:
Introduction
1. The Royal Brompton Hospital in Chelsea underwent major building works
between 1987 and 1990 as phase 1 of a programme of development. Unfortunately
it has given rise to lengthy and intractable litigation between the Claimants
(`Brompton') and the contractors, Taylor Woodrow Construction (Holdings) Ltd
(`TW') and a large number of Brompton's professional advisers. In this appeal
we are concerned with the architects Watkins Gray International (UK), the 8th
Defendant, and two partners of the firm: Ivor Gordon Berresford (14th
Defendant) and Keith Pegden Smith (15th Defendant), whom I shall refer to
collectively as WGI.
2. TW made claims against Brompton under the contract for extra payments and
loss and expense for variations, delay, disruption and other matters amounting
to some £22 million, against which, on the advice of their quantity
surveyor, Brompton paid £5.2 million. TW were not satisfied. The
contract contained an arbitration clause and TW in due course began arbitration
proceedings claiming, with interest, some £15 million more. Brompton
counterclaimed some £6.6 million. The arbitration was settled on 19
December 1995 on terms that Brompton paid to TW some £6.2 million in
satisfaction of the claim, after taking into account the counterclaim.
Brompton also bore its own costs, said to be about £2 million and some
£13,000 paid to the arbitrator. It was a term of the settlement that
Brompton should indemnify TW against any claim for compensation made against TW
by the Defendants.
3. It is an unfortunate feature of this litigation that since the decision in
North Regional Health Authority v Derek Crouch Construction Co Ltd
[1984] QB 644, it was not, or not thought, possible to stay an arbitration on
the grounds that there were claims against other parties arising out of the
same subject matter, which would normally be a good reason for a stay, so that
all issues can be tried in one forum, because it was thought that the Court,
unlike an arbitrator who is given express powers to do so, could not reopen
certificates. The result of this decision was that a building owner who might
have claims against the contractor or his professional adviser or both, had to
litigate against the contractor in arbitration proceedings and against the
professional adviser in Court, unless all parties agreed to submit to one
tribunal. The decision in The Crouch case has now been overruled in
Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266, and
the law has now returned to what it was widely believed to be before 1984.
Nevertheless, The Crouch case has had a baleful effect on this
litigation.
4. The writ in the present action was issued on 21 January 1993, after the
arbitration was begun, but before the settlement. The Statement of Claim was
served on 5 August 1997 and the pleading refers to the settlement. Brompton
alleges against the various Defendants, including WGI, contractual and common
law duties of professional care and skill, breaches of those duties and
resulting damage. The Defendants deny those allegations and in addition blame
each other and TW.
5. WGI joined TW by Third Party proceedings, which by the procedural changes of
26 April 1999 have become Part 20 proceedings. In those proceedings WGI allege
that if they are liable to Brompton in respect of various claims against them,
then TW are bound to contribute under the Civil Liability (Contribution) Act
1978, (`the Act'), on the ground that TW is or was liable to Brompton in
respect of the same damage.
6. TW applied for an order that the Part 20 proceedings against it be struck
out or dismissed or that the order giving leave for their commencement be set
aside on the ground that the statutory requirement of liability on the part of
the two parties concerned `in respect of the same damage' is not met. In view
of the indemnity given by Brompton to TW on the settlement, TW's application
has been conducted by Brompton's solicitors and counsel. His Honour Judge
Hicks QC, sitting in the Technology and Construction Court, by judgment given
on 23 July 1999 acceded to TW's application and ordered that the Third Party
Notice be struck out and the Part 20 claim be dismissed. WGI appeal that order
with leave of this Court.
7. The judge correctly directed himself as to two preliminary questions of law.
First, in order to strike out WGI's pleading it must be `plain and obvious'
that it discloses no reasonable ground for bringing the claim. Secondly,
although as part of the settlement TW were released from any liability to
Brompton that does not exclude the operation of the Act (see Section 1(3)).
The Statutory Provisions
8. Section 1(1) of the Act provides as follows:
"Subject to the following provisions of this section, any person liable in
respect of any damage suffered by another person may recover contribution from
any other person liable in respect of the same damage (whether jointly with him
or otherwise)."
