Mr Justice Coulson:
A INTRODUCTION
- In these proceedings, the claimants (whom I shall call 'the Dhamijas') seek damages arising out of alleged defects in the design and construction of their house in Virginia Water, in Surrey. The first defendants were the contractors and the second defendants were the architects. The present application arises out of the claim against the third defendants, whom I shall call 'McBains', who acted as the quantity surveyors.
- The claim against McBains is in two parts. The first part is concerned with allegations of over-valuation, and is outside the scope of these applications. The second is concerned with defects. It is said that McBains owed to the Dhamijas a duty "to only value work that had been properly executed by the contractor and was not obviously defective". Over half of the hundreds of items in the Scott Schedule are said to constitute individual breaches of this obligation by McBains.
- By their application dated 16 August 2010, McBains seek to strike out the defects claim on the basis that, as a matter of law, they did not owe the duty alleged. In response to that allegation, on 8 September 2010, the Dhamijas issued their own application to amend their particulars of claim. No limitation issue, or other prejudice to McBains, appears to arise out of the proposed amendments. With the agreement of counsel, I therefore address the application to strike out by reference to the proposed amended particulars of claim although, for reasons which will become apparent below, the proposed amendments do not greatly alter the underlying issue between the parties.
- I deal with the application to strike out in the following way. In Section B below, I set out the law, such as it is, relating to a quantity surveyor's obligations in respect of defective work. In Section C below, I briefly summarise the evidence as to McBains' contract, and their performance of their obligations, contained in the witness statements. Thereafter, at Section D below, I analyse the application to strike out against the background of the facts and the relevant principles of law. Although counsel argued this case on the basis of a wide-ranging point of principle (Can a quantity surveyor ever be liable to the employer for defective work carried out by the contractor?), it will become apparent from my analysis that, in my view, the answer to the issue is much more fact-specific.
B THE LAW
B.1 The Authorities
- The leading authority on the obligations owed by a quantity surveyor in connection with defective work is Sutcliffe v Chippendale & Edmondson (1971) 18 BLR 149. The case concerned an allegation of negligence against a firm of architects, to the effect that their interim certificates had failed to make proper allowance for the defective work carried out by the contractors. The architects claimed that their duties did not extend to telling the quantity surveyors to exclude defective work from the valuations. Judge Stabb QC (as he then was) found that the architects did have an obligation in those terms. Inevitably, the judgment was concerned with the overlap between the duties of the architect and the role of the quantity surveyor when issuing interim certificates. Since both parties before me placed considerable reliance on a number of passages in the judgment (and since it appears to be the foundation for a number of comments in the textbooks) it is necessary to set out some of those passages at some length.
- At pages 163 – 165, the judge was summarising the evidence of some of the witnesses. He referred to the evidence of a Mr Clark, an expert architect who gave evidence on behalf of the claimant and who stated:
"…it was his practice, as a matter of routine, on site visits if he observed any defective work to issue a written order to the contractor in relation to it, and a copy of the order would go to the quantity surveyor so that he, the quantity surveyor, should know not to include it in his next certificate, unless the defect had by then been remedied. By this simple method, he said that the quantity surveyor would be kept informed of all defective work of which the architect had taken note. Without such a system, he said that the architect would have to get in touch with the quantity surveyor in some other way, to pass on the information."
- In relation to the defendant architects, the judge summarised their experts (both architects and quantity surveyors) as all expressing the view:
"…with varying emphasis, that such a certificate was more of an approximation of the value of the work as it progressed, assessed by the quantity surveyor without any detailed inspection of the work, the object being simply to provide a reasonable progress payment for the contractor based upon a comparatively cursory examination of the site."
The judge also referred to the specific evidence of the defendant's expert quantity surveyor, Mr Palmer, who agreed that:
"…if the architect did not tell the quantity surveyor about defects, the quantity surveyor would not be expected to make allowance for them. He himself had not known of a quantity surveyor having advance information from the architect in the manner suggested by Mr Clark. It was simply for the quantity surveyor to see what work had been done and, if he had no evidence to the contrary, he was to assume that the work had been done properly. He also added that where the work was clearly wrong then, of course, it had to be excluded" (my emphasis).
