J Sainsbury Plc & Anor v WSP Consulting Engineers Plc & Anor [2004] EWHC 2556 (TCC)

No HT-030355[2004] EWHC 2556 (TCC)IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONTECHNOLOGY AND CONSTRUCTION COURTSCourt No 12St Dunstan's HouseVenue 133-137 Fetter LaneLondon EC4A 1HDDate Thursday, 4 th November 2004
Before
HIS HONOUR JUDGE SEYMOUR QC
Between
J SAINSBURY PLCClaimantSAINSBURY'S SUPERMARKETS LIMITEDClaimant-v-
Between
WSP CONSULTING ENGINEERS PLCDefendant(FORMALLY WSP KENCHINGTON FORD PLC)DefendantvKELLER LIMITEDPart 20 Defendant
Computerised Transcript of the Stenograph Notes ofSmith Bernal WordWave Limited190 Fleet Street, London EC4A 2AGTel: 020 7404 1400 Fax: 020 7404 1424(Official Shorthand Writers to the Court)
RICHARD FERNYHOUGH QC and JONATHAN LEE (instructed by Herbert Smith) appeared for Claimants.MARCUS TAVERNER QC and RICHARD COPLIN (instructed by CMS Cameron McKenna) appeared for Defendant/Part 20 Claimant.DAVID STREATFEILD-JAMES QC (Instructed by Davies Arnold Cooper) appeared_ for Part 20 Defendant
JUDGMENTThursday, 4th November 2004Approved Judgment
[1]The application before the court is that of the defendant to make certain amendments to its defence and various other pleadings.[2]The application is made on the fourth day of the trial and we are almost halfway through that day. I make that point because the application is made, as was foreshadowed and, I think, always intended, after Mr Richard Fernyhough QC, on behalf of the claimants, had opened the claimants' case and Mr Marcus Taverner QC had opened the defendants' case.[3]The application is therefore made at a time at which not only do I have a full understanding of the cases which the parties wish to advance, subject to the question of amendment which I now have to consider, but also I have been shown a considerable amount of documentary material and that has been very helpful.[4]There is an application on behalf of the claimant to make modest amendments to further information which had been provided in response to a request for further details of particular allegations in the original particulars of claim and I will deal with that application in the course of this judgment.[5]Of the considerable number of modifications to its case that the defendant wishes to make at this stage just two are in issue and I can refer to those conveniently as the measure of loss question and the extension question. I deal with them separately.[6]The measure of loss question arises out of what was pleaded initially in paragraph 4.19 of the defence. The plea is in these terms:
"Further, and in any event, the first and/or second claimant has wholly failed to mitigate its loss if it has built a new superstore in consequence of the failure of the Keller works when it could and should reasonably have undertaken the further grouting works at a fraction of the cost."
