“45.1 The Invoice Price of Works Instructions for Routine and Cyclic maintenance is calculated using any or all of the following methods. A change to a Works Instruction for Routine and Cyclic maintenance is not a compensation event: 45.1.1 where no change occurs to the quantities or items of work instructed then the Price will be calculated by multiplying the quantities of work by the appropriate rate(s) from the Highways Pricing Schedule. 45.1.2 where a change occurs to the quantities of work instructed then the Price will be calculated by multiplying the revised quantities of work by the appropriate rate(s) from the Highways Pricing Schedule. This may occur if the quantities change sufficiently to take the item into another price band. 45.1.3 where a change occurs requiring other items of work to be included in the Works Instruction and these items are contained in the Highways Pricing Schedule then the Price will be calculated by multiplying the quantities of work for the revised items by the appropriate rate(s) from the Highways Pricing Schedule. 45.1.4 where no Highways Pricing Schedule item is available then the Price for that item will be assessed by the Shorter Schedule of Cost Components. If it is likely that this item will reoccur then details should be collated to enable a new rate to be calculated and included in the Highways Pricing Schedule.” 2.37. Thus clause 45.1.1 provided for what was to happen where there was no change to a works instruction; clauses 45.1.2 and 45.1.3 provided for what was to happen where there was a change to a works instruction; whereas clause 45.1.4 provided what was to happen where a works instruction was issued, or changed, in circumstances where no highways pricing schedule item was available. In such a case its price was to be assessed by using the Shorter Schedule of Cost Components (SSCC). The SSCC was incorporated within the highways special conditions. It is, as is well known to quantity surveyors and other construction professionals familiar with the NEC forms of contract, a contractual basis for the valuation of costs, sub-divided into what are known as “people” costs together with the costs of equipment, plant and materials and various other specified types of costs. It also provided for a specified percentage uplift to be added to “people costs” which, the contract data provided here, was 75%. The contract data also provided that the cost of equipment was to be ascertained by reference to the most recent edition of the list published by the Civil Engineering Contractors Association (CECA). There was the option in the contract data to specify a discount from the CECA rates, but that option was not taken up here. 2.38. The quantum experts agree that valuation in accordance with the SSCC and the contract data does produce a relatively high valuation compared with other valuation methods, both because of the generous 75% people uplift and because of the use of undiscounted CECA rates, which are also generous. They agree that valuation in accordance with the SSCC is higher than valuation in accordance with the Schedule of Cost Components (SCC), which also forms part of the highways special conditions and is an alternative contractual valuation basis used with the NEC forms of contract. Accordingly, if clause 45.1.4 applied to the valuation of the Better Highways works, then Amey would be entitled to payment calculated by reference to this generous valuation method. 2.39. However clause 45.1.4 also provided for what should happen if this item was “likely to recur”, namely that details should be collated to enable a new rate to be calculated. Cumbria contends that on a true interpretation of clause 45.1.4 where there was a new item which was likely to recur, then the new rate which was to be collated and included in the highways pricing schedule was a rate to be calculated without reference to the SSCC, and by reference to established valuation principles based on evidence of actual costs incurred by Amey. In contrast Amey submits that it means no more than that the details which had been obtained by the use of the SSCC to ascertain the relevant costs for people and equipment and so on and used to assess the price should also be collated so as to arrive at a new rate for that new item. In this way Cumbria seeks to avoid the disadvantageous consequences to it of the SSCC being used if Amey is correct to say that clause 45.1.4 should apply. 2.40. Whilst I can see that using the SSCC to arrive at a new rate would prove commercially unattractive for Cumbria that consideration is not relevant to my determination; the question is purely one of interpretation alone. Indeed, Cumbria can scarcely complain about the result of using the SSCC when it had agreed to the details being included in the contract data which provided such a relatively high rate. I am unable to accept Cumbria’s argument on the interpretation of the clause. If it had been intended that a new rate would be fixed not on the basis of the SSCC but on the basis only of actual costs incurred, or indeed on some other basis, then surely the clause would have said so in clear terms. The words used here are far more consistent with the more straightforward process of taking the details already obtained from the use of the SSCC to enable a new rate to be ascertained. These words and this process are very different for example to the detailed procedure in clause 49 which provides for how a new rate would be arrived at in the case of a compensation event. In any event Cumbria was not locked in to such a rate; if it had wanted to make a permanent change to the services, rather than simply to instruct Amey to undertake routine and cyclic work for which no item was provided for by the highways pricing schedule, then it was entitled to use the service change procedure in Schedule 6 of the service agreement. If it chose not to do so, the result would be that further instructions to undertake that type of work would be valued by reference to a rate arrived at by use of the SSCC. 2.41. Accordingly I am against Cumbria on this point of construction. 2.42. I turn next to clauses 46 to 51, which addressed what were referred to, following the NEC2 standard form, as “compensation events”
“These shall have the full depth of the course removed, or in the case of base in pavements without binder course, the topmost layer, and replaced with fresh materials laid and compacted in accordance with the specification.” 2.50. Number (vi), which was added by the services specification, was “patches” and provided: “Where the tolerances in clause 702 are exceeded, the overseeing organisation shall determine the full extent of the area which is out of tolerance and the surface of the pavement course shall be made good by removing the full depth of the layer and replacing fresh materials laid to specification.” 2.51. Cumbria relies on these provisions entitling it to demand rectification in accordance with these clauses in each and every case of non-compliance. I do not agree. I accept that it specifies what remedial work is required where the non-compliance is such that replacement is reasonably required. It may also very well be that it sets the starting point, particularly in a case falling within the defects correction provisions of the highways special conditions. However in my view it does not alter the general law, so as to entitle Cumbria to insist upon Amey undertaking work which is not reasonably necessary. 2.52. I have already (para 1.39 above) referred to clause 771AR, in relation to patching. The clause also identifies the performance requirements to be “generally as section 2 of the New Roads and Street Works Act Code of Practice Specification for the Reinstatement of Openings in the Highway (with the exception of surface profile and surface regularity)”
“generally PTS have identified patches installed by Amey”
“Item 1, Sellafield de-trunking - Winter:£247,577.69 The Council issued a Council Change Request numbered AIS/10 instructing Amey to carry out winter maintenance services to an additional 60.75 km of road in the Cumbria road network. Amey complied with that instruction and claims the increased costs, namely the costs associated with providing an additional gritter to grit the extended network incurred on account of the Change Request.” 9.2. As I have already said, the contract included the provision of the winter service, involving the inspection, gritting/salting and snow clearance of the road network comprised within the contract. The details are found in clause 7101AR of the services specification. Paragraph 10 identifies the “approximate total length of primary routes to be treated”, but also says that these “are approximate and will vary as the winter service levels are reviewed by Cumbria each year”
“Items 3 and 4, Red Diesel Road Marking Vehicles / MEWPs:£184,390.02 and£104,069.18 … the Council issued Change Order AIS/14 on11/06/2009 . This required a service change in respect of “new legislation regarding the use of red diesel fuel for a number of vehicles uses for the delivery of the contract.”