That has to be read in conjunction with the interpretation section: Section
6(1) provides:
"A person is liable in respect of any damage for the purpose of this Act if the
person who suffered it (or anyone representing his estate or dependants) is
entitled to recover compensation from him in respect of that damage (whatever
the legal basis of his liability, whether tort, breach of contract, breach of
trust or otherwise)."
Brompton's claim against WGI and WGI's claim against TW.
9. The Statement of Claim is divided into ten sections identified by capital
letters A to J. A is introductory and J is concerned with loss and damage. B,
C, E, F and G contain allegations of negligence and breach of contract against
WGI. In their Third Party Notice WGI plead the matters on which they rely to
bring themselves within Section 1(1) of the Act by reference to Sections C, F
and G. It is common ground that if WGI cannot succeed in relation to Section
G, they cannot succeed at all.
10. The main contract was in the JCT Standard Form of Building Contract 1980,
Local Authorities Edition with Quantities, with Amendment No. 1 of 1984. WGI
were the Architect/Supervising Officer. Article 5 contains the arbitration
agreement and Article 5.3 contains the Arbitrator's power to `open up, review
and revise any certificate, opinion, decision, requirement or notice, and to
determine all matters in dispute which shall be submitted to him in such manner
as if no such certificate, opinion, decision, requirement or notice had been
given' by the Architect.
11. The contract overran by 43 weeks. WGI certified that TW were entitled to
an extension of time of 43 weeks. In the arbitration Brompton sought to
recover £2,319,169 which had been paid to TW by way of loss and expense,
quantified by the quantity surveyors, which Brompton had had to pay TW as a
result of WGI's certification. They also sought to recover £2,021,000 by
way of liquidated damages (calculated on the basis of £47,000 per week)
for delay in completion. They sought to reopen WGI's certificates granting
the extension. If, and to the extent that, the extension should not have been
granted, then TW were liable to repay some or all of the £2,319,169 and
were liable to pay liquidated damages up to £2,021,000. In the settlement
Brompton did not recover anything like the full amount of these claims. There
was in fact no break down between the claims and counterclaims in the
settlement.
12. Brompton allege that WGI were negligent in issuing the certificates
granting the extensions of time. For the purpose of the strike out application
it must be assumed that they were. Mr Taverner, on behalf of WGI submits that
(a) as a matter of pleading and (b) if it is not so pleaded, it could be, that
Brompton are claiming £2,319,169 and £2,021,000 (less the sums
recovered from TW for which credit must be given) from WGI. This is because,
he submits, the payment of the former and the inability to recover the latter
sum, resulted from WGI's negligent certification. Hence the claim against WGI
is in respect of the same damage as that claimed against TW. This is the basis
of the claim for contribution.
13. Mr Edwards-Stuart QC, on behalf of TW and Brompton, submits that this is
neither how the claim is pleaded against WGI nor could it be. The question of
how the claim is pleaded is a matter of construction of the document. I do not
intend to set it out in any detail. I am quite satisfied that the judge was
right to hold that Mr Taverner's construction was wrong. What he said was
this:
"The nature of the damage (that is the loss) allegedly suffered by the Claimant
by reason of WGI's alleged breaches is in my view plain, although it can be
expressed in various ways - as the weakening or impairment of its prospects of
success, or the increase of its prospects of defeat, as against TW in
arbitration or negotiation, or as a reduction in the value of its chance of
success or an increase in the value of its chance of defeat.
"The Claimant has, by settling its dispute with TW and relying on the terms of
that settlement in order to establish the measure of its claim for damages
against the Defendants, precluded itself from seeking to recover from them
those sums as such. Mr Taverner himself was at pains to point out, for other
purposes, that payments wrongly made during the course of a contract are
recoverable and that conversely liquidated damages not deducted at the time can
be claimed later. I accept that submission, but it is fatal to the contention
that the Claimant could be, any more than it actually is, claiming those sums,
pound for pound, as damage which it has suffered at the hands of WGI. What the
payment or non-deduction respectively of those sums, on WGI's decisions, did
was (the Claimant says) to weaken its hand and strengthen TW's in the disputes
between them and in the resolution of those disputes by settlement. Whether it
will establish that that weakening occurred is an issue of fact, but only by
doing so will it become entitled to an award of damages, and the amount of any
such award will depend on the extent of the weakening proved."
