WEST REG STREET (PROPERTY) LIMITED AGAINST CENTRAL DEMOLITION LIMITED [2018] ScotCS CSOH

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OUTER HOUSE, COURT OF SESSION

[2018] CSOH 98

CA11/18

OPINION OF LORD DOHERTY

In the cause

WEST REG. STREET (PROPERTY) LIMITED

against

CENTRAL DEMOLITION LIMITED

Pursuer

Defender

Pursuer: Lord Davidson of Glen Clova QC; DAC Beachcroft Scotland LLP

Defender: Barne QC; Pinsent Masons LLP

12 October 2018

Introduction

[1] The pursuer carries on business as a property developer. The defender is a

demolition contractor. In 2016 they entered into a contract for the defender to demolish

three adjacent buildings (a 1960s building, a Victorian building, and a Georgian building

with a Venetian façade (“the Venetian building”)) at 28-52 West Register Street and 15-19

South St Andrew Street, Edinburgh. During the course of the demolition the 1960s building

and the Victorian building were found to contain asbestos. The parties are in dispute as to

who should bear the cost of the removal of that asbestos.

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[2] In this action the pursuer seeks declarator that the defender is obliged to remove and

dispose of any asbestos encountered during demolition without the need for any variation

to be instructed and without any additional payment being made in respect of that removal

and disposal. The defender maintains that such asbestos removal and disposal is outwith

the scope of the work which it contracted to perform, and that a variation requires to be

instructed and paid for. The matter came before me for a proof before answer on the

commercial roll.

[3] The pursuer led evidence from two witnesses, Scott Castle and Ian Rodger. The

defender called three witnesses, Allan Bell, Colin Peat and John Hunter. Mr Castle, Mr Bell

and Mr Peat prepared signed witness statements and Mr Rodger and Mr Hunter prepared

reports (Mr Rodger’s being 6/2 of process and Mr Hunter’s 7/20 of process). The witness’s

statement or report was treated as being the substance of his evidence-in-chief (subject to

each party reserving the right to object to the admissibility of certain of the contents of each

report).

[4] Mr Castle is a quantity surveyor and project manager who is employed as a director

of the firm of Thomas & Adamson (“T & A”). In terms of the contract T & A were the

Contract Administrator, Quantity Surveyor and CDM Co-ordinator. Mr Castle was in

overall charge of the project for T & A. His evidence was mainly directed to discussions

which took place with representatives of the defender during August 2016 when proposed

amendments to the standard contract conditions were being negotiated. He also spoke to

subsequent events.

[5] Mr Peat is a director of the defender. His evidence focussed on the discussion which

took place with Mr Bell and Mr Castle about the inclusion in the contract of clauses 2.1C

and 2.1D.

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[6] Mr Bell is the defender’s contracts manager. He gave evidence as to the background

to the contract; the discussions with Mr Castle about the inclusion of clauses 2.1C and 2.1D;

contract instructions 5 and 6; and subsequent events.

[7] Mr Rodger and Mr Hunter are both chartered surveyors with considerable

experience of construction contracts, including demolition contracts. Their reports and their

oral evidence concentrated on the Standard Method of Measurement of Building Works

(7th ed) (”SMM7”) and its bearing on the contract.

[8] In terms of a joint minute of admissions (no 20 of process) certain matters were

agreed, including a chronology of events. In addition, much of the evidence was not the

subject of any material disagreement. It is unnecessary to rehearse the various sources of

that evidence. It is sufficient simply to narrate my findings in relation to it.

[9] The most contentious evidence concerned the discussion between Mr Castle, Mr Bell

and Mr Peat about incorporation of clauses 2.1C and 2.1D. There was also some

disagreement between Mr Rodger and Mr Hunter about SMM7’s role and significance in the

contract.

The background to the contract

[10] In April 2015 T & A asked the defender to provide an informal budget price for

proposed asbestos removal works, demolition, and façade retention at 28-52 West Register

Street and 15-19 South St Andrew Street (“the combined works”). The defender was

provided with a bill of quantities for the proposed works which included a bill item C21:

“C21 TOXIC / HAZARDOUS MATERIAL REMOVAL

Site generally

Remove and dispose of all asbestos material

identified in the Asbestos Survey reports 15-17 (sic)

South St Andrews Street ref HLAD34033/010R and

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28-52 West Register Street ref FYAD32786/001R

generally

ITEM”

The defender was given copies of the aforementioned survey reports. The report relating

to 28-52 West Register Street (ref FYAD32786/001R) set out the findings of an intrusive

refurbishment/demolition survey which had been carried out by RPS Consultants (“RPS”)

between 10 and 20 November 2014. It indicated that certain asbestos containing materials

(”ACM”) had been identified or were assumed to be present. It specified the relevant

locations. It noted certain areas which had not been accessed. The report for 15-19 South

St Andrew Street (ref HLAD34033/010R) set out the results of a non-intrusive pre-demolition

survey which had been carried out by RPS on 17 and 18 November 2014. It indicated that

certain ACM had been identified or were assumed to be present. It specified the relevant

locations. It highlighted that certain areas had not been accessed and that intrusive

investigation into the building fabric had not been possible. It concluded that all areas

should be subject to a fully intrusive demolition survey prior to any works commencing.

Each of the reports contained the caveat:

“Whilst the surveyors made every reasonable effort, RPS Consultants cannot

guarantee that all ACM had been identified, hence some ACM could be present in

the building that may only be discovered when the building is demolished or is

subject to major refurbishment.”

The defender submitted an informal budget quotation for the combined works.

[11] In June or July 2015 T & A asked the defender to submit a tender for asbestos

removal and soft strip work only (ie not including demolition). Bill no 2 in that tender

document repeated the C21 item which had been contained in the tender bill for the

combined works. The defender tendered for the work but its tender was not accepted. The

contract was awarded to another contractor, GCM Services.

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[12] On 22 and 24 July 2015 RPS revisited 28-52 West Register Street and prepared an

updated asbestos report (ref FYAD32786/002R). The same caveat as was in the earlier

reports was repeated. It seems that the defender was not provided with that report.

[13] In early January 2016 the defender was asked by T & A to tender for demolition

work at 28-52 West Register Street and 15-19 South St Andrew Street. The contract was to be

on the terms and conditions of the SBCC Standard Building Contract without quantities for

use in Scotland (SBC/XQ/Scot), 2011 edition, incorporating the JCT New Rules of

Measurement Update, August 2012. Although the contract was to be a without quantities

contract, the draft tender documentation prepared by the pursuer contained three

documents which were in the form of bills of quantities. Bill no 1 dealt with preliminaries.

Bill no 2 dealt with demolition work. Bill no 3 related to temporary works. The

Pre-construction Information issued to tenderers was a revised version of the

Pre-construction Information which had previously been prepared for a proposed tender for

the combined works.

[14] The defender put prices against the items ‘A54 Provisional Work/Items’ and

‘A55 Dayworks’ in Bill no 1. In Bill no 2 it inserted a single global figure of £360,000 for all of

the listed demolition items for the Victorian building and a single global figure of £540,000

for all of the listed demolition items for the 1960s building. It priced Bill no 3 at £60,000.

[15] On 9 March 2016 T & A emailed the defender’s Mr Bell and asked him to confirm

inter alia the following matters (shown in ordinary font below). The following day Mr Bell

replied by annotating the email of 9 March 2016 in red (shown in bold below):

“...

2. Confirmation that leaving the asbestos felt and roof tiles on the 1960s and venetian

buildings (currently included in GCM Services ongoing soft strip and asbestos

removal contract) can be included within your works and have nil cost or

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programme impact. If not please advise on cost and/or programme impact. There

will be a cost of £6,000 but the programme will not be affected.

3. A recent intrusive survey to satisfy ourselves that there is no asbestos materials

within the external wall build-up of the 1960s building has identified very minor

asbestos residue above the window heads in the new section of this building (as per

the attached photo). It is believed that this is the result of some asbestos overspray to

the steel beams. I attach a couple of photographs which hopefully helps to identify

the residue in question (note - the area in question is restricted to the brickwork

immediately above the steel plate as confirmed by the asbestos analyst). We have

agreed with GCMS that the best option for dealing with this is to infill these areas

with expanding foam to encapsulate the asbestos residue within a matrix of

expanding foam for future removal. I seek confirmation that the removal of this

expanding foam can be included within your works and have nil cost or programme

impact. If not please advise on cost and/or programme impact. There will be a cost

of £5,000 but programme will not be affected.

