BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just Β£1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!
 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
England and Wales High Court (Technology and Construction Court) Decisions |
||
|
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Rolls-Royce Power Engineering Plc & Anor v Ricardo Consulting Engineers Ltd. [2003] EWHC 2871 (TCC) (02 December 2003) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2003/2871.html Cite as: [2003] EWHC 2871 (TCC) |
||
[New search] [Printable RTF version] [Help]
QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
133-137, Fetter Lane, London, EC4A 1HD |
||
B e f o r e :
____________________
| (1) ROLLS-ROYCE POWER ENGINEERING PLC (2) ALLEN POWER ENGINEERING LIMITED (formerly NEI ALLEN LIMITED) |
Claimants |
|
| - and - |
||
| RICARDO CONSULTING ENGINEERS LIMITED |
Defendant |
____________________
Justin Fenwick Q.C. and Paul Sutherland (instructed by Barlow Lyde & Gilbert for the Defendant)
____________________
Crown Copyright ©
Introduction
"1. As from the date hereof NEI hereby appoints NEI-A.P.E. as its managing agent to undertake, carry on and conduct the management of the Business on behalf of NEI.
2. The Business shall be and remain the property of NEI.
3. As agent of NEI NEI-A.P.E. shall, subject to any directions given from time to time by NEI, perform and do such transactions dealings acts and things as may be necessary or expedient for carrying on the Business to the best advantage and shall in particular .
(b) place orders with and enter into commitments and liabilities of any description with third parties for the operation of the Business, .
but all such operations shall be on behalf of NEI who will at all times indemnify NEI-A.P.E. in respect thereof.
5. NEI-A.P.E. shall on behalf of NEI discharge and meet all the liabilities and obligations arising from the conduct of the Business and NEI shall hold it fully indemnified against all liabilities and obligations of any description which NEI-A.P.E. may incur to the intent that NEI and not NEI-A,P.E. shall bear and incur any liabilities and losses of the Business.
10. All the activities of NEI-A.P.E. in respect of the Business will be on behalf of and for the account of NEI ."
"1. With effect from 1st January 1992 NEI appoints Allen to act as its agent in conducting the Activities on the terms hereof.
2. The Activities shall be and remain the property of NEI.
3. As agent of NEI, Allen shall, subject to any directions given from time to time by NEI, perform and do such transactions dealings acts and things as may be necessary or expedient for carrying on the Activities to the best advantage and shall in particular:
3.1 conduct the management and administration of all tenders, quotations, contracts and other aspects of the Activities;
3.2 place orders with and enter into commitments and liabilities of any description with third parties for the operation of the Activities,
3.5 hold to the order and account of NEI all goods, monies and other property of whatever nature which shall come into its possession or which it may receive in carrying out the Activities under this Deed with full power and authority subject to any directions which it may receive from NEI from time to time to deal with and dispose of the same in any manner for any purpose connected with the Activities to the intent that the beneficial ownership of all such goods, monies and property shall at all times be vested in NEI and not in Allen and so that all profits accruing from the Activities shall belong to NEI and not to Allen.
4. Allen shall on behalf of NEI discharge and meet all the liabilities and obligations arising from the conduct of the Activities and NEI shall hold Allen fully indemnified against all liabilities and obligations of any description which Allen may incur to the intent that NEI and not Allen shall bear and incur any liabilities and losses of the Activities.
7. NEI shall pay to Allen all salaries wages and incidental payments in connection with its employees as shall be required by Allen on monthly account or otherwise as agreed and ensure that at all times Allen is funded to meet all its financial obligations.
8. Allen shall enter into any contracts and other obligations necessary for the Activities ordinarily in its own name acting as the agent for the undisclosed principal NEI or, in special circumstances with NEI's consent, in the name of NEI acting as NEI's disclosed agent. NEI undertakes to ratify any contracts made or actions taken by Allen in the management of the Activities and, where necessary, to provide a parent company guarantee to third parties in respect of obligations undertaken by Allen under or pursuant to such contracts or actions.
10. All the activities of Allen in respect of the Activities shall be on behalf of and for the account of NEI.
11. Unless NEI shall otherwise agree, NEI shall arrange to have all insurance policies whether by way of indemnity guarantee or for any other purpose endorsed to the effect that the policies shall enure to the benefit of Allen for its rights, interests and obligations."
"The Goods and the Work must be supplied and rendered strictly in accordance with the requirements of the Contract. In the absence of a specific reference to specification the Goods and the Work must be new and of first class quality."
For the purposes of the Conditions the expression "the Goods" was defined as meaning "the goods and materials to be supplied by the Seller under the Contract", while the expression "the Work" was defined as meaning "the services to be provided by the Seller under the Contract".
"2. The claims in this action are brought by the First Claimant as principal to the contracts described below and as the party that has suffered the substantial loss and damage; and in the alternative, by the Second Claimant in its capacity as agent for the First Claimant and party contracting on behalf of the First Claimant.
3. For the purposes of these Particulars of Claim, no distinction is drawn between the two companies and they are referred to jointly as "Rolls-Royce"."
It is unclear whether the unhelpful decision not to distinguish in the Amended Particulars of Claim between the two Claimants was made deliberately so as to attempt to conceal the important issues as to what duties, if any, Ricardo owed to RRPE, and whether, if no duties were owed by Ricardo to RRPE, Allen could recover damages in respect of losses in fact suffered by RRPE, or whether it was simply a misguided effort at finding a short-hand way of referring to the Claimants. If the former, it certainly did not succeed. The inelegance of seeking to have the two Claimants treated as one and indistinguishable only in the event served to call attention to the importance of the issues to which the reality of the separate identities of the two Claimants was relevant.
"15.1 At all material times, in carrying out the design, development, testing, manufacture and sale of the AX500 engine, and in instructing Ricardo, Allen held itself out to Ricardo as acting for itself as principal, and not as agent for Rolls Royce or anyone else. All negotiations were between Allen and Ricardo, and all relevant contracts were entered into between Allen and Ricardo. At no time did Allen indicate to Ricardo that it was purporting to contract on behalf of Rolls-Royce. Rather, at all material times Allen acted and described itself as the sole contracting party.
15.2 Further and in any event, Ricardo's engagement was for it to act in collaboration with Allen. Ricardo's personnel were to be (and were) based at Allen's premises and were to (and did) work closely with the Allen designers and analysts. Allen had approached Ricardo personally. It was understood that it was a team of designers from Allen with whom Ricardo had agreed to work and collaborate.
15.3 Accordingly and in any event Ricardo puts the Claimants to strict proof of the fact, nature and extent of the alleged relationship of agency between Rolls Royce and Allen, and of its applicability to the contracts which are the subject of these proceedings.
15.4 In the premises, it is not admitted that Rolls-Royce is entitled, as between itself and Allen, to the benefit of the said contracts as principal and it is denied that Rolls-Royce is entitled to enforce the terms of the same against Ricardo as principal or otherwise.
17. . Ricardo's case as to the legal relationship between itself and the Claimants is as follows:
17.1 Allen Ricardo accepts that it owed contractual and concurrent common law duties to Allen, as detailed in paragraphs 47 and 48 below;
17.3 Rolls Royce As indicated in paragraph 15 above, Ricardo does not admit and puts Rolls Royce to strict proof of the alleged contractual relationship between Ricardo and Rolls Royce. Ricardo denies that it owed any common law duties to Rolls-Royce (paragraph 48 below). .
121. Ricardo will contend that Allen can only recover such loss as it has suffered and that, in assessing the existence and extent of such loss, Allen cannot recover in respect of Rolls-Royce's losses, except to the extent that they are liable in respect of such losses and that it was reasonably foreseeable by Ricardo that they would suffer such loss. Ricardo will rely in this context on the terms of the agency agreement (if any) that Allen proves that it had with Rolls-Royce, including the terms of any indemnity.