“Item 8, Increased Employer National Insurance Contributions:£77,362.66 The Finance Act 2011 which came into effect as from01/04/2011 increased the rate for employer’s national insurance contributions by 1% for Amey’s employees’ salaries and benefits. Amey seeks reimbursement in respect of additional national insurance contributions paid pursuant to its Contractor’s Change Request dated10/02/2012 and to be assessed as a change under the Change Control Procedure at Schedule 6 of the Services Agreement. By its letter of03/07/2012 the Council accepted the principle of the claim and that a sum of£58,756.48 was owing to Amey. That sum has not been paid to Amey and in any event the larger sum of£77,362.66 is in fact owing.” 14.2. In its defence Cumbria pleaded in terms (see paragraph 2 (2) of Appendix 11) that Schedule 6 did not apply. That is because under condition 33 the change in the law would have to fall within the contract definition of a “specific change of law”
“The trial of the Better Highways Model started in August 2009 and ran until March 2011 when the model was implemented. Amey agreed initially to second 3 of its staff to the Council free of charge. The parties entered into a secondment agreement with a duration of 3 months. A copy of that agreement is annexed at Schedule 2 hereto. Amey accepts that it was not entitled to be paid for its 3 members of staff for the period of the secondment agreement, but Amey does claim the costs of those seconded members of staff beyond the 3 month duration of the secondment agreement together with management time and vehicle costs for the staff involved in the delivery of the Better Highways trial support.” 16.2. As summarised by Cumbria in its closing submissions, the claim is in two parts. The first is for the 3 seconded staff, namely (1) Louise Johnson, an administrative assistant; (2) Dan Sowerby, a supervisor (Highways Steward for the Eden Area), and (3) Paul Little, a manager (Watchman-in-Chief on the Strategic Partnership for Highways Work in Cumbria). The 15-month period for which Amey claims costs of£274,462.92 runs from1 November 2009 until31 January 2011 . The second part of the claim is for the cost of a further 19 managerial and support staff during the development and trial phases of Better Highways. The 18-month period for which Amey claims costs of£417,036.88 runs from1 August 2009 until31 January 2011 . 16.3. It appears from paragraph 475 of Amey’s closing submissions that it claims payment under clause 45.1.4 of the highways special conditions. Amey’s case as advanced in opening was that the trial period was envisaged to last for no longer than 6 months, but in fact it started in August 2009 and roll-out did not start until a further full year later, in August 2010, and was not completed until the end of January 2011. 16.4. It appears to me that Amey is confusing its right to payment under the works instructions issued during the trial period and roll out period with its right to payment for specific seconded staff and/or for managerial and support staff. In the absence of a specific agreement, Amey’s only entitlement to payment arises under clause 45, as I have already held. On any view Amey’s local area overhead, which would include the costs of its managerial and support staff, was comprised within the highways response team daily rate and if, as I have found, that is the appropriate rate for the Better Highways team, then it is comprised within that as well. If Amey had been entitled to payment in accordance with clause 45.1.4 then it would have been entitled to include claims for individual personnel if they fell within the “people” costs of the SSCC; otherwise they would fall within the specified working area overhead uplift. What Amey cannot do is to seek to make the present claims other than through that contractual structure, unless it is able to point to a specific agreement to that effect. 16.5. Cumbria, in its closing submissions, submits that insofar as these are claims made under the contractual structure, they are wholly unsupported by proper documentary evidence. (1). The 3 seconded staff 16.6. I have been referred to the secondment agreements in question. The front page provides for the secondments to begin on20 February 2010 and end on20 August 2010 , thus a 6 month duration. (Although this appears inconsistent with paragraph 2 of part 1, the handwritten amendments to that paragraph make it clear, in my view, that it is a 6 month rather than a 3 month secondment which has been agreed.) Paragraph 1 of part 1 states in terms that “the funding for this secondment will be the responsibility of Amey”
“Item 14 is a claim for the reduced productivity of the available workforce and the reduction in uplifts received due to having less opportunity to carry out works which attracted an uplift as a result of a change in the way Amey delivered the services to the Council by the implementation of the Better Highways model. In addition, Amey claims additional costs incurred due to having to instruct third party sub-contractors to carry out certain services which, without the impact of the Better Highways model, would have been self-delivered.” 17.2. As pleaded, there were 4 separate elements to this claim: (1) a loss of local area overhead; (2) a loss due to additional subcontracting; (3) a loss of productivity due to skill diversion; (4) a loss due to under-utilisation of the surfacing and surface dressing gangs. 17.3. The loss of local area overhead claim was premised, as I understand it, on the basis that the ancillary Better Highways claims for overtime, plant and materials et cetera did not include any allowance for local area overhead, to which Amey was entitled. However this claim is no longer pursued as a result of Mr Taft’s investigations having revealed that these claims have been made under the SSCC and, hence, already include a sufficient allowance for local area overhead. The end result, financially, is that the claim value decreases from£1,883,597.79 to£1,393,226.71 . 17.4. The first flaw in these claims is that I have already rejected their underlying premise, which is (paragraphs 492 – 493 of Amey’s closing submissions) that Better Highways was a significant change which involved a significant reorganisation of resources and disruption. Instead, I am satisfied, although there was some uncertainty during the trial period and the roll-out period as to the eventual form which Better Highways would take, in fact as introduced there was no significant difference between Better Highways and its predecessors, other than the increase in the number of gangs involved. 17.5. The second flaw in the claims is that they are premised on the basis that the increase from 12 highways response teams to 32 Better Highways teams involved an increase in the labour force from 24 to 64 operatives, resulting in Amey having to transfer 40 skilled operatives from measured work gangs to Better Highways teams, and to make up the difference through greater reliance on subcontractors. However, this analysis completely ignored the fact that the existing 24 highways stewards, whose role was made defunct as part of the changes, were transferred into the Better Highways teams, not surprisingly since they were already undertaking virtually identical work. Once this is taken into account, the true number of extra operatives which Amey needed to find was not 40, but only 16. This, inevitably, would have involved far less of an impact on the measured work gangs and consequential need to obtain subcontractors. Indeed, it goes further than that, because in paragraph 40 of his second witness statement Mr Smith had said that there was a pool of 107 available operatives from whom the 16 needed to be found. It follows that less than 20% of the available pool were in fact required to transfer to Better Highways. Still further, Mr Smith also said that this pool of 107 itself excluded 90 further operatives who were “confined to specialist roles (e.g. street lighting, surfacing, grounds maintenance et cetera)”