...”

[16] On 18 May 2016 Coal Consultants carried out a refurbishment and demolition survey

of the buildings for T & A. The survey took place after completion of the soft strip and

asbestos removal contract by GCM Services. The survey noted small quantities of asbestos

in two locations. None of the other representative samples taken from any of the other

locations included asbestos. The report recommended (para 5.2) that further inspection,

sampling and testing be carried out in areas which had not been covered by the inspection

work. It highlighted areas excluded from the survey (para 5.3). The report contained a

number of other caveats. For example, paras 1.17 and 6.0 - 6.1 provided:

“Representative Sampling

1.17 Every attempt has been made to ensure that representative samples of

materials suspected of containing asbestos have been recovered for

testing purposes. Nevertheless, where the laboratory results of analysis

indicate that no asbestos has been detected, caution should be exercised

in extrapolating the same conclusion to the parent material. Where doubt

remains, further sampling and testing should be carried out.

...

6.0 Caveats

6.1 All reasonable steps have been taken to ensure that the contents and

findings of this report are true and accurate. Though as stated below,

further undetected ACM's may still be present within the premises. The

client should therefore be aware of his responsibilities for identifying,

locating, removing and/or managing all ACM's within the premises, and

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for notifying the appropriate authorities where necessary.”

The report was provided to Mr Bell by T & A on 14 June 2016.

[17] The defender carried out work on the contract for a number of months before the

contract was signed by either party. T & A issued contract instructions 1, 2 and 3 to the

defender on 19 April 2016, 13 June 2016 and 16 June 2016. On 1 August 2016 Mr Peat signed

the contract on behalf of the defender. However, at that stage the parties were still in

discussion as to the contents of a schedule of proposed amendments to the standard contract

terms and conditions. On 12 August 2016 a meeting took place between Mr Castle, Mr Peat

and Mr Bell. At the meeting all of the proposed amendments were agreed apart from

proposed clauses 2.1C and 2.1D. There is a dispute as to what Mr Castle said at that

meeting. There was further discussion of those clauses during a telephone conference call

on 17 August 2016 between Mr Castle and a solicitor acting for the pursuer on the one hand

and Mr Bell on the other hand. At the end of that call Mr Bell indicated he was content with

the clauses but he would have to obtain confirmation from Mr Peat and Mr Ross Craig

(another director of the defender). By email to Mr Castle of 19 August 2016 Mr Bell

confirmed the defender’s acceptance of the clauses:

“Scott,

Confirmation that we will accept the clauses as written for this contract mainly due

to the fact that we are not removing or disturbing the basement but will require

alteration for the ISG contract if or when they get signed up.

...”

It was anticipated that ISG were to be contractors in a follow on contract. On 23 August

2016 T & A issued contract instruction no 4 to the defender. The schedule of contract

amendments was signed by both parties on 26 August 2016. The contract was signed on

behalf of the pursuer on 2 September 2016.

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The contract

[18] An explanatory note at the beginning of the printed standard form indicated that it is

appropriate:

“for larger works designed and/or detailed by or on behalf of the Employer, where

detailed contract provisions are necessary and the Employer is to provide the

Contractor with drawings; and with either a specification or work Schedule to

define adequately the scope and quality of the work and where the degree of

complexity is not such as to require bills of quantities”.

[19] The Articles of Agreement included the following Recitals and Articles:

“Recitals

Whereas

First the Employer wishes to have the following work carried out:

Complete demolition of the 1960s building to existing basement level.

Complete demolition of the Victorian building to existing basement level.

Venetian building temporary infill works and left standing in a protected

state. Existing sub-station to be protected and remain live.

at 28-52 West Register Street and 15-19 South St Andrew Street, Edinburgh

(‘the Works’) and has had drawings and either a specification or work

Schedule prepared which show and describe the work to be done.

Second the drawings are numbered/listed in Part 9 of the Schedule annexed to this

Contract (‘the Contract Drawings’)...

Third

...

the Contractor .... :

...

(B) has stated the sum he will require for carrying out the Works shown on

the Contract Drawings and described in the Specification, that sum being

the Contract Sum stated in Article 2, and has supplied to the Employer a

Contract Sum Analysis or a Schedule of Rates on which that sum is based

(‘the Priced Document’)...

Articles

Now it is hereby agreed as follows

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Article 1: Contractor's obligations

The Contractor shall carry out and complete the Works in accordance with, and the

rights and duties of the Employer and the Contractor shall be regulated by, these

Articles of Agreement together with the contract particulars forming part of this

Agreement (the 'Contract Particulars') and the schedule annexed hereto (the

‘Schedule’) including, without limitation, the Contract Documents as defined in the

conditions bound in with this Agreement at Pages 20 to 74 (inclusive) (the

‘Conditions’) and listed in the Schedule Part 9 all of which Contract Documents are

hereby incorporated in and form part of this Agreement.

Article 2: Contract Sum

The Employer shall pay the Contractor at the times and in the manner specified in

the Conditions the VAT- exclusive sum of ... £1,010,795.63 ... (‘the Contract Sum’) or

such other sum as shall become payable under this Contract.

...

Article 11: Modifications – Amendments to Contract

This Contract shall be interpreted subject to the terms of the amendments set out in

Schedule Part 10 as annexed as relative hereto (‘the Schedule’), and the provisions of

this Contract and the Conditions are hereby modified accordingly.”

[20] The Contract Particulars and the Conditions provided:

“Contract Particulars

Part 1: General

...

Third Recital The Pricing Option that applies is ... Pricing Option B

The Priced Document is ... the Contract Sum Analysis

...

Conditions

Section 1 Definitions and Interpretation

Definitions

1.1 Unless the context otherwise requires or the Agreement or these Conditions or

the Schedule specifically provide otherwise, the following words and phrases, where

they appear in capitalised form in the Agreement or these Conditions or the

Schedule, shall have the meanings stated or referred to below:

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Word or phrase

...

Agreement:

Meaning

the Articles of Agreement consisting of the Recitals,

the Articles and the Contract Particulars all as

amended by Schedule 10 as annexed hereto.

...

Contract Documents:

the Contract Drawings, the Agreement, Schedule and

these Conditions and any other Contract Documents

referred to in the Schedule of Contract Documents

forming part of the Schedule to include:

...

Site:

...

Works:

(where applicable) the Employer's Requirements, the

Contractor's Proposals and the CDP Analysis; ...

(where Pricing Option B applies) the Specification;

the site comprising the Works at 28-52 West Register

Street and 15-19 South St Andrew Square, (sic)

Edinburgh

the works briefly described in the First Recital

(including, where applicable, the CDP Works), as

more particularly shown, described or referred to in

the Contract Documents, including any changes made

to those works in accordance with this Contract.

...

Interpretation

Reference to clauses etc.

...

Agreement etc. to be read as a whole

1.3 The Agreement, these Conditions and the Schedule are to be read as a whole but

nothing contained in the Specification/Work Schedule or the CDP Documents, nor

anything in any Framework Agreement, shall override or modify the Agreement or

these Conditions or the Schedule. In the event of any conflict or ambiguity between

the terms of the Conditions and /or the SBCC Standard Form (including the

Schedule), as amended by Schedule Part 10, and any other provision of this Contract,

the provisions of the Conditions and/or the SBCC Standard Form (including the

Schedule), shall take precedence.

...

Section 2 Carrying out the Works

Contractor's Obligations

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General obligations

2.1 The Contractor shall carry out and complete the Works in a proper and

workmanlike manner and in compliance with the Contract Documents, the

Construction Phase Plan and other Statutory Requirements, and shall give all notices

required by the Statutory Requirements.

...

2.1C The Contractor has had full opportunity to inspect the physical and other

conditions at or affecting the Site and shall be deemed to have satisfied himself that

the Site is in all respects suitable for the carrying out of the Works thereon. As

between the Contractor and the Employer the Contractor shall not be entitled to rely

upon any survey report or other document prepared by or on behalf of the Employer

in relation to such matters and the Employer makes no representation or warranty as

to the accuracy or completeness of any such survey report or document.