122. Ricardo will contend that Rolls-Royce cannot recover any loss suffered by it from Ricardo, and/or that if Rolls-Royce is entitled to recover such loss, it cannot recover it to the extent that the real cause of the loss was any breach by Allen of the duties owed by Allen to Rolls-Royce."
"117. Further or alternatively, Ricardo will contend that any loss which the Claimants may have suffered was caused alternatively contributed to by negligence on the part of the Claimants themselves. On the basis of the Claimants' Particulars of Claim and Further Information provided to date, and the limited information in relation to the testing of the AX500 engines presently available to Ricardo, the best particulars of the foregoing which Ricardo is presently able to provide are as follows. Ricardo reserves the right to revise this section of the Defence in the light of further information and clarification of Allen's conduct of the NEDD [New Engine Design and Development] process and its application of the principles set out in section 4 above.
118 On the part of Allen:
118.1 Allen failed to carry out adequate testing, Post-test inspection and/or trial release of the AX500 engine. If and to the extent that there were defects in the design as alleged in the Particulars of Claim, these ought to have been detected in the course of the Claimants' testing, Post-test Inspection and/or trial release.
118.2 Allen attached undue and inappropriate significance to the results of the FEA carried out to the con[necting] rod and cylinder head designs, and to the advice of Ricardo, by (as Allen asserts on its own case) treating the FEA carried out during the Definitive Design phase as having "validated" the design of the engine at the time of deciding to enter into production and/or release for sale.
118.3 Allen failed to heed Ricardo's advice at the Design Review Meeting No. 4 on 6th July 1995 that there was a prediction of separation and risk of fretting to the con rod palm face and that this was a matter which required careful monitoring during testing. Without prejudice to the generality of the foregoing, Allen ought to have devised and effected a detailed testing regime directed specifically at the monitoring and assessment of the risk of fretting and any consequences of the same (including in particular crack initiation and propagation), to include extended component testing with periodic examinations and crack detection tests at the palm face.
118.4 Allen failed to heed or act upon the fretting to the con rod which was detected on the palm face at an early stage of testing. Having discovered such fretting during testing, Allen ought to have:
118.4.1 recognised and fully investigated the possible consequences of such fretting, namely crack initiation and propagation, potentially resulting in catastrophic failure of the connecting rod and the risk of fatal or serious injury.
118.4.2 In particular, Allen ought to have carried out rigorous testing to ascertain the severity of the problem and risk which it presented, as referred to in the last sub-paragraph.
118.5 Between the Definitive Design phase and production of the AX500 engines Allen effected significant changes to both the connecting rod and cylinder head design, but failed
118.5.1 To consider the possibility that the changes may adversely affect the Factors of Safety as calculated by Ricardo and used by them in assessing the fitness of the components for subsequent testing;
118.5.2 To refer the changes to Ricardo, or to perform (themselves or otherwise) any or any appropriate FEA of the revised design;
118.5.3 To validate the revised designs, by means of increased engine and/or rig testing.
118.6 Without prejudice to the generality of the preceding sub-paragraph, during the Definitive Design phase Allen failed to make sufficient resources and staff available for training by Ricardo and/or to take over Ricardo's models during the final stages of the Definitive Design phase, and failed to purchase the necessary software to make full use of Ricardo's analysis (both during the Definitive Design phase and thereafter as necessary and appropriate), in breach of the express and implied terms referred to in paragraph 49 above.
118.7 Allen failed to subject the AX500 engine to a trial release prior to general release of the engine into the marketplace. Allen ought to have identified and approached an appropriate customer and entered into an appropriate pre-production agreement with it on terms which enabled an actual production engine to be subjected to extended and intensive use without risk to safety or significant financial losses in the event of a failure of the engine during such trial release.
119 On the part of Rolls Royce (strictly without prejudice to Ricardo's non admission that it owed contractual duties and denial that it owes common law duties to Rolls Royce):
119.1 Ricardo is presently unaware of the precise relationship between Rolls Royce and Allen or of the involvement of Rolls Royce in relation to this project. However so far as Ricardo is aware, on the Claimants' own case:
119.1.1 Rolls Royce had a duty to monitor and/or oversee Allen's conduct of the design, development and testing of the AX500 engine.
119.1.2 In any event, in view of Rolls Royce's interest in the outcome of the NEDD process, Rolls Royce ought to have done so, and to have taken care in doing so.
119.2 Further, prior to entering into production, entering into contracts for the sale of the new AX500 engines and/or releasing the engines onto the market, Rolls Royce ought to have considered carefully the nature and extent of testing of the engines carried out by Allen, and the extent to which Allen had properly applied the principles set out in section 4 above. Insofar as necessary Ricardo will rely on admissions by Mr. Ruffles, a senior director of Rolls Royce, at the review meeting of 15th May 2001 to the effect that it was dismayed and concerned at, amongst other things, the lack of design/change control processes and component release processes in relation to the AX500 engine.
119.3 Rolls Royce also ought to have taken care to set up an appropriate regime for release of the AX500 engine on a trial basis at the outset, in the manner referred to in paragraph 118.7 above. Without prejudice to the generality of the foregoing, Ricardo will insofar as necessary refer to the Claimants' admission at the foregoing review meeting of 15th May 2001 that they would have wished a trial release of the AX500 engine comprising 8000 hours of service prior to general release and sale, but that only 2,000 hours had been possible.
119.4 Before embarking on a programme of developing, manufacturing and/or marketing the AX500 engine through the agency of Allen and/or using designs produced and/or developed by Allen, Rolls Royce should have taken steps to satisfy themselves that Allen had sufficient resources and/or experience to carry out the tasks delegated to them and/or should have taken proper steps to monitor the performance of Allen and/or to satisfy itself that the AX500 had been properly developed and tested so as to be in a fit state to be manufactured and sold commercially.
119.5 So far as Ricardo is aware Rolls Royce failed to take any of the abovementioned steps or measures and/or failed to exercise appropriate care in doing so. Had Rolls Royce done so, it would have discovered the inadequacies in Allen's testing and withheld the engines from the market until an appropriate level of testing had been successfully carried out.
119.6 Further and in any event, Rolls-Royce on its own case relied solely and exclusively on Mr. Youdan. Ricardo will say that it was unreasonable of it to do so.
119.7 Further, on the Claimants' own case as to the involvement and interest of Rolls Royce in the project, Rolls-Royce ought to have applied (but so far as Ricardo is aware failed to apply) its own FEA skills and expertise to assess the design and analysis of the AX500 in the light of its development history."
"133.3 However so far as Ricardo is aware Allen owed common law duties and express or implied contractual duties to Rolls Royce obliging it to exercise the level of skill and care reasonably to be expected of engineers in the position of Allen in and about:
133.3.1 conducting and supervising the NEDD process and applying the principles referred to in section 4 herein above;
133.3.2 supervising the subsequent manufacture of engines;
133.3.3 responding promptly, diligently and with due care to faults and problems encountered with the engines post-sale.
134. Further Allen was in breach of the aforementioned duties owed to Rolls Royce, in the respects set out in paragraph 118 above. Ricardo will rely in particular on the Claimants' own admission in answer to Request 6 of the Further Information served on 31st January 2003, in which Rolls Royce accepted that "Because of his position as Programme Manager of the AX500, the senior management of the First and Second Claimant relied on Mr. Youdan to alert them if the design integrity was not confirmed", and that Rolls Royce relied upon the absence of any warning from Mr. Youdan that the design integrity of the AX500 engine was not confirmed."
"1. Did the Second Claimant enter into the Definitive Design Contract as:
a. Principal to the Contract; or
b. As agent for the First Claimant (and if so, was the First Claimant a disclosed or undisclosed principal)?
2. Did the Defendant owe the First Claimant a duty of care in respect of any or all of the losses pleaded?
3. Were the Rolls-Royce General Conditions of Purchase ("the Conditions") incorporated into (and if so, to what extent, having regard to paragraph 44 of the Defence) the Definitive Design Contract, as pleaded at paragraph 14 of the Particulars of Claim?