[7]Some explanation of that plea is necessary. The claimants in this action are two companies in the Sainsbury group. The project which has given rise to the litigation is the construction of a supermarket on a site at Newhaven.[8]The defendant, WSP Consulting Engineers plc, was formerly called WSP Kenchington Ford plc and in that capacity it was engaged by the first claimant in fact, J Sainsbury plc, to undertake the civil and structural engineering design of the supermarket in Newhaven.[9]The supermarket, as originally designed and constructed, was a comparatively straightforward single storey structure. It had a superstructure of steel, for which piled foundations were provided. There was a ground bearing slab, which constituted the floor of the supermarket, and that was constructed within the outer ring of piles upon which the main structural steel frame was constructed and around, I think, seven internal steel columns.[10]It is common ground that the design of the ground bearing slab was in breach of the defendant's contractual obligation to exercise reasonable care and skill in the design of foundations because the ground upon which the supermarket was constructed consisted of soft compressible clay and the appropriate design for the ground floor slab would have involved providing piles for that as well.[11]As a result of the failure of the defendant to design an appropriate foundation for the ground bearing slab the slab settled. Settlement started quite soon after the completion of the initial works of construction and it was differential.[12]As a result of those problems becoming apparent, consideration was given to a remedial scheme. One of the considerations which seems to have been important, was that, if possible, any remedial scheme should not interrupt the trading of the claimants from their supermarket.[13]The Part 20 defendant is a company called Keller Limited. Keller Limited specialises in undertaking ground treatment works.[14]The particular form of ground treatment which is relevant in this litigation is something called Soilfrac. In very broad general terms, Soilfrac is a form of grouting which can be inserted from outside a structure such as the supermarket with the intention that if it operates in accordance with the expectations of Keller it will cause the structure to rise and thereby eliminate differential settlement.[15]An agreement was made between J Sainsbury plc, the first claimant, and Keller Limited for Keller to undertake Soilfrac grouting works at the site of the supermarket.[16]Before that agreement was made, an agreement was made between the defendant and J Sainsbury plc, without admission of liability, that the defendant would reimburse J Sainsbury plc, in effect, whatever had to be paid to Keller for the work to be carried out under the contract between J Sainsbury plc and Keller.[17]It was contemplated at the time the agreement between J Sainsbury plc and Keller was made that the application of the Soilfrac process might involve the need for more than one visit to the site by Keller.[18]The contract therefore made provision for that to happen. The provision which it made was that when what has been described before me as the trigger level of settlement was reached, it should be open to Sainsbury's to require Keller to return to carry out further work at a price which was fixed at £75,000 subject to adjustment in accordance with an industry formula.[19]As matters have turned out, there has been further settlement under the original supermarket after Keller initially carried out its work. Precisely what happened following the carrying out by Keller of its initial work is very much in issue in this action and therefore I say as little as about it as I can in order to explain the context of this judgment.[20]Suffice to say that there came a time when consideration was given by the claimants to what to do about the site at Newhaven. A possibility, at any rate, was for the first claimant to require Keller to return to site at the cost of the defendant, WSP in order to carry out further work.[21]That option was not taken. The circumstances in which a decision was taken not to exercise that option are hotly in dispute and I say no more about it.[22]What was done was that a scheme was devised which involved the construction ultimately of a completely new supermarket. That was done in stages.[23]The first stage involved the construction of part of the intended new supermarket in an area of the car park of the existing supermarket. Once that was done the existing supermarket was demolished and on part of the footprint of the existing supermarket the remainder of the new supermarket was constructed.[24]In this action the claimants seek against the defendant damages in respect of the costs and losses which they say they have suffered as a result of adopting that particular scheme.[25]The claimants' case is that the adoption of the scheme of replacement of the old supermarket with the new supermarket is a direct consequence of the original admitted breach of contract on the part of the defendant and that therefore the defendant is liable to pay the damages claimed.[26]The Part 20 defendant, Keller, has been joined in this action only by the defendant. That is to say there is no direct claim by the claimant against the Part 20 defendant at all. I give that explanation in order to explain why Keller is before the court at all but for the moment I say no more about the position of Keller.[27]With that background, what in effect is pleaded at paragraph 4.19 of the existing defence is that the claimants ought to have mitigated the loss which they suffered as a result of the initial Keller works not proving to be satisfactory by requiring Keller to return to the site at the defendants' expense in order to carry out further work.[28]That plea is repeated in paragraph 21.2 of the existing defence. The relevant part of that paragraph is in these terms:
"First and/or second claimant cannot recover the cost of building a new store for the following reasons: "21.2.1. It is unreasonable to build a new store in circumstances where the remedial scheme that had been started could have been completed at a fraction of the cost."
[29]There was a request for further information of the allegation that a remedial scheme could have been completed at a fraction of the cost of the scheme which the claimants in fact adopted. That gave rise to the provision of further information as follows:
"The best particulars that can be provided at this stage is the figure provided by the defendants' loss adjuster at £900,000, which includes the cost of remedial works including contingencies, the cost of making good and professional fees. Details of the costs that would have been likely to be incurred and the basis of those costs will follow."