“(a) Ultimately, claims by contractors for delay or disruption related loss and expense must be proved as a matter of fact. Thus, the Contractor has to demonstrate on a balance of probabilities that, first, events occurred which entitle it to loss and expense, secondly, that those events caused delay and/or disruption and thirdly that such delay or disruption caused it to incur loss and/or expense (or loss and damage as the case may be). I do not accept that, as a matter of principle, it has to be shown by a claimant contractor that it is impossible to plead and prove cause and effect in the normal way or that such impossibility is not the fault of the party seeking to advance the global claim. One needs to see of course what the contractual clause relied upon says to see if there are contractual restrictions on global cost or loss claims. Absent and subject to such restrictions, the claimant contractor simply has to prove its case on a balance of probabilities. (b) … (c) It is open to contractors to prove these 3 elements with whatever evidence will satisfy the tribunal and the requisite standard of proof. There is no set way for contractors to prove these 3 elements. For instance, such a claim may be supported or even established by admission evidence or by detailed factual evidence which precisely links reimbursable events with individual days or weeks of delay or with individual instances of disruption and which then demonstrates with precision to the nearest penny what that delay or disruption actually cost. (d) There is nothing in principle “wrong” with a “total” or “global” cost claim. However, there are added evidential difficulties (in many but not necessarily all cases) which a claimant contractor has to overcome. It will generally have to establish (on a balance of probabilities) that the loss which it has incurred (namely the difference between what it has cost the contractor and what it has been paid) would not have been incurred in any event. Thus, it will need to demonstrate that its accepted tender was sufficiently well priced that it would have made some net return. It will need to demonstrate in effect that there are no other matters which actually occurred (other than those relied upon in its pleaded case and which it has proved are likely to have caused the loss). It is wrong, as Counsel suggested, that the burden of proof in some way transfers to the defending party. It is of course open to that defending party to raise issues or adduce evidence that suggest or even show that the accepted tender was so low that the loss would have always occurred irrespective of the events relied upon by the claimant contractor or that other events (which are not relied upon by the claimant as causing or contributing to the loss or which are the “fault” or “risk” of the claimant contractor) occurred may have caused or did cause all or part of the loss. (e) The fact that one or a series of events or factors (unpleaded or which are the risk or fault of the claimant contractor) caused or contributed (or cannot be proved not to have caused or contributed) to the total or global loss does not necessarily mean that the claimant contractor can recover nothing. It depends on what the impact of those events or factors is. An example would be where, say, a contractor's global loss is£1 million and it can prove that but for one overlooked and unpriced£50,000 item in its accepted tender it would probably have made a net return; the global loss claim does not fail simply because the tender was underpriced by£50,000 ; the consequence would simply be that the global loss is reduced by£50,000 because the claimant contractor has not been able to prove that£50,000 of the global loss would not have been incurred in any event. Similarly, taking the same example but there being events during the course of the contract which are the fault or risk of the claimant contractor which caused or cannot be demonstrated not to cause some loss, the overall claim will not be rejected save to the extent that those events caused some loss. An example might be (as in this case) time spent by WLC's management in dealing with some of the lift problems (in particular the over-cladding); assuming that this time can be quantified either precisely or at least by way of assessment, that amount would be deducted from the global loss. This is not inconsistent with the judge's reasoning in the Merton case that “a rolled up award can only be made in the case where the loss or expense attributable to each head of claim cannot in reality be separated”, because, where the tribunal can take out of the “rolled up award” or “total” or “global” loss elements for which the contractor cannot recover loss in the proceedings, it will generally be left with the loss attributable to the events which the contractor is entitled to recover loss. (f) Obviously, there is no need for the Court to go down the global or total cost route if the actual cost attributable to individual loss causing events can be readily or practicably determined. I do not consider that Vinelott J was saying in the Merton case (at page 102 last paragraph) that a contractor should be debarred from pursuing what he called a “rolled up award” if it could otherwise seek to prove its loss in another way. It may be that the tribunal will be more sceptical about the global cost claim if the direct linkage approach is readily available but is not deployed. That does not mean that the global cost claim should be rejected out of hand. (g) DMW's Counsel's argument that a global award should not be allowed where the contractor has himself created the impossibility of disentanglement (relying on Merton per Vinelott J at 102, penultimate paragraph and John Holland per Byrne J at page 85) is not on analysis supported by those authorities and is wrong. Vinelott J was referring to unreasonable delay by the contractor in making its loss and/or expense claim; that delay would have led to their being non-compliance with the condition precedent but all that he was saying otherwise was that, if such delay created difficulty, the claim may not be allowed. He certainly was not saying that a global cost claim would be barred necessarily or at all if there was such delay. Byrne J relied on Vinelott J's observations and he was not saying that a global cost claim would be barred but simply that such a claim “has been held to be permissible in the case where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and this situation has not been brought about by delay or other conduct of the claimant”
“Item 17, Patching Thickness:£2,094,076.68 The Council (and/or its Overseeing Organisation) were obliged to provide both Works Information and Site Information pursuant to Contract Data, Part I of the Highways Special Conditions. In particular, Appendix 7/1 of the Highways Appendices, Permitted Pavement Options, Schedule 3 states: “Permitted construction materials will be detailed on each appropriate Works Instruction.”
“The location and types of any areas of patching will be described in this schedule issued with each appropriate Works Instruction. The work will be instructed as Planned Work.”