4. If the answer to question 3 is that clause 4 of the Conditions was incorporated into the Definitive Design Contract, (a) is the obligation on Ricardo to supply Work of first class quality pursuant to clause 4.1 of those Conditions different to, and more onerous than, the (admitted) duty to exercise reasonable skill and care? (b) Is the obligation on Ricardo to supply services strictly in accordance with the requirements of the Contract pursuant to Clause 4.1 of the Conditions different to and more onerous than the (admitted) duty to exercise reasonable skill and care?
5. If the answer to question 4(a) or question 4 (b) is yes, is the defence of contributory negligence available to the Defendant (a) as against the First Claimant, and (b) as against the Second Claimant?
6. Did the Second Claimant owe the First Claimant a duty of care and if so is it open to the Defendant to claim a contribution from the Second Claimant pursuant to the Civil Liability (Contribution) Act 1978 in respect of any breaches by the Second Claimant of that duty of care, as alleged in the Part 20 Claim?
7. In the event that (a) the Second Claimant entered into the Definitive Design Contract as Principal and (b) the Defendant did not owe the First Claimant a duty of care in respect of any or all of the losses pleaded, is the Second Claimant entitled to recover losses suffered by the First Claimant on any of the following bases (as set out at paragraphs 64 and 64A of the Amended Reply and Defence to Part 20 Claim);
(a) As agent for the First Claimant, the undisclosed principal;
(b) As trustee;
(c) In accordance with the rule in Dunlop v. Lambert;
(d) Pursuant to the "broad ground" of recovery in McAlpine Construction v. Panatown?"
The Definitive Design Contract
"41A Save that it is denied that the Purchase Orders [that is the CDC Order and the DDC Order] represented counter-offers, paragraph 13A is admitted. The Purchase Orders represented confirmation by Allen of its acceptance of the offers contained in Ricardo's Proposal documents, as was originally pleaded by the Claimant in paragraph 13 of the Particulars of Claim, and was admitted and averred by Ricardo in Reply 45 of the Further Information served 13th June 2003. In support of the foregoing (and by reference to the Definitive Design Contract in particular) Ricardo will rely upon the following:
41A.1 during the course of a meeting between Mr. G H Youdan and Mr. Niven and Mr. P McNamara of Ricardo at Allen's premises on or about 10th August 1994, Mr. G H Youdan told Mr. Niven and Mr. McNamara that, as regards the Definitive Design stage of the project, Allen now "had the budget approval from Rolls-Royce and would be issuing the order shortly. The scheduled start date is 12.09.94." The reference to "order" was a reference to the issue by Allen of a purchase order, which was to represent formal confirmation of Ricardo's appointment for the Definitive Design phase pursuant to the Definitive Design Proposal.
41A.2 Further, by letter dated 18th August 1994 Mr. Youdan wrote to Mr. Niven confirming the then present position as follows:
"With regard to the Definitive Phase AX500 project I would like to advise you of the status of our administrative process in preparation for continuing this design work beginning on Monday September 12. The formalities of internal presentation/phase gate sign off has had to be rearranged to fit changed vacation and business schedules. This however does not change the plans we agreed to begin the reassembly of your team etc at the beginning of week 37. The purchase order requisition has been signed by two of the three needed and is only waiting for the General Manager's return to the office on Friday for the final signature. For the record requisition number is 31030. I hope this information is sufficient for now and look forward to meeting you again after your well earned vacation."
41A.3 In the premises, even prior to Allen's issue of the Purchase Order dated 31st August 1994, Allen had agreed in principle to appoint Ricardo pursuant to the Definitive Design Proposal, subject to formal confirmation which was to be provided by way of issue of a Purchase Order. Further, such confirmation would be provided "shortly", on completion of Allen's internal administrative processes and formalities.
41A.4 Accordingly when Allen issued the Purchase Order on 31st August 1994 and sent a copy of the same to Ricardo by fax on the same day, this represented not a "counter-offer" as alleged by the Claimants but Allen's formal and final confirmation of Ricardo's appointment for the Definitive Design phase, in accordance with the Definitive Design Proposal.
41B Paragraph 13B is denied. Even if, contrary to the foregoing, the Purchase Orders did represent only counter-offers, those counter-offers were accepted by Ricardo's letters of acknowledgement of the Purchase Orders, written and sent to Allen on 22nd December 1993 and 31st August 1994."
"The results of work performed during the project would be the property of NEI-Allen. If any innovative design or manufacturing techniques are developed by the joint engineering team during the project, NEI-Allen would have the right to patent such an item in its name and at its expense."
"This proposal describes a scope of work for Ricardo to assist NEI-Allen in the definitive design and analysis of a new family of engines.
The proposed work makes extensive use of CAE methods to optimise the design and provide a "right first time" solution.
The method of working is collaborative and it is proposed that Ricardo engineers work at the W H Allen site at Bedford. The Ricardo engineers would bring with them Ricardo computing and software facilities.
The method of working will facilitate technology transfer and will allow W H Allen engineers to use Ricardo software prior to purchase."
"A proposal (DP 93/1218) was submitted in response to a request from NEI-Allen Limited (W H Allen) made during a meeting at Ricardo on 13th May 1993. The meeting discussed how Ricardo could be of assistance to W H Allen in the concept and definitive design of a new family of engines. The document presented the assistance Ricardo would provide with the definitive design. .
During the course of the design process, W H Allen wish to expand their in-house analysis capability, particularly in the area of analytical software and experience of using it for their new engine design ."
"2.1 To provide design analysis support to the definitive design of a new W H Allen family of engines in the following areas:
- Provision of design assistance to the W H Allen team and assistance in co-ordination of the analysis activities.
- Thermodynamic simulation of the engine to assist in the design optimisation.
- Design analysis to support the engine design.
2.2 To support the design with finite element structural analysis of the major components.
2.3 To provide technology transfer to the W H Allen design and analysis team."
"Ricardo would provide assistance to the W H Allen team performing the design and analysis. In order to achieve a closely integrated team, work would be performed both at W H Allen and Ricardo by the Ricardo engineers. During the definitive design stage, Ricardo would provide analysts together with computers and software at the W H Allen site at Bedford. In this way, the best use is made of the available sources and technology transfer is facilitated from Ricardo to W H Allen personnel.
In the first half of the engine design programme, Ricardo would provide significant computer aided engineering (CAE) assistance to ensure that all the models are in place in good time to feed back into the design. The models would be progressively handed over to the W H Allen staff so that in the final stages of the programme they are performing the updating and iteration necessary on these models. This method of working would make the best use of the available resources and facilitate technology transfer from Ricardo to W H Allen."
"Ricardo understand that W H Allen would be using a team of four designers/analysts and one specialist analyst during the definitive design phase. The Ricardo support to the staff could be considered in two separate areas. The first is the design assistance and miscellaneous support tasks which would go on throughout the programme and the second area is the computer aided engineering work which would see a significant Ricardo input at the start of the programme. The Ricardo input to CAE work would gradually tail off as W H Allen take over the CAE models for iteration work, later in the design.
Throughout the programme there would be, on average, a one man support to W H Allen in the area of design and technical co-ordination. In addition a miscellaneous support task allows for a further half man during the programme. The specific task which this resource would be allocated to would be decided during the programme .
For approximately half the programme, the Ricardo support would be a four man team for CAE. This would reduce to one man during the second half of the programme.
Approximately one half of the Ricardo CAE work would be performed at the W H Allen site at Bedford. Throughout the programme, there would be two Ricardo silicon graphics workstations plus a remote terminal to it placed at the Bedford site. The workstations would be complete with Ricardo software to allow operation as stand alone analysis facilities. The workstations would be connected via a modem link to the Ricardo site at Shoreham to allow data transfer for large analysis tasks.
The aim of the Ricardo team would be to achieve a completed definitive design for the 6-cylinder in-line version. All other members of the engine family would not have been completed but the definitive designs would be well underway for the other family members."
"5.1
At the start of the definitive design phase, a senior engineer would be appointed to act as technical co-ordinator for the Ricardo work and be the main contact between W H Allen and Ricardo during the work.