- The judge said that the defendant's witnesses of fact, who included both architects and quantity surveyors, were agreed:
"…that responsibility for the detection and, if necessary the exclusion from the certificate of defective work was that of the architect as opposed to the quantity surveyor, whose concern was as to quantity and not quality. Mr Simpson stated that the informal communication system with his quantity surveyors had always worked satisfactorily and, in his view, and in Mr Collick's view any attempt to make a detailed or precise valuation at interim stage would have been impracticable."
- The judge then had to decide what an architect's proper professional function was in relation to interim certificates. At page 166, which forms the ratio of his decision, he said this:
"…since everyone agreed that the quality of the work was always the responsibility of the architect and never that of the quantity surveyor and since work properly executed is the work for which a progress payment is being recommended, I think that the architect is in duty bound to notify the quantity surveyor in advance of any work which he, the architect, classifies as not properly executed, so as to give the quantity surveyor the opportunity of excluding it…
But so long as the contractual basis of the certificate is the valuation of work properly excecuted, the architect, in my judgment, should first satisfy himself as to the acceptable quality of the work, before requiring his employer by way of certificate to make payment for it, and in particular should keep the quantity surveyor continually informed of any defective or improperly executed work which he has observed."
- There is no other reported case of any real assistance as to the quantity surveyor's role, if any, in relation to inspection and "works not properly executed". Although paragraphs 213 – 218 of my judgment in McGlinn v Waltham Contractors Limited and Others [2007] EWHC 149 (TCC) were cited to me, those passages are expressly concerned with the architect's role only. Although in that case there was a claim against the quantity surveyors, it was limited to allegations of over-valuation, and a claim for defects arising out of their project management role, which was largely unsuccessful, and does not arise here anyway.
B.2 The Textbooks
- At paragraph 7.322 of Professional Negligence and Liability (LLP, edited by Mark Simpson QC) the authors[1] say this:
"…it is submitted that an independent assessment of the work carried out must be made by the quantity surveyor each month, in order to arrive at a proper valuation. It is clear, however, that whilst the quantity surveyor must check the quantities of work carried out, he is not obliged to investigate whether or not that work is defective. As HHJ Stabb QC made plain in Sutcliffe it is for the architect to ensure that the work that is being assessed by the quantity surveyor for the purposes of valuation has been properly carried out."
- In similar vein, in Jackson and Powell on Professional Liability (6th Edition, 2007) at paragraph 9-256 the editors write:
"Clearly, however, in assessing amounts to be certified, an architect and any quantity surveyor engaged for the purpose must take care to ensure the claims for payment are reasonable and justified by the work done at the time, in quality and amount respectively…Where a quantity surveyor is also engaged by the employer, the architect should keep him continually informed of any defective or improperly executed work observed so as to give him the opportunity of excluding it from interim valuation."
- The only textbook to suggest that the quantity surveyor has a positive obligation in relation to defective work is Hudson's Building and Engineering Contracts, Volume 1, (11th Edition, 1995) at paragraph 2-230. The editors say this about a quantity surveyor:
"So if he notices defective work while visiting for purposes of making his valuations, for example, he should bring what he has seen to the architect's attention in case the latter has missed it. Bearing in mind the high degree of skill professed by quantity surveyors in the detail of construction methods, there would seem to be no reason why they should not also be joined as defendants by an owner where, for example, the defects were so glaring that they should have been seen by him in the course of valuation inspections as well as by the architect."
The footnote to this paragraph refers to the judgment in Sutcliffe. However, as we have seen, there is no part of Judge Stabb's judgment which could be described as authority for the proposition set out in Hudson. It is closer to, but still critically different from, Judge Stabb's summary of the defendant's evidence in that case, in particular the passage in bold set out in paragraph 7 above. Judge Stabb did not say that he accepted that evidence, and his judgment (with its emphasis on the architect's responsibility for keeping the quantity surveyor informed about defects) makes clear that he did not. The passage in Hudson would therefore appear to be unsupported by authority, contrary to Sutcliffe, and contrary to the professional negligence textbooks. For these reasons, I am afraid that I consider it to be wholly unreliable.