[30]The matter does not seem to have been taken any further forward in pleading terms but the figure of £900,000 was the subject of consideration in the report of the quantity surveying expert instructed on behalf of the defendant and the Part 20 defendant, Mr Christopher Huntley.[31]Mr Huntley, at page 267 of trial bundle C2 in section 5, sets out a consideration of completing Soilfrac works. Various figures appear, but for present purposes I think I need only notice two of them:
"Making good during and immediately after Soilfrac works 2000 base line: £182,000. "
Lump sum for future making good: £200,000."[32]While the figure is not material for present purposes, the calculation of the total cost -- and it is fair to say Mr Huntley's calculation comes out at a figure a fraction over £1 million -- did include an allowance for professional fees of 20 per cent. This explanation was given by Mr Huntley of that percentage:
"The amount allocated for professional fees represents 29 per cent of construction cost allowances. Previous fee costs represent about 21 per cent. For refurbishment works I would estimate 20 per cent as an appropriate allowance for professional fees."
The amendment for which Mr Taverner seeks permission is essentially to substitute for the figure of £900,000 a lower figure, £538,400.[33]The way in which the proposed amended pleadings work is this: there is a proposed amended defence in which, amongst other things, the previous paragraph 4.19 is renumbered 4.18 and the previous paragraph 21.2.1 is deleted. It is proposed that there should be added to the previous 22.2, now renumbered 23.2, these words:
"Yet further or in the further alternative, the proper measure of the claimants' loss in the circumstances as described above is by reference to the costs of completing Keller's works and not by reference to the cost of a new modern and larger store."
[34]Then there is proposed to be served with the amended defence a document called defendants' statement of quantum, which at paragraph 7 deals with the cost to complete the Soilfrac works and what is intended to be said is this:
"The estimated cost to complete the Soilfrac works is set out at amended response 18 to the defendants' request for further information. Excluding inflationary costs the maximum cost of completion of these works would be: two visits at £75,000 each, £150,000; making good maximum, £382,000; professional fees at 20 per cent, £106,400. Total £538,400."
[35]Response 18 to the defendants' request for further information is that which I have already read out and the amendment proposed to that response is simply to bring it into line with these figures.[36]The derivation of the figures is quite clear. The two visits at £75,000 each comes, albeit inaccurately, but it comes, obviously, from the terms of the contract between J Sainsbury plc and Keller under which Keller could be required to return to the site.[37]Why I comment that the figure is obviously inaccurate is that it includes no allowance for adjustment in accordance with the formula included in the contract. "Making good maximum £382,000" is, fairly obviously, the two amounts respectively of £182,000 and £200,000 from the expert's report of Mr Huntley, to which I have referred.[38]"Professional fees, 20 per cent", is simply a function of calculating 20 per cent of the foregoing figures. The derivation of the figure of 20 per cent is, fairly obviously, the expert's report of Mr Huntley.[39]I explain all that because the objection to the amendment is that, first, it is not a matter which has been considered by experts instructed on behalf of the parties. That is correct to an extent.[40]It is correct that the expert instructed on behalf of the claimants, Mr Hobbs, has not considered at all what the costs involved would be were Keller to return to the site in order to carry out further remedial works.[41]Mr Huntley has considered a different figure, £900,000. He has reached a conclusion that that is an underestimate by a figure approaching £200,000. So his view appears to be that the appropriate allowance would be something of the order of double of what it is intended to plead.[42]Mr Fernyhough, on behalf of the claimant, objects that all of this comes late. Mr Taverner accepts that. But Mr Taverner submits that it is simply following through to a logical conclusion points which were already on the face of the pleadings.[43]Mr Fernyhough also objects that the amendment, I think he put it, was bound to fail. But perhaps a more felicitous way of putting it, with great respect to him, is that it is irrelevant.[44]The reason is this: the point which is taken on behalf of the defendant is that the claimants have failed to mitigate their loss -- and I think I can use a shorthand expression to describe what they have not done -- by invoking their rights under the Keller contract.