The technical co-ordinator would spend 20% of his time throughout the project involved in design and analysis decisions, both at W H Allen and Ricardo.
5.2 Task 2 Thermodynamic Simulation
It is assumed that this task would be performed primarily by the W H Allen engineers with Ricardo support. It is also assumed that W H Allen would have already purchased the WAVE software by the start of the definitive design phase. .
5.4 Task 4 Finite Element Analysis
The finite element analysis would be performed by a team made up of W H Allen FE specialists and Ricardo engineers. The exact scope of work allocated to each of the engineers would be decided at the start of the project.
5.6 Task 6 Miscellaneous Design and Analysis Support
An allowance has been made in the price for general analysis and design support by Ricardo for W H Allen. This would be used to perform any tasks which cannot be identified at the start of the project. "
"The programme of work for the definitive design has been constructed so that the software necessary to ensure a good design would be made available at the W H Allen site at Bedford on Ricardo hardware.
During the definitive design, W H Allen engineers would be able to work with the software in collaboration with Ricardo engineers, through the use of the additional terminal on the Ricardo silicon graphics work station. This would provide W H Allen with a clear understanding of the capabilities of the software, training in the use of the software and where the software can be used during a design programme. Having obtained this experience in the use of the software, it would allow W H Allen a clear judgement on which software to proceed with to purchase. This proposal for definitive design assistance assumes that W H Allen have purchased the WAVE software at some point during the concept phase."
"Provision of new engine concept design as discussed between your Messrs. H. Niven and J.M. Hales and our Mr. G.H. Youdan. Your ref J50369; DP93/2544 refers."
After the details of stage payments the CDC Order went on:-
"Payments due 60 days from invoice"
That was not a provision which had featured in the First CDC Proposal. The print on the Standard Form included:-
"Please supply the above Goods and/or Work to the Conditions overleaf [that is to say, the Conditions]."
"We acknowledge and thank you for your Purchase Order No: 529/655, dated 20 December 1993. However we would point out that our payment terms are strictly 30 days, in accordance with Clause 8.3 of our proposal which you have referenced on the order, and our quoted [sic] being given on that basis."
"Please supply New Engine Definitive Design Support Re Your Ref J50369, DP93/2568 Refers"
Unlike in the case of the CDC Order there was no reference to any discussions between representatives of Allen and Ricardo.
"We acknowledge and thank you for your Purchase Order No: 529/688, dated 31 August 1994. However we would point out that our payment terms are strictly 30 days, in accordance with our proposal which you have referenced on the order and our quote being given on that basis. (J50369 DP93/2568).
We accept your order subject to the above, and confirm that it is receiving our attention."
"Unless otherwise agreed in writing, the terms of payment are nett 60 days from completion of the Contract in all respects."
In opening the Claimants' case orally Mr. Marrin submitted, for reasons which were not altogether clear to me, that the counter-offer contained within the DDC Order was accepted by Ricardo by the letter of acknowledgement dated 31 August 1994 because in that letter Ricardo sought to make alternative provision as to the timing of payments of invoices, which provision was expressed in writing and was accepted by Allen by conduct. A less contrived analysis would be that the letter dated 31 August 1994 written by Ricardo was a further counter-offer to the counter-offer contained in the DDC Order in that it sought to reinstate provision for payment of invoices within 30 days, whilst accepting the other terms proposed in the DDC Order. That further counter-offer was itself capable of being accepted by conduct. In his closing submissions Mr. Marrin accepted that the latter was the preferable analysis.
"PMM and I visited Glyn Youdan, the AX500 project leader, to discuss the next phase, namely the definitive design. He said that they had the budget approval from Rolls Royce and would be issuing the order shortly. The scheduled start date is 12.09.94!"
Mr. McNamara said a little more in his witness statement dated also 29 September 2003, but what he said did not take matters further:-
"On 10 August 1994, Humphrey Niven issued an internal memorandum concerning the AX500 project which referred to a meeting which he and I had with Glyn Youdan. The memo reported that WHA had received approval from Rolls-Royce and that WHA would be issuing the purchase order shortly. I took this to mean that WHA wished to appoint Ricardo in respect of the definitive design phase of the project on the terms set out in the definitive design proposal, the latter to be confirmed by WHA's purchase order. Consequently, we commenced forward planning, even before receipt of the purchase order. When the purchase order was received, although I doubt that I would have seen it, I would not have considered it, or any standard terms and conditions attached to it, to represent a counter-offer to the proposal, but merely confirmation of the acceptance of the definitive design proposal. "
Whatever Mr. McNamara's private opinions as to the significance of the despatch of the DDC Order by Allen, he certainly anticipated that one would be sent and he did not contend that at the meeting on 10 August 1994 Dr. Youdan accepted the DDC Proposal orally.
Issue 1: Did the Second Claimant enter into the Definitive Design Contract as:
a. Principal to the Contract; or
b. As agent for the First Claimant (and if so, was the First Claimant a disclosed or undisclosed principal)?
"Further or alternatively, Ricardo was under a duty at common law to exercise reasonable skill and care in the performance of the services. In relation to the duty owed to the First Claimant, the following facts and matters are relied upon in support of the Claimants' contention that Ricardo assumed responsibility to the First Claimant to avoid causing economic loss:
(1) The Second Claimant entered into (or purported to enter into) the Concept Design Contract and the Definitive Design Contract on behalf of the First Claimant.
(2) Ricardo assumed responsibility to provide services of first class quality (see paragraph 14 above), alternatively with reasonable skill and care.
(3) Ricardo knew, or ought reasonably to have known, that (a) the First Claimant would rely upon Ricardo's services and advice and (b) that the First Claimant would be likely to suffer loss in the event of breach of duty by Ricardo (in other words), that damage was reasonably foreseeable. In particular:
(a) During the 1980s and 1990s, Ricardo had worked with Rolls-Royce plc on different projects which included extensive involvement in, for example, the Rolls-Royce Trent aero-engine programme.
(b) Ricardo had worked with Allen on various projects since the 1930s.
(c) Ricardo knew that, in 1989 Rolls-Royce plc acquired the NEI group of companies (which included Allen) and thereby created the Rolls-Royce Industrial Power Group.
(d) On or around February 1993, Ricardo had in its possession a chart which shows the breakdown of the Rolls-Royce Industrial Power Group. Further this chart described the First Claimant as a management company and the Second Claimant as a trading company under the First Claimant's control.
(e) Ricardo therefore actually knew that the Second Claimant was a wholly owned subsidiary of the First Claimant.
(f) Ricardo undertook research into, and provided a report to the Second Claimant dated 2 November 1993 concerning competing products in the medium speed diesel market. This research would have revealed (had Ricardo not already known, which is denied) the fact that the Second Claimant was a trading company under the First Claimant's control.
(g) Most, if not all, correspondence from the Second Claimant to Ricardo from as early as 26 April 1993 (including the Concept Design and Definitive Purchase Orders) was either written on Rolls-Royce letter-head or had the Rolls-Royce logo on the face of it.
(h) In its "Leads Review Form" no. 02473 dated 18 May 1993 Ricardo described the Second Claimant as "part of NEI Rolls-Royce Power".
(i) The fact that, on 10 June 1994, Ricardo attended a meeting with Stewart Miller whom they knew to be Director Engineering & Technology of Rolls-Royce plc. At that meeting Ricardo gave Mr. Miller a detailed presentation as to their services in relation to the AX500 project and discussed, inter alia, project timescales and project objectives and that Ricardo was to supply design expertise, design analysis, cycle simulation, FEA, software and technology transfer.
(j) On or before 14 June 1994, Ricardo became aware of a "Directive from Rolls-Royce" whereby the Rolls-Royce management committee had to sign off deliverables and phase gates before a project moved from one phase to the next.
(k) Ricardo knew that the Second Claimant needed approval from the First Claimant before it could issue the Definitive Design Purchase Order.