“In the Schedule of Rates the sub-headings and item descriptions identify the work covered by the respective items read in conjunction with the matters listed against the relevant marginal headings “Item coverage” in Chapter IV of the Method of Measurement for Highway Works, these preambles and the amendment to the Method of Measurement immediately following these preambles. The nature and extent of the work performed is to be ascertained by reference to the drawing specification appendices conditions of contract and the Works Instructions.”
“The Overseeing Organisation will supply the contractor with the setting out details, ie in the form of drawings and information stated on the Works Orders or the actual marking out on site … prior to commencement of the works.”
“Item 23, Efficiency Savings on Volumes of Work:£1,100,000 The Council has purported to withhold the sum of£1.1 million from Amey. The Council is not entitled to withhold those sums. Part 3 of Schedule 13 of the Services Agreement provides that if Amey’s annual turnover is in excess of£24 million as indexed linked, the Council is entitled to claim additional Services up to a value of 5% of the sum exceeding£24 million . Amey’s annual turnover for 2010/11 was£27,660,548.45 . Amey contends that annual turnover comprises only Services detailed in the Schedule of Rates and not additional Work Instructions. The sum of£24 million as index linked equates to£32,900,000 in 2010/11 and therefore Amey’s annual turnover was below the relevant threshold for the purposes of Part 3 of Schedule 13. In any event, the Contract clearly provides that the Council is entitled to claim additional Services but not entitled to claim the cash equivalent. In purporting to withhold the sum of£1,100,000 the Council is claiming a cash equivalent which is impermissible under the Contract. Amey therefore claims the sum of£1,100,000 .” 21.2. Cumbria’s response appears from appendix 26 to the amended defence and counterclaim. In short, it is said that not only was Cumbria entitled to deduct the amount withheld, but it is also entitled to deduct substantial further sums under parts 3 and 4 of schedule 13. In summary, it says as follows: (1) Parts 3 and 4 of schedule 13 contained provisions entitling Cumbria to request services free of charge in each year, the amount of which is calculated by reference to the annual turnover for the previous year. (2) Amey was under an obligation to provide a notice within 30 days of each year end, which set out the amount of the services which Cumbria was entitled to request free of charge. (3) Amey either failed to provide notices or, where it did provide notices, they wrongly stated that Cumbria was not entitled to request any services free of charge. (4) The true position is that Cumbria was entitled to request services free of charge to a substantial value under parts 3 and 4 and, in so far as it may have failed to make a formal request for these services to be provided within each relevant year, Amey cannot complain about that, given its failure to provide any or any accurate notices, and that Cumbria is therefore entitled to seek performance of the contract at final account stage, which does not fall foul of the prohibition against seeking a cash equivalent. 21.3. In reply, Amey contended that it provided details of the relevant annual turnover through the financial information which Cumbria had available to it, and which resulted each year in discussion and agreement of the annual accounts, so that Cumbria had no excuse for not following the contract procedure and requesting services free of charge in the relevant year. It also contended that, on a proper interpretation of the contract, only works undertaken against schedule of rates items should be included in annual turnover and, on that basis, there was no entitlement to services free of charge in any event. 21.4. So far as the figures are concerned the position, as I understand it, is as follows: (1) In addition to seeking repayment of the£1.1 million , Amey is also contesting the further withholding made by Cumbria of£558,890 , being the amount Cumbria claimed was due to it in relation to work volumes for the year 2011/12, this therefore falling within the part 1 claim. (2) Mr McGoldrick has produced an updated analysis at [F/15.214] which records Cumbria’s claimed entitlement under parts 3 and 4 for each of the years in question, totalling£2,786,195.42 . (3) However, it is common ground that the valuation of the services is provisional on the resolution of the other items in dispute in this case, which insofar as they fall within the definition of annual turnover will have an impact on the value of the services which Cumbria was entitled to request free of charge. 21.5. It appears, therefore, that the following issues arise as between the parties: (1) The true construction of the relevant provisions. In short, if Amey is correct then Cumbria was not entitled to request any free of charge services under part 3, whereas if Cumbria is correct then it would have been entitled to do so. (2) Whether Cumbria can make any claim for whatever its true entitlement might be, having regard to the competing arguments about Amey’s failure to give notices or correct notices, and Cumbria’s failure to request free of charge services. (3) What the relevant amounts are in either case. (1). Construction 21.6. As already stated, schedule 13 contains 2 separate provisions for additional services, in parts 3 and 4 respectively. The most straightforward is part 4, efficiency savings. This entitles Cumbria to request additional services free of charge up to£250,000 (index linked – as are all other sums referred to here, without the need for me to say so each time) in each of the first 5 years, save only that if annual turnover is less than£24 million , it is reduced by 1.04% of the shortfall for the following year. Part 3, work volumes, is rather more complicated, being a form of mutual “pain/gain” clause. It provides that Cumbria can request additional services free of charge up to 5% of annual turnover above£24 million , whereas for each£1 million that annual turnover falls below£18 million Cumbria must pay 0.55% to Amey. If annual turnover is within the bracket of£18 million -£24 million then part 3 has no impact either way. (I should say that it is common ground that in no year, even on Amey’s case, did annual turnover fall below£18 million , so that the contest is either between there being no entitlement, which is Amey’s case, or some entitlement, which is Cumbria’s case.) 21.7. Both parts of schedule 13 states in express terms that there is no entitlement to the cash equivalent of the additional services and, also, that “Cumbria shall only be entitled to require the contractor to provide such additional services within the relevant year”. 21.8. Annual turnover is defined as being the “total value of the services listed in part 1 of this schedule 13” provided by Amey and invoiced to Cumbria. Part 1 is entitled “summary of pricing”
“Item 24, Account Production Costs:£356,136.25 Amey is entitled to recover its account production costs as work carried out under the contract. Insofar as Amey is not entitled to recover these sums as money due under the Contract, Amey will claim the same as costs in these proceedings.” 22.2. In its opening submissions (paragraph 465) Amey clarified that its pleaded case in its amended reply was that it was entitled to these costs up to the date of production of its final account “on the basis that Cumbria has unreasonably refused to value its works, meaning that Amey had to expend monies in proving them”