14. The quantification of the loss in Brompton's claim against WGI demonstrates
that this is the way the claim is put. It is said that Brompton only recovered
a proportion of the sums overpaid to TW, for example 15% or 25% depending on
the strength of the particular point. Against WGI Brompton claims damages up
to 85% or 75% of the amount on the basis that its claim against WGI was
weakened, though clearly 85% or 75% is a ceiling and probably unrealistic.
15. Mr Edwards-Stuart submits that Brompton's case is, in effect, that as a
result of WGI's breaches of duty Brompton entered the arbitration with one hand
tied behind its back. Thus as a result of the extensions of time:
(i) Liquidated damages had not been deducted
(ii) £2.3 million had been paid for prolongation costs
(iii) TW was claiming further sums
(iv) Brompton had to persuade the arbitrator that WGI had been wrong in
circumstances in which (a) WGI were not going to support that case and (b) TW
could contend that WGI had been there at the time, whereas the arbitrator had
not.
Brompton therefore faced an uphill struggle in an arbitration which was
estimated to last 40 weeks.
16. On the other hand if the extensions of time had not been granted, then:
(i) Brompton would have deducted liquidated damages
(ii) Brompton would not have paid £2.3 million for prolongation costs
(iii) TW would have had to consider whether to seek to obtain extensions of
time in the arbitration
(iv) If TW had commenced an arbitration (and Brompton claim that they
probably would not have), then it would have been very different from the
arbitration which in fact occurred in that Brompton's position would have been
supported by WGI, and TW would have faced an uphill struggle in trying to
persuade the arbitrator that WGI were wrong. Damages are claimed on the
difference financially between the two positions.
17. The position can be demonstrated by an example. The work is delayed. TW
claim 40 week's extension of time and say £8 million by way of consequent
loss and expense. If WGI reject TW's claim for an extension (and hence the
claim for loss and expense), Brompton will have to assess the commercial
settlement value of those claims in the light of WGI's decision and the
anticipated support of WGI in the arbitration and would have deducted £2
million liquidated damages (40 weeks at £50,000 per week). The settlement
value of TW's claims might be assessed at say:
Extension of time.................................. 10 weeks
Loss and expense...................................£2 million
Repayment of liquidated damages.........£0.5 million
Retention of liquidated damages............£1.5 million
Net cost to Brompton............................ £1 million (£2.5 m
less £1.5m)
18. On the other hand if WGI had granted 30 weeks extension of time, so that
say £6 million is assessed by the quantity surveyors for TW's loss and
expense, the commercial settlement value changes significantly. Brompton now
have to persuade the arbitrator, not only that TW is wrong in its claim for a
further 10 weeks extension and £2 million loss and expense, but that WGI
was wrong in granting the extension that it did. Brompton has only deducted
£0.5 million liquidated damages. In these circumstances TW's position is
stronger (the settlement value of its claims has increased). They might be
assessed as follows:
Extension of time.................................20 weeks
Loss and expense.................................£4 million
Liquidated damages.............................£1 million
Net cost to Brompton...........................£3 million (£4m less
£1m).
19. In this example Brompton's claim is for £2 million against WGI, being
the difference between the two positions. Mr Edwards-Stuart submits, rightly
in my judgment, that that is not the same `damage' as Brompton's claims against
TW in the arbitration. It is for the difference in financial terms between the
ability to recover sums overpaid (in loss and expense) or to enforce their
claim for sums underpaid (by way of liquidated damages), in the two different
situations. While the quantification of Brompton's claim against WGI, and
hence the damages recoverable, have to be calculated by reference to the
amount claimed against TW, the damage is not the same. As was pointed
out in Birse Construction Ltd v Haiste Ltd [1996] 1 WLR 675 by Roch LJ
at p682 the word in s.1(1) of the Act is damage not damages and
the two things are quite different. Damages are the financial compensation for
the damage, whatever it is that is sustained.
20. The point can be illustrated by the all too common case of the solicitor
who fails to issue a writ in time in a personal injury action. The damage
suffered by the Claimant for which he sues the original tortfeasor is the
personal injury for which he claims to be compensated in money by an award of
damages. The damage for which he sues the negligent solicitor is the loss of
his chance of obtaining damages against the tortfeasor. The value of the claim
is assessed by reference to the quantum of the personal injury claim and the
prospects of success against the tortfeasor; but the damage is not the same.