2.1D Any adverse ground conditions, artificial obstructions or contamination

encountered during the execution of the Works shall be the sole responsibility of the

Contractor (whether or not the same could reasonably have been foreseen at the date

of this Agreement by a contractor exercising the standard of skill care and diligence

referred to in Clause 2.1A) and no adjustment shall be made to the Contract Sum or

to the Date for Completion in respect of such matters.

2.1E The Contractor shall ensure that the carrying out of the Works does not result in

pollution or contamination of the Site or of any land or water adjoining the site. The

Contractor shall further take all practicable steps to prevent the risk of migration of

existing pollutants or contaminants to or from the Site. The Contractor shall procure

the delivery to the Employer of any environmental surveys or Phase 2 contamination

reports it commissions in connection with the Works and/or the Site together with

further copies of those surveys addressed to the Employer and such other parties as

the Employer shall reasonably require or letter of reliance granted in favour of

Employer and such other parties as the Employer shall reasonably require.”

Clauses 2.13 to 2.15 provided:

“Errors, Discrepancies and Divergences

Preparation of Employer's Requirements

2.13 Subject to clause 2.17, the Contractor shall not be responsible for the contents of

the Employer's Requirements or for verifying the adequacy of any design contained

within them.

CDP Documents - errors and inadequacy

2.14 .1 If an inadequacy is found in any design in the Employer's Requirements in

relation to which the Contractor under clause 2.13 is not responsible for verifying its

adequacy, then, if or to the extent that inadequacy is not dealt with in the

Contractor's Proposals, the Employer's Requirements shall be altered or modified

accordingly and, subject to clause 2.17, that alteration or modification shall be treated

as a Variation.

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.2 Any error in description or in quantity in the Contractor's Proposals or in the

CDP Analysis or any error consisting of an omission of items from them shall be

corrected, but there shall be no addition to the Contract Sum in respect of that

correction or in respect of any instruction requiring a Variation of work not

comprised in the Contractor's Designed Portion that is necessitated by any such error

or its correction.

Notice of discrepancies etc.

2.15 If the Contractor becomes aware of any such error, omission or inadequacy as is

referred to in clause 2.14 or any other discrepancy or divergence in or between any of

the following documents, namely:

.1 the Contract Drawings;

.2 the Specification/Work Schedule;

.3 any instruction issued by the Architect/Contract Administrator under these

Conditions;

.4 any drawings or documents issued by the Architect/Contract

Administrator under any of clauses 2.9 to 2.12; and

.5 (where applicable) the CDP Documents,

he shall immediately give notice with appropriate details to the Architect/Contract

Administrator, who shall issue instructions in that regard. Notwithstanding the

foregoing, the Contractor shall review all Contract Documents, drawings or other

subsequent information produced to amplify the Contract Documents on receipt

thereof and shall bring to the attention of the Architect/Contract Administrator any

discrepancies, or requirements for further information arising from them as soon as

practicable and on an ongoing basis (where applicable). Failure to reasonably

comply with this obligation shall prevent the Contractor from being entitled to

payment of any additional monies in respect of problems which would have been

notified had this obligation been complied with.”

Section 4 of the Conditions provided:

“Section 4 Payment

Contract Sum and Adjustments

Work included in Contract Sum

4.1 The quality and quantity of the work included in the Contract Sum shall, save

insofar as quantities are given in the Specification or Work Schedule, be that set out

in the Contract Documents taken together, provided that if work stated or shown on

the Contract Drawings is inconsistent with the description (if any) of that work in the

Specification or Work Schedule, then that stated or shown on the Contract Drawings

shall prevail. Where quantities are given for any items in the Specification or Work

Schedule, the quality and quantity of the work included in the Contract Sum for

those items shall be that set out in the Specification or Work Schedule.

...”

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Section 5 made provision for variations to the Works and their valuation. Clause 5.6

provided:

“Measurable Work

5.6.1 To the extent that a Valuation relates to the execution of additional or

substituted work which can properly be valued by measurement and subject to

clause 5.8 in the case of CDP Works, such work shall be measured and shall be

valued in accordance with the following rules:

.1 where the work is of similar character to work included in the Contract

Documents the Valuation shall be consistent with the relevant rates, prices

or amounts for such work in the Priced Document and shall include a fair

allowance for any change in the conditions under which the work is

carried out and/or any significant change in the quantity of such work

from that included in the Contract Documents;

.2 where the work is not of similar character to work set out in the Contract

Documents, it shall be valued at fair rates and prices.

5.6.2 To the extent that a Valuation relates to the omission of work set out in the

Contract Documents and subject to clause 5.8 in the case of CDP Works, the

valuation of the work omitted shall be in accordance with the rates, prices or

amounts in the Priced Document.

5.6.3 In any valuation of work under clauses 5.6.1 and 5.6.2, allowance, where

appropriate, shall be made for any addition to or reduction of preliminary items of

the type referred to in the Standard Method of Measurement.”

[21] Part 9 of the Schedule to the contract contained the “Schedule of Contract

Documents”. Part (viii) of the latter Schedule comprised the “Schedule of Other Contract

Documents”. That Schedule was made up of five sections, viz. 1. Drawings 2. Tender

Document and Tender Addendums (sic) 3. Contractor’s Proposals 4. Correspondence

5. Contract Amendments.

[22] The contract drawings showed the existing layout and dimensions of each floor of

the buildings, of the external elevations, and of the roofs. The drawings did not specify the

materials which were incorporated in the buildings.

[23] The Tender Document included Conditions of Tender and Bills nos 1, 2 and 3. The

Conditions of Tender provided inter alia:

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“A CLARIFICATION OF WORK SCHEDULE ITEMS: in the event that the

tenderer is unclear as to the intention or exact meaning of any particular item

he should contact the quantity surveyor and obtain clarification prior to

submitting his tender. With regard to any sections of the work schedule

where qualifications to SMM7 are made, the Contractor shall be deemed to

have made all the necessary allowances within the relevant rates in respect of

the qualifications concerned.

...

G PRE-CONSTRUCTION INFORMATION: This document accompanies the

Invitation to Tender and the Principal Contractor shall be deemed to have

taken full cognisance of the information contained therein when planning,

resourcing and pricing his submission.

H CONSTRUCTION (DESIGN AND MANAGEMENT) REGULATIONS 2015:

All matters arising are deemed to be included within the tender.”

[24] In “Bill no 1 - Preliminaries” the entries followed the numbering of SMM7. Item A12

was headed “THE SITE/EXISTING BUILDINGS”. Entries grouped under that heading

included:

“240

295

HEALTH AND SAFETY HAZARDS

• General: The nature and condition of the site/building cannot be fully and

certainly ascertained before it is opened up. However the following hazards

are or may be present:

- As detailed in Pre-Construction Information...

• Information: The accuracy and sufficiency of this information is not

guaranteed by the Employer or the Employer's representative. Ascertain if

any additional information is required to ensure the safety of all persons and

the Works.

• Site staff: Draw to the attention of all personnel working on the site the

nature of any possible contamination and the need to take appropriate

precautionary measures.

...

ASBESTOS

• A separate asbestos removal contract will be completed prior to demolition

works. The Employer has, as far as possible, removed all known asbestos

containing materials, however, cannot guarantee that all asbestos within the

building has been identified.

...”

Item A13 was headed DESCRIPTION OF THE WORK. Entries grouped under that heading

included:

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15

“110

PREPARATORY WORK BY OTHERS

 Works: Carried out under a separate contract and completed before the

start of work on site for this Contract.

 Description: Asbestos removal and soft strip.

120 THE WORKS

 Description: The works comprise the following:

 Complete demolition of the 1960s building to existing basement level

(basement floor slab to remain).

 Complete demolition of the Victorian building to existing basement level

(basement floor slab to remain).

 The Venetian building is to be retained and left standing in a protected

state.

 Protection of the existing sub-station to be left in place at end of contract.

 All associated temporary works.

...”

Item A30 was headed “TENDERING/SUBLETTING/SUPPLY”. A sub-heading was

“PRICING/SUBMISSION OF DOCUMENTS”. Entries grouped under that sub-heading

included:

“210

...

310

...”

PRELIMINARIES IN THE SPECIFICATION

 The Preliminaries/General conditions sections (A10-A50 inclusive) have

been prepared in accordance with SMM7...