[45]If the claimants had invoked their rights under the Keller contract, then the result that the claimants would have had to pay a single penny is not a possible one.[46]The result, Mr Fernyhough submitted, and, in my judgment, rightly submitted, is that in fact the claimants would not have had to pay anything at all. That is because it is common ground between the parties that had the claimants invoked their rights under the Keller contract the paying party would have been the defendant and in no circumstances would the claimants have been the paying parties.[47]That seems to me to be a complete answer to this part of the application for permission to amend. I am not persuaded that there would have been any difficulty in the claimants preparing themselves now, bearing in mind that there remain at least three more weeks of trial, to deal with the simple calculation, the basis of which is fairly obvious, upon which the defendant apparently wishes to rely.[48]Yes, it is late. But in accordance with long established principle, going back, I think, to 1875, the court permits amendments to be made to the statements of case of parties if that can be done without causing injustice to other parties which cannot be remedied by an appropriate award of costs.[49]As I say, were it a relevant amendment, it does not seem to me that any injustice would be caused by permitting it and allowing any consequences to be dealt with by an appropriate order of costs. But it does seem to me that it is irrelevant.[50]On the material which has been put before me, and which I understand to be common ground, if the defendants' case clearly on the face of its original defence that the claimants have failed to mitigate their loss succeeded, then the answer is, in the circumstances of this case, that the claimants recover nothing.[51]It is correct that the effect of a successful failure to mitigate defence in the ordinary case is that in place of recovering whatever is claimed as loss, the claimant recovers what it would have recovered had it mitigated its loss. But as I have explained, in the particular circumstances of this case, bearing in mind the arrangements put in place after the initial diagnosis of the problem, the claimants would not actually have had to pay anything.[52]I move on to the second amendment to which objection is taken and that is the question of the extension. Again, some explanation of the background has to be given in order for this judgment to be comprehensible.[53]The extension first saw the light of day in the particulars of claim and it saw the light of day in the context of the claim for damages in paragraph 21. What was pleaded was:
"By reason of the defendants' breach of the civil and structural engineer's agreement the claimants have suffered loss and damage."
[54]In subparagraph 21.1 there were three elements, of which the second was:
"Costs incurred relating to the planned extension to the superstore which was abandoned due to the remedial works of £100,000."
[55]That claim has been deleted by amendment. But during its life there was a request for further information of the extension referred to. The request included a request for this information:
"Please set out the reasons and explain how it is said that the defendant is responsible for the costs that it is alleged to have been incurred in relation to the planned extension of the existing superstore."
[56]That was request 36. The answer which was given to it was:
"The costs were incurred in the normal course of the claimants' business but were ultimately wasted when the extension plan was abandoned. The ongoing settlement suffered by the store was caused by the defendants' breaches of contract as pleaded. The ongoing settlement and the uncertainty that this generated as to the future was a material cause of the decision to abandon the plans and hence the wasted costs. The loss claimed was caused by the defendants' breaches."
[57]The application of Mr Fernyhough on behalf of the claimants, which I have mentioned, is in fact to strike out the last two sentences of that response.[58]In paragraph 22.8 of the defence as served what was pleaded was this:
"Furthermore, it is apparent that the first and/or second claimant planned to extend the superstore and it is anticipated therefore that the new store has been built to allow the new store to operate, at the very least, as if it had the same facilities as the old store, together with the planned extension. In this regard, the defendant is entitled to a credit to represent: "22.8.1. The sum that it would have cost the claimant to build the extension and/or. "22.8.2. The extra profit generated over the life of the new store by reason of the new facilities in lieu of the extension."