C THE EVIDENCE
- The admissible evidence in this case that is relevant to the present issue is limited. It appears that there was no written contract between the Dhamijas and McBains. Instead, it seems McBains were introduced to the project by a Mr Walls, who worked for the first defendant architects. On behalf of McBains, Mr Runnicles (from whom there is no statement) agreed that McBains would act as quantity surveyors and subsequently, on 19th September 2003, Mr Walls wrote to the Dhamijas saying that he recommended appointing a quantity surveyor 'to ensure some safeguard in the administration of the contract'. On 29th September 2003, Mr Walls sent on to Mr Runnicles a letter which he had received from Mr Dhamija asking him "to proceed along the lines outlined in your letter". Thereafter, it appears that McBains were named in the construction contract as the quantity surveyors and performed the usual function of quantity surveyors on the project. There is nothing to indicate that the contract was ever formalised.
- Pursuant to the JCT contract between the Dhamijas and the first defendant contractors, there was the usual regime for interim certificates and payments. Clause 4.2(c) provided that the quantity surveyor would carry out interim valuations "for the purposes of ascertaining the amount to be stated as due in an interim payment". The detailed mechanics of that process involved the identification of "the total value of the work properly executed by the contractor".
- There is a statement from Mr Andrew Crook (formerly of McBains) who prepared the interim valuations on the project. He maintains that he did this through communications and discussions with the contractors and with the architects; by requesting corroborative documentation; and "by inspecting the works where necessary". He denies that it was for him to ensure that the works had been properly executed, and he disputes the suggestion that it was for him to identify defects and/or to draw such defects to the attention of others involved in the works.
- Mr Crook also provides a number of important pieces of documentary evidence. These include:
i) Valuation 1, a typed sheet, which he says is typical of the valuations which were produced during the currency of the contract. This document identifies a gross valuation for the works "excluding any work or material notified to us by the Contract Administrator in writing as not being in accordance with the Contract". Further down the valuation, at note iii, the valuation expressly states:
"It is assumed that the Contract Administrator satisfies himself that there is no work or material that is not in accordance with the Contract".
ii) In relation to valuation 14, Mr Crook exhibits a file note in which he reported to the architect a conversation that he had had with Mrs Dhamija as to various parts of the work which she did not regard as acceptable. In the note, he expressly sought the architect's advice as to what to do in respect of the valuation for these particular items of allegedly defective work. The architect responded by indicating which items required a deduction, and which did not. The beginnings of the dispute between the Dhamijas and the architect are already apparent.
iii) As the works were nearing completion, the architects attended the property and provided lists of defects or work not properly executed. These lists were then sent by the architects to the quantity surveyors, McBains, to be taken into account in the valuation of the works.
D ANALYSIS
D1 The Basic Contractual Position
- The first issue on this application is whether or not McBains owed the claimants the pleaded duty "to only value work that had been properly executed by the contractor and was not obviously defective", as formulated in paragraph 21(d) of the amended particulars of claim. There was a good deal of what I consider to be irrelevant debate about the mechanism for the implication of contract terms of this kind. It seems to me that, on the facts of this case, the contractual position is straightforward.
- There is no evidence of a written contract and there is a positive statement by Mr Crook that there was no such contract. There is no evidence of any oral contract either. It was a contract evidenced by the letters to which I have referred and the parties' subsequent conduct. There were no express terms of that contract at all. The term alleged by the Dhamijas must therefore be implied.
- The term is not said to be implied on the basis of previous dealings between the parties, or any conversations between any relevant individuals. It is not derived from any document specific to the project. Moreover, the implied obligation, in the terms in which it is set out in the pleading, cannot be traced back to any reported case or any statute. Although it may be said to reflect the passage in Hudson, cited at paragraph 13 above, for the reasons that I have given, I am confident that there is no basis in law for the proposition that is set out in that paragraph. The term alleged here certainly cannot be said to be based on Judge Stabb's exposition of the law in Sutcliffe. On what basis, therefore, could this term, or anything like it, be implied into the contract?