In the one case the damage is physical injury, in the other it is financial
loss.
21. The analogy can be taken further if one postulates that the Claimant in
this example sues the tortfeasor and seeks to rely on s.14 of the Limitation
Act 1980 (date of knowledge) or to disapply the provisions of s.11 of the
Limitation Act 1980, relying on s.33 (the Court's discretion). Absent the
solicitor's negligence in failing to issue the writ, the settlement value of
the claim against the tortfeasor is £x. But if reliance has to be placed
on proving a later date of knowledge or the Court's discretion, the settlement
value of the claim is only a percentage of £x, say £y, depending on
the strength of the case on s.14 or s.33. The claim against the solicitor is
the difference between £x and £y.
22. I also agree with Mr Edwards-Stuart that the damage to Brompton occurs at
the time of the negligent certification because it is at that moment that its
position vis-à-vis TW is altered and weakened, though the quantification
of the damages payable to compensate for the damage cannot be assessed until
later. That quantification will depend on what happens vis-à-vis TW.
If, in this situation a contractor goes into liquidation, with the result that
nothing can be recovered from him, then the quantification of the damage caused
by the architect's negligence is the full amount of the overpayment of cost and
expense and under-recovery of liquidated damages. But where the contractor is
solvent, and there are two sets of proceedings, as in the present case, the
quantification of the damages recoverable from WGI is calculated by reference
to amount claimed against the contractor, less what is recovered from him, that
being the ceiling amount. The actual amount will be less because a settlement
is determined by the perceived strength or weakness of the two opposing
cases.
23. The question of what is meant by `damage' was considered in the context of
the period of limitation and the accrual of a cause of action against a
negligent solicitor in Forster v Outred & Co. [1982] 1 WLR 86, at
p94 Stephenson LJ said:
"What is meant by actual damage? [Counsel] says that it is any detriment,
liability or loss capable of assessment in money terms and it includes
liabilities which may arise on a contingency, particularly a contingency over
which the plaintiff has no control; things like loss of earning capacity, loss
of chance or bargain, loss of profit, losses incurred from onerous provisions
or covenants in leases."
Stephenson LJ accepted this submission. This judgment was approved by Lord
Nicholls of Birkenhead in Nykredit plc v Edward Erdman Ltd [1997] 1 WLR 1627 at p1630. The damage in the present case caused by the negligence of WGI
is the detriment to or impairment of its bargaining position vis-à-vis
TW in relation to costs and expenses overpaid pursuant to the certificate and
liquidated damages unrecovered. The damage caused by the breach of contract of
TW is the delay in completion of the building and the consequent inability of
Brompton to use it. Compensation for that damage is the recovery of liquidated
damages which are a pre-estimate of the actual damages and recovery of the
amount overpaid in expenses.
24. Mr Taverner submits that even if that is not how the case is pleaded, WGI
could by amendment be exposed to a claim for the £2.3 million and £2
million (less the recovery from TW). Indeed he described this as the
`traditional claim'. He relies on the words in section 1(6) of the Act which
provides:
"References in this section to a person's liability in respect of any damage
are references to any such liability which has been or could be
established in an action brought against him......."
Quite apart from the fact that Brompton would not be allowed to amend on these
terms having made it quite clear that that is not its case, I do not think as a
matter of law Mr Taverner's submission is correct. He cited in support of his
submission the case of Wessex Regional Health Authority v HLM Design Ltd
(1994) 71 BLR 32. That is a complicated case and I do not derive any
assistance from it or from the lengthy citation of authority in it. Care must
be taken to distinguish between cases of negligent failure by the architect to
condemn and require rectification of defective work by the contractor (this is
an example of what Mr Taverner calls the traditional claim), and a claim such
as the present for wrongful certification of extensions of time. In the former
case the damage is the defective building; both contractor and architect are
liable in respect of that damage. In the present case the damage, as I have
indicated, caused by TW's breach of contract is the failure to provide the
building on time; the damage caused by WGI is the impairment of the ability to
obtain financial recompense in full from TW.
