Authors: Tola Odedoyin and Juli Lau

This is a Scottish decision, which while not binding in England and Wales, provides insight into the interpretative approach the Court may take when faced with a similar situation in this jurisdiction.

Background

In 2004/2005, Midlothian Council (the “Council”) underwent a new social housing programme and appointed Bracewell Stirling Architects (”Bracewell”) as lead consultant on the works. As part of the works, the Council commissioned Blyth & Blyth Limited and Raeburn Drilling & Geotechnical Limited (the “Other Parties”) to carry out ground investigation works.

In 2013/2014, it was revealed that the properties had become “uninhabitable due to ingress of ground gas, including carbon dioxide that had migrated to the surface from disused coal mine workings”. As a result, the Council sought to claim loss and expense from Bracewell for a breach of duty for a failure to recommend the need for a gas membrane.

The Council did not allege that Bracewell had been negligent in carrying out its works, instead it relied on clause 5.1 of Bracewell’s appointment document, which stated that:

“[Bracewell] shall as part of the Build Services carry out any Site Investigation Works and surveys as may be necessary and shall use reasonable endeavours to see that reference to such is included in the Build Specific Agreement produced by it… [Bracewell] shall be wholly responsible for the Site Investigation Works and surveys, if any, referred to in the Build Specific Agreement and that irrespective of any Sub-Consultants, Contractor(s) or others appointed (including without limit site investigation contractors and laboratories)”.

The Council considered Bracewell had, by entering into the appointment, “assumed full responsibility for site investigation works, whether undertaken by themselves, by their sub-contractors or by others”, thus accepting any liability that followed as a result for the Other Parties failure to recommend a gas membrane.

Decision

The Lower Court

The Outer House, Court of Session concluded that Bracewell’s appointment did not impose the level of contractual responsibility the Council were alleging. While Bracewell would have had overall responsibility for the works, their obligation was intended to embody an architect’s usual responsibilities for overall co-ordination of the design works. It was not to be construed as an acceptance of liability for anything that might ultimately go wrong with the design, no matter the cause.

In coming to its decision, the Outer House, focusing on the principles laid out by the Supreme Court in Arnold v Britton[1], noted the conflict between the language used in clause 5.1 and clause 22.2.3 of the appointment, which read:

[Bracewell] shall not be held responsible in terms of this Agreement for the services provided by any other party appointed by the Council but without prejudice to [Bracewell’s] duty to warn the Council of any concerns as to the performance by any Other Consultants or Build Partner

On this reading, the Outer House could not see how the meaning and language used in clause 5.1 could have been intended to confer upon Bracewell, a requirement to be responsible for Other Parties it did not appoint in conjunction with clause 22.2.3. In arriving at its decision, the Outer House relied on the earlier observation of Lord Hodge in Arnold v Britton, citing that:

the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other”.

The Outer House concluded that taking into account the relevant surroundings (clause 22.2.3) the contract did not intend to extend Bracewell’s scope of services, but instead, the intention behind the wording in clause 5.1 was to limit Bracewell’s responsibility to site investigation works carried out by them.

The Appeal Court

On appeal, the Inner House rejected the Council’s submission, finding no fault in the Outer House’s ruling at first instance.

The Inner House decided that the intention between both parties was clear and unambiguous insofar as Bracewell was not agreeing to an acceptance of all liability. They settled on the interpretation that was the most consistent with business common sense. Furthermore, the Inner House stated that while both parties are open to assume the level of responsibility they want to undertake, “it would be an unusual step and one carrying very considerable risks” for Bracewell to have intended for clause 5.1 to have that effect.

Implications

This decision will come as welcome relief for many contractors/consultants and sub-contractors/consultants involved in works with more than one contractor, particularly where work has been carried out by others prior to the appointment of the contractor in question.

The law seems to be settling on the issue of contractual interpretation. Whilst every case will fall on its facts, there seems to be a theme in recent cases in which the Courts will first of all look at the contractual language as the most obvious mechanism to resolving the dispute. Barring a satisfactory outcome on that method alone, the Courts will then look at whether their interpretation of the Contract and its terms provides the most commercial common sense. This judgement is an extensive overview of the principles to be applied when interpreting contractual terms. As we have seen from recent casesthe Courts in both England and Wales, and Scotland, have taken a similar approach to interpreting contractual terms, by considering “the natural meaning, and the meaning which yields the least bizarre consequence[2].

[1] Arnold v Britton & Ors [2015] UKSC 36

[2] Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd [2017]

We have extensive experience advising on construction contracts and would be happy to advise further on apportionment of liability. Juli Lau is an Associate in the Infrastructure team at Sharpe Pritchard.

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.