(l) On 14 September 1994, i.e. after the issue of the Definitive Design Purchase Order, Ricardo made a further detailed presentation to Stewart Miller of Rolls-Royce plc.
(m) At a meeting held on 16 September 1994 attended by Ricardo, the Second Claimant indicated that the First Claimant required that a risk assessment be carried out for the AX500 project.
(n) As Ricardo recorded in their Project Review Report, signed on 9 November 1994, Ricardo held a meeting with "W H Allen and Rolls-Royce" to discuss overall strategy and design.
(o) The fact that the Second Claimant operated as agent of the First Claimant was stated in the relevant accounts which Ricardo obtained or ought to have obtained prior to entering into the Contracts.
(4) The First Claimant belonged to a limited class of people to whom Ricardo's advice may have been foreseeably communicated.
(5) At no stage did Ricardo seek to control who might rely, receive or benefit from its advice and services (in particular, see paragraph 8.7 of the Definitive Design Proposal and clauses 6.4 and 9 of the Conditions).
(6) Further, none of Ricardo's reports contained terms which stated that they had been prepared solely for the benefit of Allen (as opposed to any other individual or company).
(7) As is set out in paragraphs 29 and following, below, the First Claimant relied upon Ricardo's advice and services.
(8) The First Claimant relied upon Ricardo's advice and services for the purpose which they were provided (see paragraph 6 above).
(9) As is set out in paragraphs 54 and following, below, the First Claimant relied upon Ricardo's advice and services to its detriment."
"20. My recollection of the nature and purpose of the meeting is quite clear: Mr. Miller was coming to look around Ricardo to see what it was doing, what its capacities were and the like. The fact that Ricardo was acting for WHA in relation to the AX500 engine gave the meeting some added purpose but was almost incidental. I am quite clear in my own mind that the meeting was intended to be high level and not specifically aimed at the AX500 project.
21. During the visit itself there was relatively little debate about the AX500 project. There was no sense that Mr. Miller was investigating the design programme as such. My impression was that he had been to WHA, had seen Ricardo's office up there and was merely keen to keep himself abreast and informed of the project. So far as I was (and am) aware, the visit was not linked (expressly or otherwise) to any question of RRPE's approval of the entry into the definitive design stage. Certainly, there was no suggestion that anything that Ricardo could contribute was intended to be relied upon for approval purposes, albeit that we, Ricardo, plainly knew that if we performed badly during the course of the visit, that could jeopardise our ongoing role. That is always the case, however. There was no suggestion at the meeting that this was anything other than WHA's project, or that the company contracting with Ricardo was anyone other than WHA. On the contrary, it was referred to as WHA's project, both by Ricardo and I believe also Stewart Miller."
"I had a useful first visit on 10 June, which met its objective of assessing their capabilities and interest in Allen's large engine programme.
They have good design tools and I met some good people. Obviously they have a very wide experience to apply to any particular project, although they are very careful to maintain commercial security between clients' programmes.
They understand our question about the competitiveness of our project, in an industry which has a number of stronger players. Their preliminary answer is that careful selection of market applications should lead to a satisfactory level of business. They also offered their opinion that, if Allen's do not launch a project like this, their diesel business will disappear.
The decisions we require to make about which new projects to support are also understood. In their view, one year's delay in launch, for instance, would not damage the business opportunity irreparably. They did make a plea, however, for preserving the joint team and not disbanding it, if it is our intention to continue in one way or another. With an eye to business, they emphasised what their contribution could be to joint development.
During a brief presentation on the Allen project, I queried whether the fuel consumption target was aggressive enough.
All these points need further examination. We agreed to have a fuller joint technical review after the present concept design phase was completely [sic], possibly in August."
"24. The only other involvement so far as I am aware with any of the Rolls-Royce companies was with Mr. Miller in October 1994. We were asked to attend a meeting. This had been foreshadowed in a thank you letter (dated 13 June 1994) which Stewart Miller sent me shortly after the June visit. In it he had said that he had been in touch with WHA and that a "more thorough review of their project" would be arranged after the concept design was completed.
25. I believe Stewart Miller's secretary called me and said he wanted a meeting at Rolls-Royce's head office in London to discuss the further design stages of the AX500 project. It was my understanding (based on, I believe, a conversation that either Martyn Raynor or I had with Glyn Youdan) that the purpose of the meeting was to confirm the viability of the AX500 as a marketable engine. I did not understand the continuation of the engine design to be contingent on the meeting. Glyn Youdan was aware that a meeting was to be requested and he sent us a copy of a presentation that he had made to Rolls-Royce in September. Glyn Youdan did not give any idea as to what he wanted Ricardo specifically to say at the meeting, but I do remember him saying that he wanted Ricardo to put on a good show. I would have expected nothing less in any event.
26. Both Glyn Youdan and David Beighton attended the meeting. They gave an introduction to Ricardo's role in the concept design and Ricardo then described our proposed involvement in the definitive design. During the meeting, Mr. Miller said (and I think it was in his summing up) that Rolls-Royce were providing funding for the engine programme. This was no particular surprise to us, given what I have already said as to our understanding of the roles of the companies.
27. I do not believe that anything was said at the meeting which was inconsistent with our understanding of the roles of the companies. In particular there was no suggestion that this was Rolls-Royce Power Engineering's project and not WHA's own project, or that the company with which Ricardo was contracting at the Definitive Design stage was anyone other than WHA.
28. I specifically recall that Mr. Miller's main enquiry was about the place of the proposed new engine in the large engines market generally. In other words, the comfort he was looking for from Ricardo was whether if the engine was built according to the concept and early stage of the definitive design, would it be a marketable product? At that stage, whilst we may have had concerns over WHA's resources, and whilst the engine itself was not particularly innovative, there was no reason why it ought not to be marketable. There is no doubt that Mr. Miller was taking a lot more interest in the project at this stage, and whilst he indicated that he was relying upon Ricardo in terms of comfort that the engine was one which was likely to be marketable and therefore in principle worth pursuing, he did not look for, and we did not give, any advice as to the processes by which the engine could be developed.
29. The discussions in the meeting did not affect my previously held views as to with whom we were contracting, namely WHA. Nor did they change my understanding as to what the purpose of the meeting had been. The simple point was that Mr. Miller was looking for reassurance that a relatively conservative design would be competitive, not that Ricardo would ensure (beyond its normal obligations) that WHA would build the engine properly or that Ricardo would give Rolls-Royce its assurance in this respect.
30. At the end of the meeting, Mr. Miller thanked us. He said he looked forward to seeing a good product."
"9. D indicated in its Note for the PTR (at para 6.1) that the first issue that arises in relation to agency is (and the facts relevant to the issue are):
"whether Allen in fact entered into the contract of appointment with Ricardo intending to act as agent for RRPE. None of the 7 Allen witnesses support this; they do not even refer to the 1992 "Management Agreement" relied upon in the Claimants' pleadings; indeed the witnesses do not even suggest that as at 1994 they were aware of the alleged relationship of agency".
10. The burden is clearly on the Claimant to show that Allen did have the necessary intention to act as agent. Accordingly, and since the D expressly raised the point at the PTR, it is surprising that the Claimants (a) have not sought to adduce supplementary evidence of such an intention, and (b) have not even addressed this issue in their Opening Note.
11. D submits that, absent any evidence that Allen did have such an intention (which is the case here even before any cross-examination of the witnesses), the Claimants' case on agency must fail.
12. The Claimants' contemporary documents also suggest that Allen did not intend to contract (and indeed did not contract) as RRPE's agent. The Claimants have disclosed over 650 files of documents in this case. In October 2003 they proposed that 9 lever arch files of those documents be included in the preliminary issue trial bundles (Bundle E). Aside from the Management Agreement itself, not a single one of those documents even refers to the alleged relationship of agency between Allen and RRPE.