25. Moreover, I consider that this is in accordance with principles of
remoteness of damage. In the case of defective workmanship which through
failure of supervision the architect does not detect and requires to be
rectified, the foreseeable damage caused by the architect's breach of duty is
the cost of making good the defective work. That is the same measure as that
for which the contractor is liable. But in the case of wrong certification of
an extension of time, what the parties reasonably foresee is that the
contractor will repay the sums that he has received for loss and expense,
because he has been unjustly enriched to that extent and he will be liable to
pay damages for delay caused by his breach of contract. The damages which are
reasonably foreseeable as a result of the architect's breach of duty are not
damages for the delay which they have neither caused nor failed to detect.
What is foreseeable is the additional expense to which the owner is put in
trying to enforce its claims against the contractor, the financial value to be
put upon the weakening of those claims as explained earlier, and only if the
contractor is insolvent, the full amount of the claims is claimed against him,
and not recovered.
26. In my judgment the authorities support this conclusion which I have reached
in principle. In the Birse case (supra) a water authority contracted
with the plaintiffs for the design and construction of a reinforced concrete
storage reservoir. The plaintiffs retained the defendants as consulting
engineers. The third party was employed by the water authority, who appointed
him as engineer for the purpose of the contract with the plaintiffs and as the
construction engineer for the purpose of the Reservoir Act 1975 to issue all
necessary certificates. The reservoir proved to be defective. The water
authority's claim against the plaintiffs in respect of the defective reservoir
and consequential loss was settled by an agreement under which the plaintiffs
were to construct a new reservoir at its own expense. The plaintiffs sued the
defendants who in turn claimed contribution under the Act against the third
party. The judge held that the third party's liability to the defendants was
in respect of the same damage as the defendants' liability to the plaintiffs
and that the defendant was entitled to claim under the Act. The Court of
Appeal allowed the appeal. It was held that the damage suffered by the water
authority was the physical defects in the reservoir, while the damage suffered
by the plaintiffs was the financial loss of having to construct a second
reservoir and these were not the same damage.
27. At p680 Sir John May said:
"Further, the simple approach necessarily involves that the statutory draftsman
intended that "the same damage" should be damage suffered by the same
person. I do not think that the loss suffered by Anglian in not having a
completed properly working reservoir at the time that they expected, the loss
sustained by Birse in having to construct a second reservoir as a result of
their compromise with Anglian, or the damages which Haiste may have to pay
Birse or for which Mr Newton may be liable to Anglian for their respective
breaches of contract or negligence, or for both, are "the same damage" within
section 1(1) of the Act, even though each may have been brought about because
the first reservoir was badly constructed by Birse."
Roch LJ put it succinctly at p682E:
"The damage suffered by Anglian in this case was the physical defects in the
reservoir. The damage suffered by Birse was the financial loss of having to
construct a second reservoir for Anglian. Anglian and Birse did not suffer the
same damage."
28. Mr Taverner places reliance on Friends Provident Life Office v Hillier
Parker May & Rowden [1997] QB 85. In that case the plaintiff had
funded part of the cost of a property development in expectation of a share of
the profits. The defendants were surveyors engaged to advise the plaintiff and
to check and authorise payment of the developers' claims for the plaintiff's
share of the cost. Payments of such claims were by the contract between the
plaintiff and the developers expressed to be "non-refundable" to the other
party. The plaintiff sued the defendants in negligence and breach of contract
for allegedly authorising overpayments, having abandoned an earlier action
against the developers for repayment. The defendants joined the developers as
third parties, claiming contribution under the Act on the grounds (among
others) that (i) the overpayments, if established, were made under a mistake of
fact or for no consideration, and so repayable by the developers, or (ii) the
developers were trustees of any money overpaid and liable to compensate the
plaintiff for breach of trust. The claims for contribution were struck out as
disclosing no reasonable cause of action but restored by the Court of Appeal.