TENDER

 General: Tenders must include for all work shown or described in the

tender documents as a whole or clearly apparent as being necessary for the

complete and proper execution of the Works.

Item A34 was headed SECURITY/SAFETY/PROTECTION. A sub-heading was “PROTECT

AGAINST THE FOLLOWING”. Entries grouped under that sub-heading included:

“...

370 ASBESTOS CONTAINING MATERIALS

 Duty: Report immediately any suspected materials discovered during

execution of the Works.

 Do not disturb.

 Agree methods for safe removal or encapsulation.

371 DANGEROUS OR HAZARDOUS SUBSTANCES

 Duty: Report immediately suspected materials discovered during

execution of the Works.

 Do not disturb.

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 Agree methods for safe removal or remediation.

...”

Appendix 2 to Bill no 1 provided:

“Qualifications of the Rules of the SMM and Definition of Terms

Standard Method of Measurement of Building Works: Seventh Edition;

Incorporating Amendments 1, 2 & 3

1. GENERALLY

(1)The Code of Procedure for Measurement of Building Works (SMM7

Measurement Code) which accompanies SMM7 should be read in conjunction

with SMM7.

(2)Where measured items refer to specification clauses the Contractor will be

deemed to have included for all matters given in the specification reference,

unless there is a specific mention in the measured item that some matters that

are listed in the specification reference are included elsewhere.

...”

There followed certain qualifications of the General Rules and further qualifications to

certain of the specific rules including some of the rules grouped under the heading

“C Demolition/Alteration/Renovation”.

[25] Bill no 2 was headed “C EXISTING SITE/BUILDINGS/SERVICES.” The sub-heading

was “C20 Demolition”. Under that sub-heading there were entries relating to the demolition

of each of the buildings. The first entry was a note:

“Note: The 1960s and Victorian building are to be demolished down to the existing

basement level (basement floor slabs and retaining walls to be retained) and arisings

removed from site; refer to Will Rudd Davidson drawings”

The Bill items relating to demolition were also preceded by the following narrative:

“Demolition works; carefully dismantle and take down existing structures;

maintain stability of frame at all times; provide temporary supports and bracing as

necessary; break up and remove arisings off site”.

For each of the Victorian and 1960s buildings there were then separate items for stripping

the roof and each of the floors, for demolishing the external walls, and for processing and

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clearing arisings. There were a smaller number of items relating to the Venetian building.

The following entry was towards the end of the Bill:

“Additional cost items

Contractor to include here any additional items that may be required in order to

comply with the tender drawings and preliminaries

1.

ITEM

2.

ITEM

3.

ITEM”

[26] The Tender Document also included Pre-construction Information (rev 3) dated

22 December 2015. Section 2.0 was headed “Description of the project”. Paragraph 2.1

provided:

“2.1 Project description and programme details

This project is for the demolition of an existing office building and retail area with a

section of listed building and facade being retained; prior to the construction of new

office and retail building. This phase of the project is for Demolition only; full

details of the works to be carried out are included within the project brief issued by

the Client as part of the tender package and within the Demolition and Sequencing

Plan issued by the project Structural Engineer.

The scope of works includes but is not limited to;

...

• Review existing asbestos register and liaise with the Project Manager to ensure

any residual asbestos is identified prior to demolition and removed safely in

accordance with Health and Safety Guidance.

...

• Demolition and protection of buildings as identified on the scope of demolition

works plan.

2.1.1 Demolition of existing buildings:

The Victorian stone built and 1960s steel framed buildings are to be demolished

down to basement level and all excess arising's removed from site. Following

detailed surveys a demolition strategy will be developed to ensure buildings are

taken down in a safe manner in accordance with BS 6187-2011. Given the close

proximity of the building being demolished and the Venetian building being

retained to adjacent buildings, and, to ensure the safety of the public and site

operatives, demolition works must be carefully planned and carried out complying

with the Health and Safety at Work Act and all other legislation at all times.

...

2.1.4 Note:

* Asbestos removal works will have been completed as part of the previous phase

of works. On projects of this nature the chance of finding additional asbestos during

demolition is high; the PC must take this into account in their method statements

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and risk assessments to ensure that operatives and local residents are not put at risk

during demolition work.

...

2.6 Extent and location of existing records and plans

...

Asbestos Register/Surveys:

• Further asbestos survey and removal works are being carried out at the time of

producing this Pre Construction Information. Updated asbestos information will be

available from the Client prior to work commencing on site.

...”

[27] Section 4.0 of the Pre-construction Information was headed “4.0 Environmental

restrictions and existing on-site risks (safety & health hazards)”. Paragraphs 4.5, 4.6 and 4.7

provided:

“4.5 Asbestos, including results of surveys (particularly where demolition

involved)

Prior to site start a full Asbestos Refurbishment and Demolition Survey was carried

out and all known asbestos removed. If the Principal Contractor or Contractors find

any material suspected to be asbestos whether or not they have been identified

within an asbestos survey, work must stop and further asbestos survey work carried

out to identify the suspected material. All asbestos materials must be removed in

accordance with CAR 2012 and HSG264; operatives must be made aware of the

above as part of their site induction.

4.6 Existing structures containing hazardous materials

The only hazard material contained in the building structure was asbestos which will

all have been removed prior to the building being demolished.

4.7 Pollution control and waste management

The Principal Contractor should produce an environmental risk assessment as part of

their construction phase plan and ensure that waste and pollution are avoided,

carefully controlled and monitored. All waste leaving the site must have the relevant

waste transfer notes; the Principal Contractor is responsible for carrying out relevant

checks on waste carriers...”

Section 5.0 was headed “Significant design and construction hazards”. Paragraph 5.4

provided:

“5.4 Materials and operations requiring particular precautions via RAMS

• Asbestos.

...”

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RAMS is an acronym for Risk Assessment Method Statement. Section 6.0 was headed “The

Health and Safety File”. It provided:

“Clients, Designers, Principal Contractors, other Contractors and Principal Designers

each have legal duties in respect of the Health and Safety File:

6.1 Principal Contractors and the Principal Designer must prepare, review, amend or

add to the file as the project progresses, and submit the file to the Client at the end of

the project;

...

6.5 The contents of the Health and Safety File:

...

b) any residual hazards which remain and how they have been dealt with (for

example surveys or other information concerning asbestos; ...

This information should be recorded as works proceed in order that the Client and

team are made aware of anything not previously known.

...”

Section 9.0 was headed “Design Risk Management Information”. It provided:

“...

9.3 Asbestos Information

All known Asbestos will have been removed prior to the start of demolition;

updated information will be provided prior to the commencement of work on site.

...”

[28] The Schedule of other Contract Documents also contained the Contractor’s

Proposals, which included the Bills as priced by the defender. In addition it contained

correspondence, including the email exchange of 9 and 10 March 2016 already referred to.

The Schedule of Contract Amendments appears to have been included both in the Schedule

of other Contract Documents and as Part 10 of the Schedule to the Contract. Those

amendments included the insertion of clauses 2.1C, 2.1D and 2.1E in the Contract

Conditions.

SMM7

[29] General rules 1, 2, 10 and 11 of SMM7 state:

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20

“1. Introduction

1.1 This Standard Method of Measurement provides a uniform basis for measuring

building works and embodies the essentials of good practice. Bills of quantities shall

fully describe and accurately represent the quantity and quality of the works to be

carried out. More detailed information than is required by these rules shall be given

where necessary in order to define the precise nature and extent of the required

work.

1.2 The rules apply to measurement of proposed work and executed work.

2. Use of the tabulated rules

Generally

2.1 The rules in this document are set out in tables. Each section of the rules

comprises information (to be) provided, classification tables and supplementary

rules. …

2.2 Horizontal lines divide the classification table and supplementary rules into

zones to which different rules apply...

...

10. Procedure where the drawn and specification information required by these

rules is not available

...

10.2 Where work cannot be described and given in items in accordance with these

rules it shall be given as a Provisional Sum and identified as for either defined or

undefined work as appropriate.

10.3 A Provisional Sum for defined work is a sum provided for work which is not

completely designed but for which the following information shall be provided:

(a) The nature and construction of the work.

(b) A statement of how and where the work is fixed to the building and what

other work is to be fixed thereto.

(c) A quantity or quantities which indicate the scope and extent of the work.