13. In fact the documents paint a very different picture. They suggest that Allen conducted its business, and pursued the AX500 project, in its own right, and not on behalf of RRPE. See for example:
(a) The fact that the phase gates were signed off by Allen internally, i.e. by directors of Allen not RRPE. So far as approval was required from RRPE or "Rolls Royce", the Claimants rely heavily on the involvement of Mr. Stewart Miller, and the need to obtain his approval for entry into the Definitive Design phase. They appear to have lost sight of the fact that Mr. Miller was a director of Rolls Royce Plc, not RRPE, the alleged principal.
(b) The contemporaneous documents, which Ricardo will refer to during the course of the trial next week.
14. The strong impression is that the "Management Agreement" document came into being principally if not solely in order to justify the adoption of a convenient and cost effective single accounting system within the companies in the RRPE group. In particular, it avoided the need for separate accounts to be prepared in respect of each of the companies in the group, and (by stipulating that RRPE's role as principal was to be undisclosed) had the added advantage of ensuring that the exposure of RRPE itself to potential liability under Allen's contracts, was kept secret.
15. There is no evidence to suggest that the Management Agreement was intended to apply, or did apply, beyond such accounting matters. Indeed, for the reasons already referred to above, the evidence suggests the contrary."
"For present purposes the law can be summarised shortly. (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal."
"(3) Evidence as to whether in any particular case the principal assured or other contracting party did have the requisite intention may be provided by the terms of the policy itself, by the terms of any contract between the principal assured or other contracting party and the alleged co-assured or by any other admissible material showing what was subjectively intended by the principal assured."
Mr. Marrin accepted that the relevant intention was subjective, as Colman J suggested, but submitted that the Second Management Agreement was, in Colman J's terms "any contract between the [agent, in this case] and the alleged [principal]" which demonstrated the requisite intention subjectively.
"The present case is concerned with the fifth of the features noted above. The law in that connection was stated by Diplock LJ in Teheran-Europe Co. Ltd. v. S.T. Belton (Tractors) Ltd. [1968] 2 QB 545, 555:
"Where an agent has actual authority and enters into a contract with another party intending to do so on behalf of his principal, it matters not whether he discloses to the other party the identity of his principal, or even that he is contracting on behalf of a principal at all, if the other party is willing or leads the agent to believe that he is willing to treat as a party to the contract anyone on whose behalf the agent may have been authorised to contract. In the case of an ordinary commercial contract such willingness of the other party may be assumed unless either the other party manifests his unwillingness or there are other circumstances which should lead the agent to realise that the other party was not so willing."
"(1) Said v. Butt [1920] 3 KB 497 where the undisclosed principal purported to use an agent to buy him a theatre ticket when he knew that the theatre would not have sold the ticket to him had he attempted to buy it himself;
(2) Collins v. Associated Greyhound Racecourses Ltd. [1930] 1 Ch 1 where the Court of Appeal held that an undisclosed principal was not entitled to rely on an agent's application for shares on the terms of a prospectus and memorandum and articles of association as, under the terms of the transaction, the company was entitled to consider the personality of the applicant before deciding to accept the application;
(3) Greer v. Downs Supply [1927] 2 KB 28 (CA) where the third party only entered into the contract with the "agent" because the "agent" was its debtor."
"23. It is submitted that the correct approach is to consider whether or not it was a term of the Definitive Design Contract that no other individual (i.e. Rolls-Royce) had any interest in Allen's contract with Ricardo.
25. [second paragraph so numbered] On Ricardo's case the following provisions of the Definitive Design Proposal appear relevant:
(1) That Allen's engineers would be entitled to use Ricardo software and that ultimately "technology transfer" would take place (see, inter alia, clause 2.3);
(2) Section 6 states that during the concept design "W H Allen engineers would be able to work with the software in collaboration with the Ricardo engineers";
(3) Section 4 states that Ricardo understands that Allen will be using a team of four designers/analysts and one specialist analyst. It does not stipulate who those designers/analysts will be nor does it stipulate:
(a) Whom they will be employed by; and
(b) Their levels of qualification or position within Allen.
As a matter of fact, the team that Ricardo thought they would be working with was the team that it got.
(4) Clause 8.7 provides that the results of work performed during the project would be the property of Allen. If any innovative design or manufacturing techniques are developed by the joint engineering team during the project, Allen would have the right to patent such an item in its name and at its expense. In other words, Ricardo was not seeking to control who would benefit from the fruits of the project; Allen had control of them and, in theory, they could transfer the patent rights to anybody they wished including Rolls-Royce.
26. At paragraph 32 of his witness statement Mr. Monaghan, Ricardo's Technical Director suggests that it was of significance that the collaboration was to be with Allen (rather than any other organisation) because Allen were well known to Ricardo. But Ricardo's interest in limiting collaboration to working with Allen would not preclude Rolls-Royce having an interest in the contract.
27. The Claimants submit that none of these matters is such as to suggest that it was a Term of the Definitive Design Contract that no-one other than Allen would have an interest."
"I have been asked whether it was of any significance to Ricardo that it was contracting with WHA rather than anyone else The answer is that this was of significance. Both the Concept and the Definitive Design contracts were for a collaborative project, in which Ricardo were to work closely with (and to train) the client throughout these design development stages. We agreed to do this (and prepared our budget) on the basis that it was WHA's personnel, at WHA's premises, who were the client. WHA were well known to us and we thought that the intended collaboration was workable on the terms set out in the proposal documents, and was likely to be worthwhile (in the sense that the project was likely to be profitable to Ricardo both financially and in terms of adding to Ricardo's profile and portfolio). Obviously the same would not necessarily be the case with any and every other engineering firm or company."
I accept that evidence.
Issue 2: Did the Defendant owe the First Claimant a duty of care in respect of any or all of the losses pleaded?
"I therefore return to the question in what circumstances should the law deem those who give advice to have assumed responsibility to the person who acts upon the advice or, in other words, in what circumstances should a duty of care be owed by the adviser to those who act upon his advice? I would answer only if it is foreseeable that if the advice is negligent the recipient is likely to suffer damage, that there is a sufficiently proximate relationship between the parties and that it is just and reasonable to impose liability."
Mr. Marrin concentrated his submissions on the issue of foreseeability and submitted that in view of the involvement of Mr. Miller it was foreseeable to Ricardo that, if it failed to perform with reasonable skill and care the duties which by the Definitive Design Contract it had assumed in relation to Allen, RRPE would or might suffer loss.
"Because the valuer will appreciate that his valuation, though not the only consideration which would influence the lender, is likely to be a very important one, the law implies into the contract a term that the valuer will exercise reasonable care and skill. The relationship between the parties also gives rise to a concurrent duty in tort: see Henderson v. Merrett Syndicates Ltd. [1995] 2 AC 145. But the scope of the duty in tort is the same as in contract.
A duty of care such as the valuer owes does not however exist in the abstract. A plaintiff who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered. Both of these requirements are illustrated by Caparo Industries Plc v. Dickman [1990] 2 AC 605. The auditors' failure to use reasonable care in auditing the company's statutory accounts was a breach of their duty of care. But they were not liable to an outside take-over bidder because the duty was not owed to him. Nor were they liable to shareholders who had bought more shares in reliance on the accounts because, although they were owed a duty of care, it was in their capacity as members of the company and not in the capacity (which they shared with everyone else) of potential buyers of its shares. Accordingly, the duty which they were owed was not in respect of loss which they might suffer by buying its shares. As Lord Bridge of Harwich said, at p. 627:
"It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless."
In the present case, there is no dispute that the duty was owed to the lenders. The real question in this case is the kind of loss in respect of which the duty was owed.
How is the scope of the duty determined? In the case of a statutory duty, the question is answered by deducing the purpose of the duty from the language and context of the statute: Gorris v. Scott (1874) LR 9 Ex 125. In the case of tort, it will similarly depend upon the purpose of the rule imposing the duty. Most of the judgments in the Caparo case are occupied in examining the Companies Act 1985 to ascertain the purpose of the auditor's duty to take care that the statutory accounts comply with the Act. In the case of an implied contractual duty, the nature and extent of the liability is defined by the term which the law implies. As in the case of any implied term, the process is one of construction of the agreement as a whole in its commercial setting. The contractual duty to provide a valuation and the known purpose of that valuation compel the conclusion that the contract includes a duty of care. The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking.