Auld LJ, with whom Saville and Rose LJJ agreed, quoted from sections 1 (1) and
6(1) of the Act. Dealing with the first, restitutionary, ground of alleged
liability on the part of the developers to the plaintiffs, he said:
"In my judgment, despite the distinction between a claim for restitution and
one for damages, each may be a claim for compensation for damage under sections
1(1) and 6(1) of the Act of 1978. The difference between asking for a
particular sum of money back or for an equivalent sum of money for the damage
suffered because of the withholding of it is immaterial in this statutory
context, which is concerned with "compensation" for "damage".........[After
considering the purpose of the Act and quoting again from sections 1(1) and
6(1) he continued:] It is difficult to imagine a broader formulation of an
entitlement to contribution. It clearly spans a variety of causes of action,
forms of damage in the sense of loss of some sort, and remedies, the last of
which are gathered together under the umbrella of "compensation."
He then addressed an argument that restitution was akin to debt, and that debt
was implicitly recognised by section 3 of the Act, in the phrase "debt or
damage", as being distinct from damage, and dismissed it as follows:
"......even if the judge was right in associating a claim for restitution in
quasi-contract with an action for debt, that would not exclude it from being a
claim for compensation in respect of damage......within the meaning of sections
1(1) and 6(1) of the Act of 1978."
He then considered the claim in breach of trust and came to the same
conclusion.
29. The distinctions relied upon without success in that case to take the
claims outside the Act concerned the form of remedy. Both at first instance
and on appeal the argument and judgments turned on whether the alleged
liability of the developers was one in respect of damage, rather than whether
it was the same damage. The question raised in this appeal did not arise.
Moreover, I think that Mr Edwards-Stuart is right when he says that the
certificate issued by the HPMR carried no rights provisional or otherwise. It
did not affect rights of the parties under the contract and the issue of the
certificate by itself caused no damage. It was not until payment was made that
any damage was suffered.
30. The third case is Jameson v Central Electricity Generating Board
[1998] QB 32. The Court of Appeal held that a claim by a deceased workman
against his former employer for negligence and breach of statutory duty was a
claim in respect of the same damage for the purpose of the Act as one by his
executors under section 1 of the Fatal Accidents Act 1976 for the loss of
dependency, since the relevant damage was the wrong which caused both the
injury and the death (per Auld LJ at p353E). I confess to finding some
difficulty in understanding how the tort or wrong can be the damage as opposed
to the injury or disability caused by the wrong. And it is difficult to
reconcile this reasoning with that in the Birse case. But it does not
assist WGI's case. The decision was reversed in the House of Lords at [1999] 1 All ER 193 and judgment was entered for the defendant CEGB. The point was not
argued in the House of Lords because the employers did not appeal and in any
event the claim failed and with it the third party proceedings. But the point
about that case was that CEGB and the employers were concurrent tortfeasors in
respect of the same harm, since the deceased worked for the employers in
dangerous conditions at the CEGB's factory (see per Lord Hope of Craighead at
p200h).
31. In the course of argument our attention was drawn to a number of cases
where the question at issue was whether the action is one where the "damages
claimed by the Plaintiff consist of or include damages in respect of personal
injuries to any person" within Section 11 of the Limitation Act 1980 or its
predecessor Acts (see for example Akbar v C.F. Green & Co. Ltd
[1975] 1 QB 582, Howe v David Brown Tractors (Retail) Ltd [1994] 4 All
ER 30). After the argument was concluded our attention was drawn to a recent
decision of this Court in Norman v Ali and others The Times 25 February
2000, where a similar point was considered. For my part I have not derived any
assistance from considerations of these cases, or the further written
submissions which we have had from both counsel. I find nothing in this line
of cases which is contrary to the conclusion to which I have come.
32. A second case, Howkins v Harrison (a firm) v Robert Edward Taylor and
another, a decision of HH Judge Behrens QC sitting as a High Court Judge
and delivered on 18 February 2000, has also been drawn to our attention and
written submissions have been made by counsel. The case is more in point. The
facts are that in 1992 the lender advanced £634,000 to borrowers on
security of property valued by the claimant valuers. In 1995 the lender
started proceedings against the valuers for negligence and breach of contract.
The lender sold the property as mortgagee for £250,000. A demand for
£503,000 was made against the borrowers but they paid nothing and the
lender did not take proceedings. The valuers settled the lender's claim for
£400,000. The valuers sought to recover a contribution from the borrowers
under S.1(1) of the Act and their entitlement to a contribution was tried as a
preliminary issue. The judge held that the damage (if it was damage) suffered
by the lender in respect of non-payment of the borrowers' liability under the
facility letter was not the same damage as that suffered by the lender as a
result of the negligent valuations. The decision appears to me to be in tune
with the conclusion I have reached.