“83. In the light of these authorities and the principles discussed in them, I would draw the following conclusions. (1) Unless the parties are taken to have agreed otherwise, it is difficult to see that in the normal case of damage to or destruction of a chattel, it should make any difference whether the loss is caused by breach of contract or of tortious duty. The question remains, as Lord Blackburn said in Livingstone v. Rawyards Coal Co(1880) 5 App Cas 25 at 39, to find “that sum of money which will put the party who has been injured, or has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.” 84. As Lord Lloyd emphasised in Ruxley v. Forsyth at 366B, after citing a similar statement of principle from Viscount Haldane LC in Westinghouse Electric and Manufacturing Co Ltd v. Underground Electric Railways Co of London Ltd[1912] AC 673 at 689 “Note that Lord Haldane does not say that the plaintiff is always to be placed in the same situation physically as if the contract had been performed, but in as good a position financially, so far as money can do it. This necessarily involves measuring the pecuniary loss which the plaintiff has in fact sustained.” 85. (2) It follows that cases where a claimant recovers more than he has lost, as will happen where betterment occurs without a new for old deduction, ought as a matter of principle to be exceptional. Recognised examples of such exceptions, again whether in contract or in tort does not seem to matter, are cases of the repair of chattels (The Gazelle, Bacon v. Cooper) and also the destruction of buildings provided that a replacement building is necessary to prevent the collapse of a business or loss of profits (Harbutt’s Plasticine, Dominion Mosaics v. Trafalgar Trucking). It may well be, therefore, that the distinction between repair and total loss relied on by the judge is not definitive, and that the exceptions are to be explained on a more fact sensitive basis. A factor mentioned in some of these exceptional authorities is that otherwise the claimant is exposed to an inconvenience or burden or the expenditure of money from which the law ought to protect him. I suspect, however, that the true principle is that in the relevant cases the betterment has conferred no corresponding advantage on the claimant. Take the ordinary case of the repair of some part of a machine. Where only a new part can be fitted or is available, the betterment is likely to be purely nominal: for unless it can be posited that the machine will outlast the life left in the damaged part just before it was damaged, the betterment gives the claimant no advantage; and in most cases any such benefit is likely to be entirely speculative. So in the case of replacement buildings: the building may be new, but buildings are such potentially long-lived objects that the mere newness of a building may be entirely by the way. Of much more importance to a business owner is whether the replacement answers the needs of his business. Even where the replacement is of a moderately bigger size (Dominion Mosaics v. Trafalgar Trucking), in the absence of any reason for thinking that the bigger size is of direct benefit to the claimant, he has merely mitigated as best he can. If, however, it were to be shown that the bigger size (or some other aspect of betterment) were of real pecuniary advantage to the claimant, as where, for instance, he was able to sublet the 20% extra floor space he had obtained in his replacement building, I do not see why that should not have to be taken into account. It is after all a basic principle that where mitigation has brought measurable benefits to a claimant, he must give credit for them: see British Westinghouse v. Underground Electric Railways, where defective machines were replaced by new machines of superior efficiency. 86. (3) Where in the case of a second-hand chattel there is no market to replace what has been lost, a problem of betterment will often arise because there is no automatic market mechanism for measuring the loss. In physical terms, the only way to replace the loss is to buy new. But the basic principle is not physically to replace what the claimant has lost but to replace it financially, to make him whole in financial terms. If he is given the price of a new chattel, he will be made more than whole. (The problem of the wrongly constructed swimming-pool is different, but analogous: the claimant is not entitled to specific performance, but to financial compensation for what he has lost.) The authorities suggest that prima facie such a case is not within the range of exceptional situations where betterment is ignored. On the contrary, the proper approach appears to be to make a fact specific review of what the claimant has lost and then attempt to put a financial figure on it as best one can: The Harmonides approved in The Liesbosch; Sealace Shipping v. Oceanvoice approved in Ruxley v. Forsyth. 87. (4) It is in any event an error to think in terms of the correct answer lying only at the extremes, such as, at one end, the cost of replacement from new. Several of the cases, even those which have on appeal been driven by the way in which the case has been argued to select the answer from a limited choice, have commented on this factor: The Harmonides, Dominion Mosaics v. Trafalgar Trucking and Ruxley v. Forsyth itself. 88. (5) In such circumstances the test of reasonableness has an important role to play. This role goes further than the proposition that replacement from new has to be absurd for it to be rejected as the measure of loss. The loss has to be measured, and where what is lost is old and second-hand and coming towards the end of its life, it is not prima facie to be measured by the cost of a brand-new chattel, even where the market cannot supply a closer replica of what has been lost; and where such a measure would not be a reasonable assessment of what has been lost, it should not be used. As May J said in Taylor v. Hepworths, cited with approval in Dominion Mosaics v. Trafalgar Trucking and (at 356G and 369G) in Ruxley v. Forsyth, damages ought to be reasonable as between claimant and defendant. I do not see why in the realm above all of remedies the common law cannot mould its principles flexibly to the needs of the situation, and as so often the test of reasonableness lies to hand as a useful tool. It may also be possible to speak in terms of proportionality, a closely analogous but not necessarily identical test: see Lord Lloyd in Ruxley v. Forsyth at 367B and 369H.” 25.26. In this case, the evidence shows that at the time defects complained of were identified and reported on by PTS, it was not asked to, nor did it, express any opinion as to whether or not the condition of each patch was such that it represented a danger to road users or, otherwise, whether there was a real need for replacement or remedial works to be undertaken and, if so, what those works would be. Professor Walsh was not asked to do so either and nor was a highways inspector, who would have been the relevant decision-maker within Cumbria if this case had involved a potential claim, asked to do so. 25.27. It is apparent, in my view, that had such a question been asked there would have been a range of possible alternatives, from: (1) immediate replacement or repair in full on the basis that the condition of the patch represented a current danger; to (2) replacement or repair in full within a specified period on the basis that although there was no current danger, there was a real risk of deterioration leading to a real risk of danger in the short to medium term; to (3) some lesser scheme of replacement or repair, either immediately or within a specified period, to “tide” the patch over until the next planned programme of works in that area, which might involve either full re-surfacing, patching or surface dressing; or finally to (4) no remedial works necessary, on the basis that the patch would “do” until the next planned programme of works. 25.28. In fact, what happened here was that the process of deciding which remedial works were appropriate was delegated to others, in circumstances where Cumbria produced little or no evidence either as to who was involved (and thus their skills or experience in assessing such matters) or as to what they did and how they did it. Mr O’Farrell referred to this in his witness statement, saying that he had a lengthy 2-day meeting with David Harrison and someone called Matt Scott (who appears to have been another ex-Capita inspector, not called as a witness by Cumbria) where they made these decisions, albeit with some input from Mr O’Farrell. 