(d) Any specific limitations and the like identified in Section A35.

10.4 Where Provisional Sums are given for defined work the Contractor will be

deemed to have made due allowance in programming, planning and pricing

Preliminaries. Any such allowance will only be subject to adjustment in those

circumstances where a variation in respect of other work measured in detail in

accordance with the rules would give rise to adjustment.

10.5 A Provisional Sum for undefined work is a sum provided for work where the

information required in accordance with rule 10.3 cannot be given.

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21

10.6 Where Provisional Sums are given for undefined work the Contractor will be

deemed not to have made any allowance in programming, planning and pricing

Preliminaries.

11. Work not covered

11.1 Rules of measurement for work not covered by these rules shall be stated in a

bill of quantities. Such rules shall, as far as possible, conform with those given in this

document for similar work.”

[30] Rule C of SMM7 is headed “Demolition/Alteration/Renovation”. The first table

relates to C10 Demolishing structures and C30 Shoring. For demolition of structures the Bill

should give a description sufficient for identification of what is to be demolished, the levels

to which they are to be demolished, and items showing “6 Toxic or other special waste.”

The second Table relates to C20 Alterations - spot items. The requirements are similar to

those for C10/C30. The corresponding Bill item for toxic or other special waste is item 4.

Contract instructions 5 and 6

[31] On 31 August 2016 at T & A’s request the defender obtained a quotation from

another contractor, Enviraz, for the removal of asbestos from three specified areas. The total

quoted cost was £13,020 excluding VAT. On 1 September 2016 T & A instructed the

defender to proceed with that work (contract instruction 5).

[32] On 6 September 2016 at T & A’s request the defender obtained a further quotation

from Enviraz for more substantial asbestos work involving the removal and disposal of

concrete façade panels and associated asbestos debris. The total quoted cost was £61,870

excluding VAT. On 8 September 2016 T & A instructed the defender to proceed with that

work (contract instruction 6).

[33] The work instructed in each of those contract instructions was included in interim

valuations certified by T & A. However, in November 2016 T & A decided that asbestos

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22

removal work was included within the Works which the defender had contracted to

perform and a pay less notice relating to the instructions was issued to the defender.

The material contentious matters of fact

What, if any, assurances were given by Mr Castle?

[34] As already indicated, the most contentious factual issue is the terms of the discussion

between Mr Castle, Mr Peat and Mr Bell relating to the proposed incorporation of

clauses 2.1C and 2.1D.

[35] Mr Castle indicated that at the meeting on 12 August 2016 Mr Bell and Mr Peat had

been very concerned about the possibility of contamination below the sub-structure slab.

The dialogue had been about contamination “in the broadest sense”. It had not focussed on

asbestos. Mr Castle believed he assuaged the concerns about contamination below the slab

by pointing out that the Works did not involve breaking the slab. He recalled there also

being a brief discussion about how any “new asbestos” would be treated contractually. He

had said to Mr Bell and Mr Peat that in his opinion the matter would depend upon whether

or not “contamination” in clause 2.1D included asbestos. If it did, the defender was at risk

in that regard under the clause. If it did not, any asbestos removal would probably be

treated as a variation. He had had no fixed view on the matter and he had not expressed

any concluded opinion either way. He had not been authorised by the pursuer to express

any such concluded view. He was clear that he did not confirm that asbestos removal

would be paid for as a variation. On 17 August 2016 he had a telephone conference call with

Mr Bell to discuss clauses 2.1C and 2.1D. At the end of the call Mr Bell indicated that the

defender was content with the clauses but that he would have to confirm this with Mr Peat

and another director. Mr Bell’s email of 19 August had followed. That email had referred to

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an understanding that the works did not include removing or disturbing the basement.

There had been no mention in the email of any understanding that asbestos was not a

contaminant or that if asbestos was discovered it would be a variation. There had been no

mention of any such understanding at subsequent meetings with representatives of the

defender, or in correspondence from the defender after the pay less notice.

[36] Mr Bell indicated that he and Mr Peat had been concerned that the acceptance of

clause 2.1D should not make the defender responsible for contaminants in the ground or for

asbestos. Mr Bell’s main concern at the time had been the possible presence of oil or other

hydrocarbons in the ground, but he had also raised the question of asbestos. Mr Castle had

said that as the works did not involve breaking into the basement slab the risk to the

defender was minimal. He had agreed with Mr Bell that asbestos was not “contamination”

in terms of clause 2.1D, and he had said that any further asbestos found would be a

variation. The defender had relied on these assurances in reaching its decision to agree to

the clause 2.1C and clause 2.1D amendments.

[37] In his witness statement Mr Peat indicated that the discussion with Mr Castle had

taken place on 26 August 2016 when Mr Peat had signed the schedule of contract

amendments. In his oral evidence he accepted that he must be mistaken as to the date of the

discussion. He and Mr Bell had been concerned that the defender would not become

responsible for any hydrocarbons which might be in the ground. They also aired their view

that the reference to “contamination” in clause 2.1D did not include any asbestos which

might be discovered during demolition. Mr Castle said that the clause related to the

possibility of ground contamination under the basement slab. He indicated that as the

basement slab was not to be broken into by the defender and was to be left in situ, the

defender was not at risk in relation to hydrocarbons. He also said that “contamination” did

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24

not include asbestos. He confirmed that if the defender encountered asbestos during the

demolition it would be treated as a variation. It had been because of Mr Castle’s assurances

that Mr Peat had signed the Schedule of Amendments to the contract on 26 August 2016.

Subsequent events

[38] Mr Castle indicated that at the time he issued contract instructions 5 and 6 he had not

applied his mind to the provisions of the contract. His concern had been that progress

should be made with the contract works so that there was no delay to completion or to the

start date of the follow-on contract. However, when he did subsequently consider the

matter and discuss it with colleagues he concluded that the asbestos removal work was

indeed within the scope of the Works and was not a variation. Accordingly, the pay less

notice had been issued.

The evidence of Mr Hunter and Mr Rodger

[39] Both witnesses agreed that the form of contract which had been used anticipated that

it would be executed without the need for a fully itemised bill of quantities describing the

work for which the agreed contract sum was payable. They concurred that SMM7 appeared

to have been followed at least to some extent in Bill no 1 and Bill no 2. Both also agreed that

in the JCT with quantities standard form contract compliance with SMM7 was mandatory

unless the contract contained a stated departure from the rules (clause 2.13.1). Mr Rodger

also explained that clause 2.14.1 of the with quantities standard form provides that where

there is an unstated departure from SMM7 the departure or error is to be corrected, and

clause 2.14.3 provides that the correction, alteration or modification shall be treated as a

variation. Mr Hunter agreed with those two propositions in cross-examination. He

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25

maintained, however, that when SMM7 was being used but there was a departure from it, it

was normal practice to explain that expressly. Mr Rodger also noted that in the with

quantities version the direct cost of such a variation would be recoverable by the contractor

(clause 4.3.1.1), it would be a relevant event for the purposes of the award of an extension of

time (clause 2.29.1), and it would be a relevant matter for the recovery of loss and expense

(clause 4.24.1). In the without quantities version there was no obligation to use SMM7, and

any unstated departure from SMM7 in a specification was not an error falling to be

corrected. Mr Hunter agreed with Mr Rodger that the without quantities version of the

standard form did not contain provisions which mirrored those of clauses 2.13.1, 2.14.1

and 2.14.3 of the with quantities version, but he pointed to the terms of clause 2.15 of the

without quantities conditions which in his view might be relied upon by the contractor in

similar circumstances.

[40] Both witnesses were at one that if SMM7 was applied and the removal of known

defined quantities of asbestos was to be priced, an item for removal would be included as

per the fourth column of C10 (where the contract was for demolition) or as per the fourth

column of C20 (where the contract was for alterations or spot items). Where, on the other

hand, what was to be priced was the removal of unknown asbestos which might be

discovered during demolition, in terms of General Rule 10 of SMM7 the appropriate course

would be to include a provisional sum item in the Bill.

[41] Mr Rodger’s view was that demolition contracts were generally less complicated

than construction contracts when it came to describing the work which had to be done.

Mr Hunter did not accept that proposition.