33. For these reasons I would dismiss this appeal.
LORD JUSTICE WARD:
34. I have much greater difficulty with this case than My Lords, whose
judgments I have had the benefit of reading in draft. My hesitation arises
firstly from the irony that, for the Law Commission whose Report on
Contribution (Law Com. No. 79) led to the Civil Liability (Contribution) Act
1978, it was `a variety of legal problems that seem to call for law reform,'
and those problems included the following:-
"Co-contractors and co-tortfeasors may claim contribution from one another but
not where each of the two (for example architect and builder) is liable for
breach of his separate contract."
See paragraph 1 of the report. The precise problem which they identified was
the example of negligent supervision by the architects of negligent work
carried out by the builder. It is easier there to see that if through
negligent supervision defective work remains undetected, then the owner is left
with the building which remains in a damaged state, that damage having been
caused by the builder's failure to do the work in a good workmanlike manner.
The damage is unquestionably the same. So that mischief has been cured.
Damage flowing from the negligent issue of certificates may be more convoluted,
but it ought to have been within the scope of the Law Commission's survey. On
my Lords' views, that problem will not have been resolved.
35. Yet, and this is my second anxiety, I accept, indeed I totally agree with,
the judgment of Auld L.J. in Friends' Provident Life Office v Hillier Parker
May and Rowden [1997] QB 85, 102/103 where he points
out:-
"The contribution is as to `compensation' recoverable against a person in
respect of `any damage suffered by another' `whatever the legal basis of his
liability, whether tort, breach of contract, breach of trust or otherwise.' It
is difficult to imagine a broader formulation of an entitlement to
contribution. It clearly spans a variety of causes of action, forms of damage
in the sense of loss of some sort, and remedies, and the last of which are
gathered together under the umbrella of `compensation.' The Act was clearly
intended to be given a wide interpretation ..."
36. Accordingly, and painting with that recommended broad brush, the hospital's
loss - which constitutes their damage - and for which they seek compensation is
the loss of £2.3m. for prolongation costs, which the hospital would not
have paid, and £2.1m. liquidated damages, which the hospital did not
deduct from sums payable to Taylor Woodrow and would have recovered from them
respectively but for the negligent issue of the certificates. It was
compensation for those sums which the hospital sought to recover from Taylor
Woodrow in the arbitration. It is thus arguable that the architects are
`liable in respect of (that) damage' given the broad interpretation provisions
in section 6 of the Act to the effect that `a person (the architect) is liable
in respect of any damage if the person who suffered it (the hospital) is
entitled to recover compensation from him in respect of
that damage (whatever the legal basis of his liability)'. I have added
the emphasis. I adopt the explanation of the words `in respect of' given by
Mann C.J. in Trustees Executors & Agency Co. Ltd. v.
Reilly [1941] V.L.R. 110,111 approved in Paterson
v. Chadwick [1974] 1 W.L.R.890:
"The words `in respect of' are difficult of definition, but they have the
widest possible meaning of any expression intended to convey some connection or
relation between the two subject matters to which the order refers."
The compensation to which the hospital is entitled from the negligent architect
does have some connection with the compensation to which it is entitled from
the builders. If, like Croom-Johnson J in Ackbar v. C F Green & Co
Ltd. [1975] Q.B. 582, 587, one asks `What have the hospital lost?' and
`What is this action all about?' the answer is that the hospital have lost
£2.3m. plus £2.1m. and the action is all about their trying to get a
contribution towards that loss from their architects. The fact that the cause
of action against the architects is quite different from the cause of action
against the builders does not matter: the hospital is looking to both the
builders and the architects between them to compensate for their loss. It
seems to me difficult to see why the negligent architects would not be entitled
to a contribution from the unjustly enriched and negligent builders if the
action had been commenced against the architects for recovery of the two sums
as damage flowing naturally from the negligent issue of certificates and there
had been no reference to arbitration. The availability of a remedy for just
and equitable apportionment should not depend on who brought what action when.