25.29. However when Mr Harrison was asked about this, he appeared to have little or any recollection of this having happened, somewhat surprisingly in the circumstances. There is no other evidence, documentary or otherwise, as to who was involved in this process, and on what basis. In paragraph 249 of his first witness statement Mr Robinson said that the decisions were taken, as they had to be, by Cumbria’s “team”, although he did not specify who he meant by that. It appears to me that it is a loose shorthand for the team involved in driving forward the claims process, and which included those employees of Cumbria particularly involved in the claims process, such as Mr Robinson and Mr Roper, as well as – when required – people such as Mr O’Farrell, Cumbria’s external claims consultants, JR Knowles, internal/external lawyers, experts and people such as Mr Harrison. 25.30. There is no evidence that Cumbria took the decision to delegate these decisions to Mr Harrison and/or Mr Scott on the basis that they were instructed to approach it as they would any other highways maintenance safety inspection decision. In any event, in my view it is wholly unsatisfactory to seek to rely upon Mr Harrison as some form of quasi expert, either in relation to whether or not work was defective or as to what remedial work was reasonably necessary. First, he gives no evidence at all as to his involvement in this aspect of the claim; second, as I have said, in my view he was an unreliable and a partisan witness. Cumbria cannot rescue this by seeking to rely upon the involvement of Mr O’Farrell, because Mr O’Farrell and Mr Robinson were clear that he had only limited involvement. Even if that had not been the case, in the absence of any evidence as to how this task was approached and what criteria was adopted, it is impossible to place any real reliance upon its conclusions. 25.31. In reality, it seems to me, this was a notional desktop exercise undertaken without consideration of the real life factors which any reasonably competent highways authority would consider when making the decision whether and if so how to spend its scarce resources. Instead, in my view, it was an exercise primarily driven with a view to maximising this claim. 25.32. I reached the same conclusions as regards the ascertainment of the remedial costs. This appears to have been another notional desktop exercise undertaken by JR Knowles with, I am satisfied for reasons I give when considering the detail of the individual claims, no consideration as to how it could be done most cost effectively, whether by undertaking the work in-house, or undertaking the work in batches so as to achieve economies of scale, or in terms of what traffic management was realistically required given the location of the patch and the nature and extent of the remedial works required. 25.33. Professor Knapton has not been asked to consider these questions. His approach is limited to considering whether or not replacement or repair is a reasonable response to the defects complained of, on the basis that it is a breach of contract which would justify replacement or repair in the abstract, as opposed to a highways authority operating in the real world, having to make decisions as between competing priorities. He has not been asked to consider, particularly in the context of the service life of each patch, what if any remedial works would be a reasonable and proportionate response to the problem at the stage over the period 2012 – 2014 when the defects complained of was first observed. Again, in my view, his involvement is a notional desktop exercise, rather than a real life exercise. 25.34. As I have already said, there is no evidence from Cumbria as to whether or not remedial works have been undertaken in relation to any of the individual patches, and if so what works have been undertaken, when, and at what cost. There is no indication that any attempt has been made by Cumbria to interrogate its own highways maintenance records to ascertain whether any, and if so what, works have been undertaken in relation to individual patches. All that is known is that in a significant number of cases the subsequent visits by Amey or Mr Griffiths have revealed that the patches have been surface dressed over. There is no evidence that this has not provided a satisfactory solution for the remaining lifetime of any individual patch, nor is there any evidence that the cost of this surface dressing has, whether in an individual case or overall, increased due to the presence of these defects. 24.35. In short, the claim for damages is in my view a wholly theoretical exercise with no basis in reality. This is not a case where Amey is criticising decisions taken by Cumbria at the time about what remedial works were reasonably necessary, in circumstances where those works were then carried out and the claim is for actual costs incurred. In such a case the court would not unnaturally be willing to give Cumbria as the innocent victim of a breach the benefit of any reasonable doubt. Here, so such work has been carried out. There has been some suggestion that Cumbria has waited until the outcome of this case is known before choosing to spend any damages it might be awarded on undertaking these repairs. Insofar as it is seriously suggested by Cumbria that this is a consciously taken policy, and that it would undertake whatever repairs the court considered were justified, I reject it. There is no evidential basis for such an argument. Indeed, the idea that Cumbria could even undertake this exercise, even if it wished to do so, is completely undermined by the fact that it is seeking damages on a theoretical extrapolated basis, in circumstances where it would not even know where to begin to ascertain patches which were defective by reason of what it says was Amey’s breach, other than those the subject of the sampling exercise. 25.36. So far as the service life is concerned, although Cumbria has given credit on the basis of an 8 year service life, that is not accepted by Amey. Professor Knapton supports the 8 year service life by reference (paragraph 4.59 of his principal report) to a document entitled “Service Life of Asphalt Materials for Asset Management Purposes” produced by the Mineral Products Association [MPA] & Association of Directors of Environment, Economy, Planning and Transport [ADEPT] in April 2015. He accepts that it postdates the Contract, but says that it nonetheless sets out received highways engineering wisdom which has been correct for many years, being the combined opinions of a group of eminent and experienced professionals in the field of highway repair methods. It refers to asphalt concrete as having a “material surface life in designed roads” of 8 years, but an equivalent life in “evolved roads” of 6 years. It would appear, therefore, that even if this publication is accepted as authoritative, and even assuming areas of patching can be equated with areas of surfacing, the service life can be said to be no more than 6 years in relation to the typical evolved roads in rural Cumbria with which many of these patches are associated. 