[42] Whilst disavowing the intention of giving evidence on matters of law, both witnesses

offered views as to the proper construction of the contract, in particular whether the

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26

contract provided that SMM7 required to be used, the scope of the Works, and the meaning

of the word “contamination” in clause 2.1D. On the latter point, each witness’s view was

premised on the ordinary meaning of the word. Neither suggested that the word had a

special technical meaning.

Counsel for the pursuer’s submissions

[43] Lord Davidson submitted that the contract was a lump sum contract. While the

tender documents had included documents in the form of bills of quantities, it was a

without quantities contract and the bills did not have all of the functions of bills in a with

quantities contract. The Works included the “complete demolition” of the Victorian

and 1960s buildings to existing basement levels. The lump sum price was an inclusive price

for all work which was necessary to achieve that result (Wilson v Wallace (1859) 21D 507;

Hudson’s Building and Civil Engineering Contracts (11th ed.) at para 4-039 et seq; Emden’s

Construction Law, paras 8.14 - 8.15; Keating on Construction Contracts (10th ed.), para 4-044;

Stair Memorial Encyclopaedia, The Laws of Scotland, vol 3, Building Contracts, para 34). The

defender was aware of the risk that the buildings might contain unknown asbestos over and

above the two particular known quantities it had been asked to price separately. That risk

had been made clear in the contract documents and in the reports provided to the defender

before the contract was concluded. On a fair reading of the contract as a whole a reasonable

person in the position of the parties at the time of contracting would have understood that

all known asbestos identified in the two RPS surveys (other than the asbestos referred to in

the emails of 8 and 9 March 2016) would have been removed prior to the demolition work,

but that the defender bore the risk of other unknown asbestos being discovered during

demolition. Reference was made to Oceanbulk Shipping & Trading SA v TMT Asia Ltd &

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27

Others [2011] BLR 1, per Lord Clarke JSC at paras 39-40. Such an understanding was plain

even if no regard was had to the terms of clause 2.1D. Clause 2.1D put the matter beyond

question. The word “contamination” in that clause had its ordinary meaning. Asbestos

encountered during demolition of the buildings was “contamination encountered during the

execution of the Works”. It was a noxious and hazardous substance which required to be

removed taking appropriate precautions.

[44] Counsel submitted that Mr Castle had impressed as a careful and measured

professional. Where his evidence differed from the evidence of Mr Bell and Mr Peat,

Mr Castle’s account should be accepted as being more reliable. It was implausible that a

careful professional like Mr Castle would have said that any asbestos discovered would be a

variation to the contract, or that asbestos would not be contamination in terms of

clause 2.1D. His account of events was more consistent with the contemporaneous

documentation and with the defender’s subsequent actings. Mr Bell’s email of 19 August

2016 accepting the clauses made no reference to the statements which it was now claimed

that Mr Castle had made. On the contrary, it explained that the defender was prepared to

accept the clauses “mainly due to the fact that we are not removing or disturbing the

basement”. When the pay less notice had been served the defender had not contended that

Mr Castle had made the disputed statements. There was no mention of the statements in a

letter from the defender’s agents to the pursuer’s solicitors dated 20 January 2017. There

was no mention of them by the defender at a meeting on 10 February 2017 to discuss the

dispute (which was attended by representatives of the pursuer, the defender, and T & A).

There was no mention of the statements in Mr Bell’s witness statement. The matter had

been introduced to the case by very late adjustment of the defences and by lodging the

witness statement of Mr Peat (19 of process) days before the proof.

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28

[45] Where the evidence of Mr Rodger and Mr Hunter differed, that of Mr Rodger should

be preferred. He had been the fairer and more open of the two. He was content to answer

questions on the basis of the hypotheses which were put to him. By contrast Mr Hunter was

reluctant to do so and was generally more combative under cross-examination. It accorded

with common sense that the description of the works in a demolition contract was usually

more straightforward than the description of the works in a construction contract. The role

of SMM7 in a without quantities lump sum contract was quite different from its role in a

with quantities contract. In the former there was no formal measurement - there was only

the lump sum.

Counsel for the defender’s submissions

[46] Mr Barne submitted that the contract was a lump sum contract to perform defined

work. Whereas in a with quantities contract the bills of quantities define the scope of the

works, in a without quantities contract the contract documents taken together describe the

quantity and quality of the work included in the contract sum (Keating on Construction

Contracts (10th ed.), at para 20-036). In terms of condition 4.1:

“The quality and quantity of the work included in the Contract Sum shall ... be that

set out in the Contract Documents taken together...”

In this case the Works were defined by the Specification and the drawings. The Specification

was the three bills which had been issued as part of the tender. The completed bills which

the defender had returned were the Contract Sum Analysis. There was provision in the

contract (clause 5 of the Conditions) for variation of the Works. The position was similar to

that in Mascareignes Sterling Co Ltd v Chang Cheng Esquares Co Ltd [2016] BLR 512,

[2016] UKPC 21. In that case, like the present, the contract was a lump sum contract but the

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contract documents included priced bills of quantities. In delivering the judgment of the

Board Lord Hodge observed at para 21:

“... In the present case the lump sum was made up of elements set out in the fully

priced bills of quantities which the arbitrator held were part of the contract. There

was thus a definition of the works which were the subject of the lump sum, from

which the existence of additional or substituted work could be identified.”

Reference was also made to Emden’s Construction Law, para 6.23 and C Bryant & Son Ltd v

Birmingham Hospital Saturday Fund [1938] 1 All ER 503.

[47] In the bills the Works had been described and defined using SMM7, except where the

application of SMM7 had been expressly qualified. In terms of SMM7 the removal of toxic

or other special waste was to be described and measured as a separate item. In the event of

it not being possible to do that, General Rule 10 directed that it be included as a provisional

sum. At the end of the day Mr Hunter and Mr Rodger had not disagreed that that ought to

be the result if SMM7 was applied. As Judge Thornton QC put it in Demolition Services Ltd v

Castle Vale Housing Action Trust 79 Con. L.R. 55 at para 39:

“9.3 Standard method of measurement

39. The overall purpose of SMM7 is stated to be a means of providing bills of

quantities that fully describe and accurately represent the quantity and quality of the

works to be carried out. The intention is that the bills of quantities should define the

precise nature and extent of the required work. To this end, each item of work

should be prepared in the way provided for in the rules which follow. Where a

completed structure is to be demolished, the demolition of toxic or other special

waste should be provided for in a separate item from any other work involved in

that demolition. Where the available information does not enable the work to be

fully described and accurately quantified, detailed provisions for the creation of

provisional sums for such work are set out. The relevant rules provide that such

provisional sum work is to be for either defined work or undefined work. Defined

work is work that can be described so that the scope and extent of the work can be

quantified and its location in the building can be provided for. The contractor is

deemed to have made due allowance for such work in his programming and

planning and in the pricing of his preliminaries. All other provisional sum work is to

undefined work for which no such allowance is to have been made.”

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[48] In so far as Mr Rodger proffered views as to the proper construction of the contract

and made comparison with the terms of the JCT with quantities contract, the objection taken

to his evidence was insisted upon. In relation to the former matter he was usurping the

function of the court, and in relation to the latter his evidence was entirely extraneous to the

task which the court faced (Kennedy v Cordia Services LLP 2016 SC (UKSC) 59, in the joint

judgment of Lord Reed JSC and Lord Hodge JSC at paras 38, 49 and 59).

[49] Since there was no specific item or provisional sum in the Specification for the

removal of toxic or other special waste, there had been no item against which to price

asbestos removal work or make allowance for the risk that unknown asbestos would be

discovered during the Works. The asbestos removal was not part of the Works.

[50] In construing the contract the defender relied on the matrix of fact at the time of

contracting including the use of SMM7; the provision which was made for the removal of

two specific quantities of asbestos; the regulatory context (including the Control of Asbestos

Regulations 2012 (“CAR”), the Construction (Design and Management) Regulations 2015

(“the CDM Regulations”), and the HSE’s Guidance “Asbestos: The Survey Guide”

(HSG264)); and the asbestos surveys which had been provided to the defender. A number

of the entries relating to asbestos in the contract were explicable having regard to the

regulatory context and the regulatory obligations incumbent upon the pursuer and the

defender. Bill item A12/295 was an example. Those entries were directed towards

establishing processes that ensured that the pursuer and the defender fulfilled their

respective regulatory duties. On a proper construction of the contract those provisions did

not enlarge the scope of the Works. At the time of tendering the defender had not been

provided with the updated surveys following completion of the soft strip and asbestos

removal works.