37. I am, however, reluctantly persuaded that it is not quite as simple as
that. What the hospital have actually lost, so far as the architects are
concerned, is that proportion of those sums which the hospital failed to
recover from Taylor Woodrow in the arbitration because of the handicap the
hospital there faced that their own architects' certificates were against them.
Looked at in that narrow light, the damage is different. My Lords have
analysed that difference closely and I cannot fault the analysis. I therefore
agree with the dismissal of the appeal, though I remain distinctly
uncomfortable about it.
LORD JUSTICE BUXTON:
38. I agree that this appeal should be dismissed, for the reasons given by
Stuart-Smith LJ.
39. The only issue in the appeal is whether WGI were correct in asserting, in
paragraph 9 of their Third Party Notice, that:
"If...WGI was negligent as alleged by Brompton in granting extensions of time
to TW to which TW was not entitled, and liable to Brompton for the liquidated
damages and/or loss and expense paid to TW as alleged in the Amended Statement
of Claim, then TW is and/or was also liable to Brompton in respect of the same
damage the subject matter of this part of the action against WGI."
40. Mr Taverner summarised his assertion that the "damage" was the same in each
case by saying that the damage was Brompton's loss of capital, to which both TW
and WGI had made a major causative contribution. Any difference between the
amounts actually recovered or recoverable from the two parties was merely a
matter of quantification: it did not affect the nature of the damage itself.
41. I did not find the cases to which we were taken of assistance in
determining this issue. Its solution, rather, flows from consideration of the
way in which WGI itself put its case. If WGI was negligent in granting an
extension of time, then the damage inflicted on Brompton was that grant of an
extension itself. That is established, whether the claim is made in contract
or in tort, by the passage in Nykredit plc v Erdman [1997] 1 WLR 1627 at
p1630C-F to which my Lord refers: because by the grant of the extension the
architect alters the building-owner's position, and sets in train a course of
events that may result in actual financial loss to the building-owner unless he
takes recuperative steps by arbitration or in litigation. The point was also
clearly made in the context of incorrect certification in a passage with which
Mr Taverner said he did not disagree, the observations of Oliver LJ in
Townsend v Stone Toms (1985) 27 BLR 26 at p46.
42. It must, I think, be plain that TW is not liable to Brompton in respect of
that damage: since whatever TW is liable to pay to Brompton does not
result from, and is not to be measured in terms of, any negligent extension of
time given by WGI. Moreover, that WGI cannot recover from TW is in the
interests of economy of litigation, and not unfair to WGI. As WGI contends, in
paragraph 152 of its Defence to Brompton's claim, WGI is only liable for loss
actually caused by its negligence. Brompton will therefore only recover from
WGI in respect of sums paid to TW if (i) Brompton did not owe those sums to TW;
and (ii) it was WGI's negligence that led to Brompton being unable to recover
those sums. If TW has no liability to Brompton, and that would, as WGI
asserts, have been established had Brompton persisted with the arbitration,
then Brompton's claim against WGI will, in terms of quantification, be limited
to inconvenience and expense that may have been caused to it through difficulty
in establishing TW's liability. But Brompton's claim, and the damage in
respect of which that claim is brought, will still persist: because it is a
claim for damages in respect of WGI's original act of negligence or breach of
contract, rather than a claim, as against TW, in respect of wrong payment of,
or failure to recover, sums certain.
43. The foregoing analysis in my view marches with that advanced by my Lord in
paragraph 24 and 25 of his judgment, with which I respectfully agree. Where
there is negligent failure to supervise defective workmanship, the architect's
initial and continuing act of negligence is failure to prevent defective work.
The damage that he inflicts on the building-owner is thus possession of a
defective building. The contractor inflicts the same damage, though by
negligent building rather than by lack of supervision. The contractor cannot
defend himself by saying that the architect should have prevented his negligent
work; whereas the contractor can at least aspire to defend himself where there
has been negligent certification on the basis of that certification. That in
my view further demonstrates that in the latter case the building-owner's
complaint is in respect of the damage done to his relations with the
contractor, rather than in respect of any damage inflicted on him by the
contractor.
Order: Appeal dismissed with costs. Permission to appeal was
refused.
(Order does not form part of the approved judgment)
BAILII:
Copyright Policy |
Disclaimers |
Privacy Policy |
Feedback |
Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/120.html