What therefore should be the extent of the valuer's liability? The Court of Appeal said that he should be liable for the loss which would not have occurred if he had given the correct advice. The lender having, in reliance on the valuation, embarked upon a transaction which he would not otherwise have undertaken, the valuer should bear all the risks of that transaction, subject only to the limitation that the damage should have been within the reasonable contemplation of the parties.
There is no reason in principle why the law should not penalise wrongful conduct by shifting on to the wrongdoer the whole risk of consequences which would not have happened but for the wrongful act. . But that is not the normal rule. .
Rules which make the wrongdoer liable for all the consequences of his wrongful conduct are exceptional and need to be justified by some special policy. Normally the law limits liability to those consequences which are attributable to that which made the act wrongful. In the case of liability in negligence for providing inaccurate information, this would mean liability for the consequences of the information being inaccurate.
I can illustrate the difference between the ordinary principle and that adopted by the Court of Appeal by an example. A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee.
On the Court of Appeal's principle, the doctor is responsible for the injury suffered by the mountaineer because it is damage which would not have occurred if he had been given correct information about his knee. He would not have gone on the expedition and would have suffered no injury. On what I have suggested is the more usual principle, the doctor is not liable. The injury has not been caused by the doctor's bad advice because it would have occurred even if the advice had been correct.
Your Lordships might, I would suggest, think that there was something wrong with a principle which, in the example which I have given, produced the result that the doctor was liable. What is the reason for this feeling? I think that the Court of Appeal's principle offends common sense because it makes the doctor responsible for consequences which, though in general terms foreseeable, do not appear to have sufficient causal connection with the subject matter of the duty. The doctor was asked for information on only one of the considerations which might affect the safety of the mountaineer on the expedition. There seems no reason of policy which requires that the negligence of the doctor should require the transfer to him of all the foreseeable risks of the expedition.
I think that one can to some extent generalise the principle upon which this response depends. It is that a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them."
Issue 3: Were the Rolls-Royce General Conditions of Purchase ("the Conditions") incorporated into (and if so, to what extent, having regard to paragraph 44 of the Defence) the Definitive Design Contract, pleaded at paragraph 14 of the Particulars of Claim?
"It was never intended by the parties that those or any such Conditions were or would be relevant or applicable to Ricardo's contract of engagement, in the light of its nature and the content of the proposal documents."
The second reason put forward was:-
"neither of the parties had any regard to any of the contents of those Conditions during the course of or at any time since Ricardo's engagement with Allen."
"In any event, if and insofar as, contrary to the foregoing, those Conditions were somehow incorporated into the contracts of engagement:
44.1 this was only to the extent that they were not inconsistent with what had otherwise been agreed between the parties, including in particular the contents of the Concept and Definitive Design proposal documents. On this basis Ricardo does not accept that any of the particular provisions of the standard terms and conditions to which the Claimants refer in the Particulars of Claim were applicable to the Contracts between the parties.
44.2 Further and in any event, to the extent that the standard terms and conditions purported to limit the liability of Allen and/or to render a performance of their obligations under the Contracts substantially below that stipulated, they were only incorporated to the extent that they were reasonable, and it is denied that it is reasonable of the Claimants to rely on the terms upon which they seek to rely in the Particulars of Claim to enable them to escape or diminish their responsibilities under the Contracts and/or to impose a liability on Ricardo which does not take into account the Claimants' own breaches. .."
" the standard terms on the back were nonetheless not incorporated because it was clearly not the intention of the parties that they should be:
(a) see particularly the number of iterations of the DDP proposal document prior to its finalisation: which is quite inconsistent with a sudden unilateral imposition of the proposed new terms;
(b) the contents of the small print terms are also inappropriate for a professional appointment such as that of Ricardo for the Definitive Design period [sic]. See e.g. clause 3.3: "The Seller will mark and despatch the Goods in accordance with the Buyer's instructions and ensure that each separate consignment is suitably packaged and each item is clearly identified."
(c) D also relies on C's own admission that the standard terms are inappropriate to Ricardo's appointment, as contained in a letter from John Brown of Allen to Allen's loss adjusters on 17 January 1996, regarding an insurance claim in respect of a burglary [which] included the theft of some of Ricardo's computers
"Please note that the Ricardo proposal does not specifically address the question of insurance and the purchase order conditions [are] not really appropriate to a contract of this nature, whereby the sub-contractor is actually employing people on our site and using his own equipment."
(d) There is also evidence that C did not in fact believe that it could impose its own standard terms on Ricardo. See in particular Allen's manuscript notes on Ricardo's letter of 22 December 1993 acknowledging receipt of the Purchase Order : " it will be too late to change the agreement now hopefully KK will agree to 30 days in this case"; And "Are 30 days agreed?"
(e) See also the inconsistencies between the 2 documents: e.g. the payment terms under the standard terms (clause 8.1: 60 days for payment of invoices) differ from those contained in the payment provisions in the DDP (at clause 8.3: 30 days for payment)."
"As a final point, insofar as necessary D will contend that the proposed standard terms, and in particular clause 4.1, are in any event unreasonable. D's case in this regard is set out in Reply 50 to the Further Information The point is a straightforward one. C contends that the effect of clause 4.1 is to bar any defence of contributory negligence. If that is right, then clause 4.1 represents an attempt by C to impose on D a liability irrespective of C's own breaches, and/or an attempt to escape or diminish their own responsibilities under the contract. It would be unreasonable for any such attempt to succeed."
"As against that party, the other cannot by reference to any contract term
(a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or
(b) claim to be entitled
(i) to render a contractual performance substantially different from that which was reasonably to be expected of him, or
(ii) in respect of the whole or any part of his contractual obligation, to render no performance at all,
except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness."
The "requirement of reasonableness" is set out in Unfair Contract Terms Act 1977 s. 11(1) and is "that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made".
Issue 4: If the answer to question 3 is that clause 4 of the Conditions was incorporated into the Definitive Design Contract, (a) is the obligation on Ricardo to supply Work of first class quality pursuant to clause 4.1 of those Conditions different to, and more onerous than, the (admitted) duty to exercise reasonable skill and care? (b) Is the obligation on Ricardo to supply services strictly in accordance with the requirements of the Contract pursuant to Clause 4.1 of the Conditions different to and more onerous than the (admitted) duty to exercise reasonable skill and care?
"A The first (usu the highest) of a series of classes into which people or things are grouped; a set of people or things grouped together as better than others;
B Belonging to, achieving, the first class; of the best quality, very good; of the highest order"
"Moreover, if we look at the words of these covenants, I think the true and sensible construction of them is, that this was to be a first-class station for taking up and setting down passengers; and that that was the primary object of this contract. This is a small place, and cannot possibly have any great traffic; and the intention of the parties was, that the company should afford the travellers at that station, few as they might be in number, all the advantages that were given to any other station on the line. First-class must mean something, and must mean that the station shall be in a position at least equal to any other station."
"In performing the Work the Contractor shall observe and exercise the standards of skill, care and diligence adhered to by recognised first class contractors performing work of a similar nature."
At paragraph 11 of his judgment H.H. Judge Havery Q.C. said this about that provision:-
"I do not read clause 3.5 as implying that there necessarily exist second class contractors that perform work of a nature similar to that undertaken by Snamprogetti. Rather, it recognises what may be described as the high class nature of the work undertaken. Nevertheless, whilst not requiring the services of a paragon, combining the qualities of polymath and prophet, the contract did, in my judgment, require something more than ordinary competence on the part of Snamprogetti. It required the competence of the no doubt limited number of firms that undertake work of the relevant kind."
Issue 5: If the answer to either question 4(a) or question 4(b) is yes, is the defence of contributory negligence available to the Defendant (a) as against the First Claimant, and (b) as against the Second Claimant?