D2 The Implication of a Term as to Quality of Work
- Mr Crook accepts, on behalf of McBains, that he was aware of the terms of the building contract, and was aware of the obligation on the part of the quantity surveyor to include in his interim certificate a percentage based on the value of the works 'properly executed'. Accordingly, it seems to me that the Dhamijas would be right to assert that there was an implied term in this contract, in order to give it business efficacy, that McBains would act with the reasonable skill and care of quantity surveyors of ordinary competence and experience when valuing the works properly executed for the purposes of the interim certificates.
- That implied term arises because that is what Mr Crook agreed to do; and that is what Mr Crook said that he actually did. Moreover, since it was known by all parties to be a requirement of the building contract, it seems to me that such a term would be implied into the contract between the Dhamijas and McBains in order to give it business efficacy. Such a term was necessary in accordance with the well-known test set out in Liverpool City Council v Irwin [1977] AC 239; otherwise, there would be an unworkable gap between the mechanism as stated in the construction contract (of which everyone was aware), and McBains' direct obligations to the Dhamijas.
- But that is not the term which the Dhamijas seek to imply. Their proposed term omits the 'reasonable skill and care' qualification, thus seeking to impose an absolute obligation, the breach of which is said to be measurable by results, as if it were a guarantee. It adds a word ("only value…") for which there is no basis in the JCT contract. Most important of all, it then goes on to create a positive obligation not to value work which was "obviously defective". Mr Lewis said that this meant that only defects which were obvious to McBains should have been reported, which is why not all the defects in the Scott Schedule were pursued against them. But inherent in this obligation is a positive duty on the part of McBains to inspect the works, so as to draw to the architect's attention to works which they, as quantity surveyors, thought were "obviously defective".
- On the basis of the material before me, I can see no basis in fact or in law for this positive duty as alleged in the amended particulars of claim. It cannot be said to have been expressly agreed and, for the reasons which I have indicated, there is no legal foundation for implying such a term. Indeed, I consider it to be contradicted by the express terms of the judgment in Sutcliffe because, contrary to Judge Stabb's conclusion, the Dhamijas are seeking to turn the usual position on its head, to require the quantity surveyors to tell the architects about defective works (rather than the other way round), and to make the quantity surveyors liable for quality (at least to the extent that the defects were 'obviously defective') as well as quantities.
- Moreover, I consider that Mr Parker is right to submit that an implied term of this type would get nowhere near passing the test in Liverpool City Council v Irwin. It cannot be said that this term was necessary in order to make the contract work, or that the contract was unworkable unless the quantity surveyors, whose primary obligations were concerned with valuation, were also responsible for inspections on quality matters. Such a term cannot be necessary in circumstances where, as everyone agrees, the architects (the second defendants) were obliged to perform precisely that task.
- For these reasons, I reject the basic proposition advanced by Mr Lewis. The only implied term relevant to the quality of the work is the one that I have identified in paragraph 21 above. The remaining issue raised by the application to strike out is whether there is an arguable case that McBains breached that implied obligation.
D3 What Actually Happened?
- On the evidence as it presently stands, Mr Crook says that McBains fully performed this obligation because, in addition to his dealings with the architect and the contractor, and his inspections on site, his interim valuations made plain on their face that all issues of defective work were for the architects to address. In addition, he says that he expressly liaised with the architects in relation to items of defective work that had been drawn to his attention. In those circumstances, it is said that McBains did all that they were obliged to do under their contract.
- Of course, on this issue, McBains can derive considerable support from Sutcliffe, which makes clear that a quantity surveyor is concerned with quantities, not the quality of work, and that it is for the architect to notify the quantity surveyor if there are defects in the work which affected the valuation. That is also the position recorded in the other two textbooks which I have cited at paragraphs 11 and 12 above. On the evidence before me, that was precisely how McBains went about their task.