[59]The amendment which is now proposed, to which objection is taken, is to put a figure on the sum that it is said it would have cost the claimant to build the extension. In very general terms that sum is an amount of £6.2 million.[60]Its derivation, as I have been shown in the course of the openings, is a detailed costing of an extension scheme prepared by the well known quantity surveying firm, Gleeds. That was prepared for the claimants at a time when the possible construction of an extension was under consideration.[61]It is common ground between the parties that in the event no extension was constructed. There is a dispute between the parties as to what precisely were the circumstances in which the decision was made not to pursue the question of having an extension built. For the moment I say no more about it.[62]Mr Fernyhough's objection to this amendment is, again, that it is late, as Mr Taverner accepts, that the experts instructed on both sides have not had an opportunity of considering the particular figure -- and certainly it is correct that neither Mr Huntley nor Mr Hobbs has actually done that -- in their initial reports.[63]Mr Huntley, on behalf of the defendant, has prepared a supplementary report almost two weeks ago in which it is plain Mr Huntley does not consider or examine in any sort of detail the total of Gleeds' deliberations but he does some limited exercises over a small number of pages. The total supplementary report runs to no more than seven pages.[64]Mr Hobbs, as I say, as yet has not gone public, at any rate, on any consideration which he may have given to the figure or the exercises which Mr Huntley has done.[65]The main thrust of Mr Fernyhough's objection, however, seems to be not that there would be any particular difficulty in grappling with the figure of £6.2 million, which is after all the claimants' own figure or, at any rate, a figure produced on their side.[66]Rather it is that the claimants would want to react to this point being raised by the defendants by considering whether it would not be appropriate to pursue the logic of the point in this way: if it is to be said that credit should be given for the foregone cost of the extension as a factor diminishing the damages payable by the defendant, then it must be right that the claimants should be able to claim as an element in their loss the profits foregone had the extension been constructed and generated additional revenue.[67]That may be. The logic of that analysis is fairly plain. I think Mr Taverner accepted it. I commented to Mr Fernyhough in the course of his submissions that it may well be that if I permitted this amendment and the claimants desire to make an amendment consequent on upon it following through that logic, it would be difficult for the defendants to resist that. Again, I think it is fair to say that Mr Taverner, whilst not positively welcoming such an amendment, at any rate contemplated that it might of necessity follow.[68]The issue then really in relation to this amendment seems to me to be what I should do against the contingency that Mr Fernyhough might seek to make a further consequential amendment. For the moment it seems to me that I should do nothing. That is to say that I should wait and see what happens.[69]If an appropriately formulated amendment were to be produced or if I were to be told at some point during the trial that that was something that the claimants wanted to do if it became relevant, then it might be necessary to contemplate some such course as hiving off an assessment of that claim were it to be relevant.[70]But even if the claim were to be made, with the issues in the litigation being as they are at the moment, it is far from obvious that it would actually turn out to be a relevant one. It might, but one just cannot tell for the moment.[71]So what I propose to do in relation to this amendment is to permit the amendment that Mr Taverner wishes to make and to deal with the consequences as and when the claimants desire to carry forward that aspect of the matter if indeed they ever do.[72]The remaining question is the application on behalf of the claimants to amend to delete the last two sentences of the response to the request for further information to which I have referred.[73]With great respect to Mr Fernyhough, it does seem to me that this is in the nature of shadow boxing. There was a moment at which an argument seemed to centre on whether those two sentences were or were not in the response to the request for further information.[74]The reality, as it seems to me, does not depend upon that circumstance at all. The reality depends upon the documents which have been disclosed in the litigation, and I have been shown if not all of the relevant ones then certainly a considerable number of documents which are relevant to this question.[75]The resolution of the issue, whether an extension would or would not have been constructed but for the problems on the site at Newhaven and what precisely were the circumstances in which the decision was taken not to pursue an extension, will depend upon further detailed consideration of the relevant documents and the oral evidence of witnesses now to be called, I think, no earlier than next week.[76]So I do not propose to accede to Mr Fernyhough's application. It is not necessary or appropriate to strike through the relevant sentences. The case which the claimants want to advance is clear and that is sufficient in my judgment.