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31

[51] The pursuer’s construction of the contract flouted business common sense. It

involved the defender gambling on the absence of further asbestos, running the risks of

(i) having to undertake potentially costly and time-consuming work for which no allowance

had been made in the bill items or the tender, and (ii) exposing itself to the risk of liability

for substantial liquidate damages (cf Demolition Services Ltd v Castle Vale Housing Action

Trust, supra, per Judge Thornton QC at para 42).

[52] In relation to clauses 2.1C and 2.1D, where their evidence differed the evidence of

Mr Peat and Mr Bell should be preferred to that of Mr Castle. Mr Castle’s issuing of contract

instructions 5 and 6 was consistent with Mr Peat and Mr Bell’s account of what was said. It

tended to confirm that at the time of the meeting Mr Castle did indeed consider that

asbestos removal would be a variation. It was implausible that the defender would have

agreed to the inclusion of the clauses had they not been given the assurances which Mr Bell

and Mr Peat say Mr Castle gave. In agreeing to the inclusion of the clauses the defender

relied on what Mr Castle said about asbestos not being contamination and about further

asbestos work being a variation. In those circumstances the pursuer was personally barred

from relying on the clauses. The lateness of Mr Peat’s witness statement was because it had

been introduced once it became clear that the pursuer proposed to rely upon the clauses.

[53] In any case, neither clause assisted the pursuer. Clause 2.1C concerned the contract

Works. It did not vary or extend the definition of the Works. It did not provide any basis

for maintaining that asbestos removal works were not part of the Works (cf Demolition

Services Ltd v Castle Vale Housing Action Trust, supra, per Judge Thornton QC at paras 44 - 47;

Linklaters Business Services v Sir Robert McAlpine Ltd 133 Con LR 211, [2010] EWHC 2931

(TCC), per Akenhead J at paras 150-155). Moreover, the basis of the defender’s claim in

respect of asbestos work was not founded on reliance on any report provided to it by the

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32

pursuer. Clause 2.1D was not relevant to the issue between the parties. Asbestos within the

buildings was not “contamination”. Contamination involved defilement, being sullied,

tainted or infected by contact, especially with noxious substances (Oxford English

Dictionary). In some circumstances asbestos could be contamination, eg when asbestos

waste had been deposited on land, because then the land would be defiled. However the

asbestos had not affected the buildings in that way. Besides, the contract dealt separately

with asbestos and contamination. It was clear that they referred to different things, and that

the latter did not include the former.

Decision and reasons

[54] It is convenient to begin by providing my assessment of the credibility and reliability

of the witnesses. I am content that each of the witnesses was doing his best to assist the

court and that no issues of credibility arise. However, as will be clear from what I say

below, I am not satisfied that all of the evidence is reliable.

[55] At the meeting between Mr Castle, Mr Bell and Mr Peat the focus of the discussion

was the possibility of hydrocarbons under the basement slabs. Asbestos was mentioned

very much as a secondary matter. I am not satisfied from Mr Peat’s witness statement or

from his oral evidence that he has a clear recollection of precisely what was said during the

discussion with Mr Castle, or that such recollection as he does have is reliable. It is difficult

to reconcile Mr Peat’s absolute conviction as to the correctness of his recollection with the

content and manner of his evidence. His account in his witness statement of when the

discussion took place was plainly wrong, and he accepted that during his oral evidence. In

my view this cannot be dismissed as a mere slip as to the date on which the relevant

discussion took place. In his witness statement he also indicated that the discussion and the

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33

signing of the amendments took place on the same day. These errors reinforce my clear

impression that Mr Peat had no real recollection of precisely what was said during the

discussion. Mr Bell’s recollection of matters seemed better than Mr Peat’s. However,

ultimately I am not convinced that I ought to accept his evidence on the disputed matters.

Like Mr Peat, he expressed absolute conviction that his account of what Mr Castle had said

was correct. He was not prepared to concede that there was any possibility of any degree of

misunderstanding on his part. I find Mr Bell’s certitude difficult to accept, particularly as

the main focus of the meeting was on hydrocarbons and very little was said about asbestos.

By contrast, Mr Castle impressed me as a careful and impressive witness. The manner and

content of his evidence inspired confidence in its reliability. I find it implausible that he

would have made the incautious and unqualified statements about asbestos which Mr Peat

and Mr Bell say he did. It would have been surprising if a professional in his position had

been prepared to say the things it is suggested that he said. His evidence seems more in

keeping with the more guarded approach which I would have expected a professional

person in his position to have taken in the circumstances. I think it likely that Mr Bell and

Mr Peat’s recollections of what was said have developed with the passage of time to their

present certitude. While I do not doubt that they now truly believe that Mr Castle said that

asbestos is not contamination and that if new asbestos was discovered it would be treated as

a variation, I do not accept that that was what was said. In my view the contemporaneous

documentary evidence – Mr Bell’s email of 19 August 2016 - is more consistent with

Mr Castle’s account than with the accounts of Mr Bell and Mr Peat. If Mr Bell’s account is

correct and the suggested assurances were important and were given by Mr Castle, I find it

surprising that there was no reference at all to them in Mr Bell’s email. I also think it odd

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34

that the suggested assurances were not raised by the defender when the pay less notice was

served in November 2016, or in the discussions in January and February 2017.

[56] I am not persuaded that the issuing of contract instructions 5 and 6 undermines

Mr Castle’s reliability. I accept his account of the circumstances in which he gave the

instructions, viz that his overriding concern at the time was for progress to be made and for

deadlines to be met. I also accept that it was only later when he and his colleague applied

their minds to the contract terms that he formed the view that the asbestos removal work

was within the scope of the works and was not a variation. In my opinion, while ideally a

considered view ought to have been taken at the time, it is not uncommon that work which

has been treated as a variation in an interim valuation is later recovered as an overpayment

when its true character is determined (see eg Demolition Services Ltd v Castle Vale Housing

Action Trust, supra, at para 10).

[57] It follows that the defender has not established its case of personal bar.

[58] Both Mr Hunter and Mr Rodger sought to assist the court and to comply with their

duties as skilled witnesses. However, I agree with Lord Davidson that Mr Rodger was the

more open witness, and that he fairly accepted matters which ought to have been accepted

on the hypotheses which were put to him. Mr Hunter was less ready to make appropriate

concessions. Perhaps inevitably given the subject matter of the dispute, at times both

witnesses slipped into offering evidence as to the meaning and effect of the contract. That

evidence is inadmissible - the proper construction of the contract is a matter of law for the

court to decide - and I sustain each party’s objection to those parts of the evidence of its

opponent’s witness. However, Mr Barne’s further objection that Mr Rodger’s evidence as to

the terms of the JCT with quantities standard form is inadmissible is not well founded in my

view, and I repel it. The context in which that evidence was given was that Mr Hunter had

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raised the issue of normal practice where SMM7 applied. In those circumstances it was

legitimate for Mr Rodger to make the point that in with quantities JCT contracts the

suggested normal practice is one which has a clear contractual foundation. I reject the

contention that that evidence is entirely extraneous to the matters which the court has to

decide.

[59] That brings me to the crux of the dispute - who bore the risk under the contract if

additional unknown asbestos was discovered in the course of demolition? The answer

depends upon how a reasonable person in the position of the parties at the time of

contracting would have interpreted the contract’s terms. Given the defender’s signature of

the contract on 1 August 2016, both parties signing of the Schedule of Amendments on

26 August 2016, and the parties’ actings, I think that the relevant time is the period up to the

latter date.

[60] The contract requires to be read as a whole (clause 1.3 of the Conditions). The Works

are defined in clause 1.1 of the Conditions as being the works briefly described in the First

Recital (which description includes “complete demolition” of the 1960s and Victorian

buildings to basement level), as more particularly shown, described or referred to in the

Contract Documents. In turn, the Contract Documents are defined as being the Contract

Drawings, the Agreement, Schedule, Conditions and any other Contract Documents forming

part of the Schedule including the Specification. The relevant definition of the Specification

is the unpriced specification. I agree with Mr Barne that the unpriced tender bills are the

Specification, and that the Contract Sum Analysis is the priced bills.