25.37. Mr Griffiths considered this question in some detail in his principal report and concluded (paragraph 14.26) that the service life would be at most 6 years, assuming that the adjacent road was in good repair and so on (paragraph 14.25), but otherwise it would all depend on the individual circumstances of the patch, and that he would not expect patching to last, on average, more than about 3 years in the conditions prevailing in the unclassified, minor, evolved roads forming the majority of Cumbria’s road network. It is clear in my view that there is clearly a range of potential service lives and, I have no doubt, some patches will last more than 6 years whereas others will last less. Cumbria may say that in fact it would have obtained a greater service life, by dint of undertaking remedial works only when absolutely necessary, and by undertaking surface dressing to extend the life of roads with these patches in them. I accept, as already stated, that this may be so in some cases; equally however it is apparent that others will have failed earlier due to non-workmanship factors such as poor surrounding road conditions, poor foundations, water penetration and heavy trafficking. On balance I am satisfied that 6 years is a fair service life to take overall in this case. 25.38. In my view, the position overall is as follows: (1) The claim that Cumbria has advanced is entirely theoretical and, I am satisfied, cannot and will not ever be implemented in the sense that the remedial works it contends for will never be implemented in the way and at the cost which Cumbria contends for. Furthermore, they are remedial works which no reasonable highways authority in Cumbria’s position would consider as being either reasonable or proportionate, even making due allowance for the fact that on this assumption Cumbria is the innocent victim of poor workmanship amounting to breach of contract by its highways maintenance contractor. (2) Cumbria could have advanced a claim on a basis which was founded in reality, had some competent person or organisation been asked to consider what, if any, works reasonably required to be undertaken to the individual patches inspected by PTS, having regard to Cumbria’s maintenance and repair policy and its statutory obligations. I am satisfied that this would have revealed that as regards some patches falling within the sample it was necessary to undertake immediate replacement or repair works, whereas as regards the remainder there would have been a range of options along the lines that I have indicated. (3) It would then have been necessary, when presenting the claim, to consider whether or not these or other similar remedial works would have been required anyway in the context of the service life of the patch. If so, then either the claim could not succeed or some credit for betterment would have to be given. (4) An analysis of that nature, if properly costed, could properly have formed the basis of a claim, assuming breach was established and also assuming extrapolation was proven. (5) In the absence of such an approach, when I consider the claims in relation to the individual patches which I examine, I will need to consider whether or not any defects for which liability is proved are such that they can properly form the subject of a claim on the basis advanced by Cumbria. (c). The individual visual defect claims Visual defect claim 7 25.39. Cumbria’s case is that this patch suffers from fretting, edge deterioration and delamination, and complete replacement is required. 25.40. Mr Griffiths’ view in his report was that he accepted there was some minor deterioration, but considered that the patch was in a safe condition. He noted that the surrounding road was in a poor condition and that there were “possible drainage issues”
“this amendment forms part of the contract documentation and you are required to base your responses accordingly”. 33.7. However Cumbria relies upon the terms of the contract and the terms of the invitation to negotiate to seek to demonstrate that the answer is of no contractual effect. Thus Cumbria relies on clause 68.1 of the services agreement, which is a form of entire agreement provision. It should, however, be noted that it does not seek to exclude reliance on prior representations, or to define what “the contract and the documents referred to in it” are to comprise. Cumbria also relies upon the invitation to negotiate which begins with a notice, on which Cumbria places reliance, which as material states: “NOTICE This Invitation to Negotiate ("ITN") has been prepared by [Cumbria] The information contained in this ITN and all subsequent information provided pursuant to this ITN is provided under the terms of a Confidentiality Agreement that has been agreed signed and by and on behalf of the Bidder. [Cumbria has] taken all reasonable care to ensure that the information provided is accurate in all material respects. However; the Bidder’s attention is drawn to the fact that no representation, warranty or undertaking is given by [Cumbria] in respect of the information provided in respect of this transaction and/or any related transaction. [Cumbria does] not accept any responsibility for the fairness, accuracy or completeness of the information provided and shall not be liable for any loss or damage arising directly or indirectly as a result of reliance on this ITN or any subsequent communication. Only the express terms of any written contract for the provision of services, and/or supplies, as and when it is executed, shall have any legal effect in connection with the matters to which it relates.” 33.8. It seems to me that the effect of this notice is to provide, in the concluding sentence, that information provided in the invitation to negotiate and any subsequent information provided pursuant to it should only have legal effect if it is also part of the express terms of the subsequent written contract. Cumbria can therefore say that because the tender clarification was not stated to form part of the contract documentation, it has no legal effect. 33.9. However, in my view, there is a distinction between information provided in and pursuant to an invitation to negotiate on the one hand and a clear statement on the other that: (a) the terms of what was intended to become a contract document were to bear a particular meaning, regardless of whether or not that was the correct meaning of that intended contract document as a matter of contractual construction; (b) the contents of the tender clarification were to be treated as part of the contract documents. 33.10. Since the contract does not contain an exhaustive list of all documents stated to be contract documents, and indeed many of the documents which are accepted by both parties to be contract documents are only incorporated by reference, there seems to me to be no valid reason why the tender clarification should not be given effect, so that it is treated as a contract document for the purposes of clarifying the meaning of other contract documents, here the preamble. Furthermore, the tender clarification contained a clear representation to this effect, sufficient to found an estoppel, and I do not construe the terms of the notice as having the effect that Amey is not entitled to place reliance upon that representation which, as I have said, does not in my view fall within the scope of the “information” referred to in that notice. 33.11. It is apparent that Amey entered into the contract in reliance upon the contents of the tender clarification, and undertook the relevant work, making applications for payment, and receiving payments, on the basis of the understanding contained in the tender clarification. As I have said, no point was taken by Cumbria about this until 2009, and even then no action was taken until 2012, when Mr Robinson used this as a means of making a deduction from the final payments due to Amey and to include it as a counterclaim. In the circumstances, in my view Amey is right to say that an estoppel arises, in that Cumbria is estopped both from contending that the relevant clause of the preamble should be read otherwise than as amended by the tender clarification, and from contending that the tender clarification is not a contract document. 33.12. It follows that I find against Cumbria on this issue. 33.13. The next item in dispute relates to a dayworks charge, where the claim value is£16,786.70 . The issue is whether a change, made at a meeting in June 2011, to correct a previous erroneous method of charging by Amey, should apply only for the future, or should have retrospective effect. In cross-examination Mr Collins was referred to the minute of the meeting, prepared by someone who was then employed by Amey, which said that there should be an investigation into “historic payments”
“From my reading of the Scott Schedule referred to in paragraph 7, I confirm that I agree that each of the Uncorrected Defects Claims appears to be a valid claim. Trevor Capstick’s witness statement, which I deal with at paragraphs 9.133 to 9.135 provides detailed comments on this matter. From paragraph 40 of his witness statement onwards Mr Capstick describes 70 outstanding surface dressing defect claims covering the period 2008 to 2012 and concludes that the quantum for repair works is£295,214.85 .”