- Thus, on the face of it, it seems to me that the Dhamijas' currently pleaded claim against McBains in relation to defective work is unsustainable. That is not because, as Mr Parker suggested, there was no duty at all; self-evidently, for the reasons that I have given, there was an implied duty as recorded in paragraph 21 above. But, on the basis of the material before me, McBains complied with that duty. Their conduct was precisely that which was envisaged by Judge Stabb in Sutcliffe. It cannot be criticised merely because, on completion, there were alleged defects in the work, whether 'glaring' or otherwise. Is there any other reason, therefore, why the defects case against McBains should not be struck out?
D4 Other Considerations
- On behalf of the Dhamijas, Mr Lewis submits that disclosure has not yet occurred and that, as a result, he does not know for sure that the contract was not reduced to writing. Moreover, he says that Mr Crook's summary of his involvement on the project is just that, a summary, and that, prior to disclosure, it is not appropriate to dismiss the claimants' claim in relation to the defective work. For example, he points out that only one of the valuation documents has been provided and only skimpy information has been provided in relation to how the defects were dealt with in the later stages of the project. He says that he "challenges" much of Mr Crook's statement, although the nature of that challenge was unclear, since the Dhamijas have been wholly unable to set up any positive material in opposition to Mr Crook's evidence.
- From the Dhamijas' point of view, therefore, these evidential issues seem to me to be somewhat forlorn. There is no reason disclosed in the papers or in the parties' submissions for me to doubt what Mr Crook says. If what he says is correct, then for the reasons I have given I am of the view that there can be no defects claim against McBains.
- However, I acknowledge that disclosure has not yet taken place and that it is just possible that, on the evidence, the Dhamijas might be able to demonstrate that, in carrying out the obligation to value the works, McBains did somehow fall below the standard to be expected of ordinarily competent quantity surveyors. I reiterate that, at present, there is nothing to persuade me that that is a real possibility but, provided that they are aware of the significant costs risks that they are running (an order for indemnity costs in favour of McBains may be appropriate if this aspect of the claim is as hopeless as I suspect it might be), it seems to me that it is appropriate to give them at least the opportunity of pursuing such a case to the next stage, if that is what they want.
- This does not, of course, mean that I am simply going to allow the claim to continue. That would be wholly contrary to the overriding objective, and a dereliction of my case management powers. Moreover, as I observed at the hearing on 10th September, contrary to my earlier order, the Dhamijas have wholly failed to provide a proper Scott Schedule setting out these allegations, and have instead filled two lever arch files with endlessly repetitive, computer-generated allegations that are so general as to be meaningless, with the case on each individual defect regularly set out in no more than half a dozen words. There is no way that I could possibly allow this claim to go further without a fundamental rethink on the part of the Dhamijas and their advisors as to the whole basis of the pleaded defects case. As I have said, they are already running grave risks as to costs.
D5 The Solution
- Accordingly, the solution to these applications is straightforward. I shall order the hearing of a preliminary issue, to last one day, to address the issue as to what McBains did in relation to the valuations, the methodology they adopted, and how, if at all, it could be said that it amounted to a breach of the implied term which I have found. Disclosure will be ordered, limited to that issue, with the exchange of short statements and very short reports dealing with that issue only. It is wholly unnecessary for the court to consider any part of the Scott Schedule in order to decide that issue, because what will matter is what McBains did when valuing the works, not whether or not there were defects at the end of the project. I make plain that, as things presently stand, it will be for the Dhamijas to show that what Mr Crook said that he did somehow fell below the standard to be expected of a reasonable quantity surveyor. On the face of his evidence, and in line with the authorities, that seems to me to be something of an uphill task, but because it will ultimately turn on the facts, I accept that the issue should be finally resolved on the evidence.
- In addition, in the light of the fundamental defects in the Scott Schedule, and the application to amend the particulars of claim, both of which affect the other two defendants and the whole question of the continued pursuit of this claim, it will also be necessary to reconsider the case management of this action at the earliest possible opportunity.