[61] The court’s task is to ascertain the objective meaning of the language in which the

parties have chosen to express their agreement. This is a unitary exercise involving an

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iterative process (Wood v Capita Insurance Services Ltd [2017] AC 1173, per Lord Hodge JSC at

paras 10-15).

[62] In my opinion, at the time of contracting a reasonable person in the position of the

parties would have known that, notwithstanding the soft strip and asbestos removal, there

remained a risk of further, unknown, asbestos being present within the buildings which

were to be demolished. In my view that was clear from a fair reading of the Contract

Documents as a whole. It was also clear from the terms of the surveys which the pursuer

had provided to the defender. The reasonable person would also have understood that the

scope of the work which the defender undertook to perform for a lump sum price included

the removal of any presently unknown asbestos which might be encountered during

demolition.

[63] The contract was a contract to perform the Works for a lump sum price. While the

pursuer chose to set out the Specification in three documents which take the form of bills of

quantities, they are not truly bills of quantities. The uncompleted bills provide a description

of the contract works, but it is the Contract Documents as a whole which require to be

considered. The completed bills (the Contract Sum Analysis) provide a breakdown of the

lump sum to assist the pursuer to assess the lump sum tender, but they are not to be used to

measure and value the work.

[64] The Works are described in Bill no 2 as including the complete demolition of the

Victorian and 1960s buildings to basement level with all arisings being removed from the

Site. In my opinion the ordinary and natural reading of that work description is that the

buildings are to be demolished and all the demolished materials are to be removed from the

Site. That reading is also consistent with the various provisions in the Contract Documents

which highlight to the defender the risk of the presence of residual asbestos at the Site, and

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the need for it to carry out inspection, survey and removal (see in particular paras 2.1

and 4.5 of the Pre-construction Information).

[65] I am not persuaded that the provisions in the Contract Documents which highlight

the risk of residual asbestos are merely dealing with regulatory matters or that they have no

bearing upon the scope of the works. When read as a whole, and taken together with the

other provisions of the contract, I think it clear that they do not have the limited role which

Mr Barne suggests.

[66] Nor do I think that the defender obtains any real assistance from the fact that

separate specific provision was made for the removal of the asbestos referred to in the email

exchange of 8 and 9 March 2015. That dealt with known asbestos which the tender

documents had envisaged would be removed by the soft strip/asbestos removal contractors.

It seems to me that unknown asbestos is a very different matter.

[67] Further, I am not convinced that SMM7 is as important to the interpretation of the

contract as Mr Barne (and Mr Hunter) maintained. The contract conditions here do not

include provision that compliance with SMM7 is mandatory unless the contract contains a

stated departure from its rules. That is one of the respects in which the conditions differ

from the with quantities version of the JCT standard form contract conditions (see

clause 2.13.1 of the latter conditions). Clause 1.5 of the standard form conditions in

Demolition Services Ltd v Castle Vale Housing Action Trust, supra, (JCT Intermediate Form

(1984 edn.)) was similar to clause 2.13.1 of the JCT with quantities conditions (see para 18 of

the judgment in that case). Where such provision is made in a contract the “normal

practice” (which Mr Hunter suggested was followed when SMM7 was used) has a clear

contractual basis. The context here is different. In my opinion it is necessary to bear that in

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mind when considering the effect of such references to SMM7 as there are in the Contract

Documents.

[68] It is common ground that Bill no 3 expressly states that it has not been prepared in

accordance with SMM7. On the other hand, Bills nos 1 and 2 use SMM7 headings and

numbering. Bill no 1 states that items A10 - A50 have been prepared in accordance with

SMM7. Appendix 2 to that Bill sets out qualifications of the Rules of SMM7. Those

qualifications include some qualifications of the General Rules and of Rule C. Bill no 2 itself

contains no express reference to SMM7. The reasonable inference is that SMM7 has been

used to prepare items A10 - A50 in Bill no 1 and the items in Bill no 2, but not the remaining

items in Bill no 1.

[69] In my view it is of no significance that no item for removal of hazardous material

was included in the C20 bill items in Bill no 2. Such an item would only have been

appropriate if known asbestos which could be properly described was being included

within the Works. The asbestos we are concerned with was unknown and could not be

specified at the time of contracting.

[70] If the contract had provided that SMM7 applied in respect of provisional sums listed

in A54 of Bill no 1 unless (and to the extent that) it was expressly excluded, there would

have been greater scope for arguing that unknown asbestos was not included within the

work described in the Bill. On that scenario it could have been maintained that if unknown

and undefined asbestos removal was within the scope of the work a provisional sum for it

ought to have been included. The difficulty for the defender is that the contract did not so

provide. Indeed, as already indicated, in my view the correct inference from the express

provision that SMM7 has been used to prepare items A10 - A50 in Bill no 1 is that it has not

been used to prepare the remaining items in that Bill.

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[71] I do not accept Mr Hunter’s evidence that there is a normal practice in the terms he

described where, as here, the contract is a without quantities one. Neither am I satisfied that

the reasonable person in the position of the parties at the time of contracting would have

understood the position to be as Mr Hunter maintained it to be. Nor am I persuaded by

Mr Hunter’s (rather tentative) suggestion that clause 2.15 of the contract conditions might

provide similar redress for a contractor as clauses 2.13.1, 2.14.1 and 2.14.3 of the with

quantities conditions. In my opinion it is clear that it does not. The difference of view as to

whether demolition contracts are generally more straightforward than construction

contracts seems to me to be unimportant to the determination of the issue I have to decide,

but I incline to the opinion that Mr Rodger’s view accords with common sense and is to be

preferred. For what it is worth, the introductory note to the without quantities standard

form indicates its suitability where the degree of complexity is not such as to require bills of

quantities.

[72] Clause 2.1D also points strongly towards the pursuer’s suggested construction of the

contract. In my opinion a reasonable person in the position of the parties would have

understood “contamination” to include asbestos in the buildings. I am not persuaded that

the contract treats the presence of asbestos and the presence of contamination as being

mutually exclusive matters. Whether or not the asbestos had been an integral part of the

design of the buildings, the question is whether its presence constitutes contamination. The

reasonable person would have known that asbestos is a highly noxious substance; and that

if it was present in the buildings it would require to be disturbed and removed for the

buildings to be demolished. The asbestos would present a serious hazard to the health of

those in the vicinity of the demolition work unless appropriate precautions were taken. As a

matter of ordinary, everyday language a building which is to be demolished but which

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contains asbestos is a contaminated building (cf New Ingliston Limited v The City of Edinburgh

Council [2017] CSOH 37, per Lord Tyre at paras 30 and 31). Asbestos within such a building

is one of the sorts of contamination issues which I would expect an environmental risk

assessment (see para 4.7 of the Pre-construction Information) or a Phase 2 contamination

report (see clause 2.1E of the Conditions) to refer to. Moreover, the risk of the presence of

asbestos was one of the health and safety hazards flagged up in the Pre-construction

Information. In Bill no 1 those health and safety hazards were referred to in item “A12 240

Health and Safety Hazards”. I think it is not without significance that the item goes on to

direct that the nature of any possible “contamination” and the need to take appropriate

precautionary measures should be drawn to the attention of Site staff. In my view the

contamination there referred to includes asbestos contamination.

[73] In the whole circumstances I am satisfied that the scope of the Works includes the

removal and disposal of asbestos whose existence was unknown at the time of contracting. I

am not persuaded that at that time reasonable people in the position of the parties would

have considered that it would flout commercial common sense for the defender to include

any such work within the lump sum price. It involved the defender taking a commercial

risk - but the risk was informed by its experience in demolition work including asbestos

removal, by the survey reports which were provided, and by the full opportunity that it

accepted it had had (in terms of clause 2.1C) to inspect the physical and other conditions at

or affecting the Site.

Disposal

[74] I shall put the case out by order to discuss (i) an appropriate interlocutor to give

effect to my decision; (ii) any questions relating to expenses which may arise.

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> WEST REG STREET (PROPERTY) LIMITED AGAINST CENTRAL DEMOLITION LIMITED [2018] ScotCS CSOH_98 (12 October 2018) URL: http://www.bailii.org/scot/cases/ScotCS/2018/[2018]_CSOH_98.html Cite as: [2018] CSOH 98, [2018] ScotCS CSOH_98

Scottish Court of Session Decisions