“From my review of Mr Capstick’s witness statement, I have found support for my opinion that the schedule 7 claims are valid from a technical standpoint.” 34.16. Professor Knapton does not even refer to, let alone address, Amey’s consolidated defects summary. His consideration of schedule 7 seems to me to be the most cursory of considerations that could be envisaged. I do not consider that Cumbria is entitled to place any reliance upon this statement of opinion, contrary to what Cumbria submitted in paragraph 591 of its closing submissions. Whilst I accept that it may well be that this is a consequence of Professor Knapton’s late instruction and consequential timing difficulties, nonetheless in my view it is a statement of opinion which is of no assistance at all to me in resolving the schedule 7 dispute, and that it would have been much better if Professor Knapton had admitted, openly and frankly, that he had been unable in the time available to him to undertake any proper investigation of the schedule 7 claims and, hence, was unable to offer any useful opinion upon them. 34.17. I do accept that Mr Griffiths was not even instructed to consider the schedule 7 claim, so that Amey does not have any expert evidence in relation to this claim either, but nonetheless the position remains that I must seek to determine these allegations without the benefit of any expert evidence from Cumbria upon which it can place any reliance. 34.18. It is also relevant that Cumbria, as the highways authority responsible for these roads, has not according to Mr Roper undertaken any remedial works to any of the 82 allegedly outstanding defects falling within the original items 1 – 209. When asked why he explained that it was a matter for the Highways Department as to which works were undertaken and, since he was not part of the Highways Department and had not made any enquiry of them, he did not know whether or not they had done so, or planned to do so. He accepted that it was not Cumbria’s case that the defects complained of necessarily made the roads unsafe. In my view the only sensible inference which can be drawn is that as a highways authority Cumbria has decided that it is not necessary to undertake any particular remedial works in relation to these defects. It appears that they are subject to the same regime of inspection and, where necessary, maintenance or repair as the other areas of highway within Cumbria, where it would appear that roads are inspected with a regularity of anything between once a month and once a year. In the absence of any evidence of repairs being undertaken, it is reasonable to assume that the highways inspectors undertaking inspections of these areas of these roads have decided that the defects are not sufficiently serious to justify repair. Whether they will be worked on, by repair or otherwise, in the future, in advance of the time when they might otherwise have been repaired or worked on even if the defect was not present, must be a matter of pure conjecture in those circumstances. Item 1 34.19. The other individual item referred to in oral evidence was item 1. The pleaded allegation is that the sub-base material failed on testing as regards its grading and its plasticity, but that instead of seeking to replace the sub-base Cumbria was claiming the cost of monitoring over the 20 year lifespan of the sub-base. Amey’s response did not admit that there was a breach, but it was also contended that there would be no need for Cumbria to undertake any monitoring beyond the normal highways inspection process, in circumstances where since the sub-base had been laid in 2008 there had been no evidence of any deterioration. Amey also contended that Cumbria had failed to demonstrate any loss. 34.20. Mr Johnson was cross-examined on this item, since he had addressed it in paragraph 14 of his second witness statement, recording that although Mr Melville had wanted to replace the sub-base, even though that would have caused major inconvenience, given its location near to the entrance to a hospital, he had been overruled by John Robinson, who had accepted Amey’s proposal for monitoring to be carried out by Amey and by the materials supplier, Cemex. Mr Johnson also said that “ultimately the decision was proved correct, because the patch did not suffer. I still keep an eye out for it, and when I was in the area recently it was looking fine”. 34.21. The original defect notice had been produced by a Mr Dodds, who had simply recorded it as being a “material failure”, and Amey’s stated reason for not accepting it as a defect was that it was being monitored, in circumstances where it appeared that the test reports undertaken had demonstrated that the material was not compliant, but that there was no evidence of any actual defect resulting. Furthermore, in a defects list subsequently provided by Mr Collins, it was said that monitoring was being undertaken by Cemex, and that the surface had since been micro asphalted over. 34.22. It is clear that at the time both parties were proceeding upon the basis that there was no justification for remedial works unless or until the non-compliant sub-base caused some failure, and that in the meantime all that was required was monitoring. Indeed that is still Cumbria’s position. There is no evidence from anyone that the non-compliant sub-base has in fact caused a failure, or even a material risk of increased failure. There is no evidence from Cumbria that it has in fact been undertaking a monitoring programme in relation to this area of road in any way different from or additional to that which it would undertake in any event in its role as highways authority. It follows, in my view, that there is no evidence that Cumbria has actually suffered, or will suffer, any of the pleaded loss or damage. 34.23. Cumbria was clearly on notice that it would need to prove its claim in these respects, but failed to take any active steps to do so. I am satisfied on the balance of probabilities that this is because Cumbria has not undertaken any additional monitoring, and is unable to point to any loss or damage. In the circumstances whilst I would be prepared on the available evidence to accept that Cumbria has established a breach of contract by Amey, it has failed to establish any claim for loss or damage. Indeed the claim as advanced was clearly made in the face of what I am satisfied was a previous agreement, made by John Robinson on behalf of Cumbria, that it would be sufficient for Amey and Cemex to monitor the patch. In short, I am satisfied that this is a bad claim. 34.24. In its closing submissions Cumbria referred to this item (paragraphs 571 – 575), but did not engage with these difficulties. It appears to argue that it would have been entitled to have replaced the bed in any event, due to the materials failure, relying upon the general provision in the specification for highways works, but it does not seem to me that this advances Cumbria’s case, because: (1) this is not pleaded as a claim for replacement; (2) the section relied upon is concerned with horizontal alignment and surface levels and regularity, as opposed to a non-compliant sub-base; and (3) most importantly, because even if it was applicable I am wholly unpersuaded that this general statement of what is required in terms of rectification of a non-compliant pavement area can be taken to mean that Cumbria is entitled to insist on rectification in strict accordance with the specification in every case, regardless of the individual circumstances. 34.25. This examination of this individual claim illustrates that, as is typical of defects claims such as those in schedule 7, each individual claim has its own individual story, with its own individual arguments, all of which require elucidation through relevant evidence, documentary and witness, factual and expert, with cross-examination as reasonably necessary, in order for a fair decision to be made on each. 34.26. In its closing submissions (paragraph 567 and continuing) Cumbria invites me to “review the claimant’s schedule and make findings on liability”