"This Issue can be dealt with shortly, because C's submissions proceed on the basis of the wrong legal test. The correct position is that if the liability of Ricardo includes liability for breach of the contractual duty of care, with its tortious parallel, then the defence of contributory negligence is available."
(i) where liability does not depend on negligence but arises from breach of a strict contractual duty;
(ii) where liability arises from breach of a contractual obligation which is expressed in terms of exercising reasonable care, but does not correspond to a common law duty of care which would exist independently of the contract; and
(iii) where the defendant's negligent breach of contract would have given rise to liability in the tort of negligence independently of the existence of the contract.
That categorisation was approved by the Court of Appeal in the same case in its judgment reported at [1989] AC 852. Both Hobhouse J and the Court of Appeal held that in cases in the third category a defence of contributory negligence was available, but such defence was not available in either of the other two cases. That conclusion was applied by the Court of Appeal in Barclays Bank Plc v. Fairclough Building Ltd. The leading judgment in the latter case was that of Beldam LJ. As characterised by the Court of Appeal, the case was one falling within class (i) of Hobhouse J's categorisation, the obligation in question being a provision in a building contract that the contractor in undertaking the relevant work would comply with any relevant statutory provision or regulation. There was a failure to comply with the provisions of Control of Asbestos at Work Regulations 1987, SI 1987 No. 2115. It was contended on behalf of the defendant that that failure amounted also the torts of nuisance and trespass. That, it was said, amounted to "fault" within the meaning of Law Reform (Contributory Negligence) Act 1945 s. 4, in which the definition of "fault" which gave rise to a defence of contributory negligence was:-
"negligence, breach of statutory duty or other act or omission which gives rise to liability in tort or would, apart from this Act, give rise to the defence of contributory negligence;"
At page 230 of the report Beldam LJ rejected the submission that a defence of contributory negligence was available in a case of a breach of a contractual provision which did not consist in a want of reasonable skill and care as long as the conduct complained of was also tortious. The decision in Barclays Bank Plc v. Fairclough Building Ltd. is, as it seems to me, a complete answer, as Mr. Marrin submitted, to Mr. Fenwick's submission at paragraph 69 of his skeleton argument.
Issue 6: Did the Second Claimant owe the First Claimant a duty of care and if so is it open to the Defendant to claim a contribution from the Second Claimant pursuant to the Civil Liability (Contribution) Act 1978 in respect of any breaches by the Second Claimant of that duty of care, as alleged in the Part 20 Claim?
"However, I believe that in order to determine whether a duty arises in tort it is necessary to consider the circumstances in which the parties came together in the initial stages at which time it should be considered what obligations, if any, were assumed by the one in favour of the other and what reliance was placed by the other on the first.
The contractual structure against which the engineer and the contractor came into contract [sic possibly contact was meant] was substantially provided by the terms of the contract which, of course, were part of the background against which the tender was made.
It is now necessary to turn to consider some of the authorities relating to the specific position as between the contractor and the engineer. It is immediately apparent that there is no simple unqualified answer to the question; "Does the engineer owe a duty to the contractor in tort to exercise reasonable skill and care?" but that this question can only be answered in the context of the factual matrix including especially the contractual structure against which such duty is said to arise. "
"A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort. Subject to this qualification, where concurrent liability in tort and contract exists the plaintiff has the right to assert the cause of action that appears to be the most advantageous to him in respect of any particular legal consequence."
Issue 7: In the event that (a) the Second Claimant entered into the Definitive Design Contract as Principal and (b) the Defendant did not owe the First Claimant a duty of care in respect of any or all of the losses pleaded, is the Second Claimant entitled to recover losses suffered by the First Claimant on any of the following bases (as set out at paragraphs 64 and 64A of the Amended Reply and Defence to Part 20 Claim):
(a) As agent for the First Claimant, the undisclosed principal;
(b) As trustee;
(c) In accordance with the rule in Dunlop v. Lambert;
(d) Pursuant to the "broad ground" in McAlpine Construction v. Panatown?
Trust
"The obligation on which reliance is placed is the core obligation of a fiduciary to act in the interests of his beneficiary and not his own. Such obligation arises whenever one person (the beneficiary) entrusts the management of a particular matter to another (the fiduciary) to undertake on his behalf. It is immaterial whether the obligation arises contractually or gratuitously. In the company's skeleton it is admitted that:
"The essence of a fiduciary relationship is that one person acts for, or on behalf of, or in the interests of, or with the confidence of, another."
This is no doubt sufficiently accurate for most purposes, but it is misleading if the concluding words are taken to be an alternative, for confidence is the very essence of the relationship. Unless a relationship is one of trust and confidence, it is not fiduciary. There are many commercial situations in which one man undertakes to act for the benefit of another without any trust or confidence being reposed in him. In such a case there is no fiduciary relationship. An example, not far removed from the present case, is that of a plaintiff who brings proceedings for the benefit of an insurance company which has subrogated rights to his claim. He is accountable to the insurance company for the proceeds of the action, but he is not a fiduciary: see Lord Napier and Ettrick v. Hunter [1993] AC 713 at p752.
The mere separation of legal and equitable ownership does not without more result in a fiduciary relationship. This has led Lord Browne-Wilkinson to say that it does not necessarily create a trust: see Westdeutsche Landesbank [1996] AC 669 at p 760. This, perhaps, raises a semantic question which need not detain us, but it is certainly the case that the mere separation of the legal and beneficial ownership does not ipso facto create a fiduciary relationship.
It is in any case fanciful to suppose that the relationship between Mr. Flood and the company brought about by the assignment is a relationship of trust and confidence. Mr. Flood does not trust the company; he controls it. He is not only Managing Director (in which capacity he owes fiduciary duties to the company), but its principal shareholder (in which capacity he is not subject to any fiduciary obligations to the company). Before the assignment, as after it, and irrespective of the validity or scope of the assignment, he has had the carriage of the action. He does not need the assistance of a court of equity to prevent the company from exploiting a position of trust or confidence. The company is not in a position of trust, nor is it in a position to exploit Mr. Flood's vulnerability."
"It is said that the son was the manager of the stores and therefore was in a fiduciary relationship to his mother. This illustrates in a most striking form the danger of trusting to verbal formulae. Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another where the one is wholly in the hands of the other because of his infinite trust in him. All these are cases of fiduciary relations, and the courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them. In my opinion there was absolutely nothing in the fiduciary relations of the mother and the son with regard to this house which in any way affected this transaction."
"Then the next question which, no doubt is a very important and substantial one, is, that Lloyd's, having sustained no damage themselves, could not recover for the losses sustained by third parties by reason of the default of Robert Henry Harper as an underwriter. That, to my mind, is a startling and an alarming doctrine, and a novelty, because I consider it to be an established rule of law that where a contract is made with A. for the benefit of B., A. can sue on the contract for the benefit of B., and recover all that B. could have recovered if the contract had been made with B. himself. The books afford innumerable instances of the application of this doctrine. Lloyd's policies, from the time that Lloyd's was established, have been always made in the name of the insurance broker on printed forms. The broker insures for the benefit of all whom it may concern, and the broker can bring an action, and is the person to sue and recover according to the interest of the parties. It is true that the person who employed him has a right, if he pleases, to take action himself and sue upon the contract made by the broker for him, for he is a principal party to the contract. If the subject-matter of the policy is sold with the benefit of the policy, the purchaser cannot sue, because he was not a party to the contract, but the assured, the assignor, may in this case sue upon the policy for the benefit of the person to whom he assigned it. That is the doctrine which runs through the whole of our law. I confess I heard the point pressed with something like surprise. I have not the slightest doubt that in this case Lloyd's could recover. The very object of making them the parties to the contract was that they should recover for the benefit of all the persons who had sustained losses upon the default of Robert Henry Harper."
"The only other point was one of a rather technical character. The Defendants say, "You Lloyd's have sustained no loss, and can only recover nominal damages, because you can only recover for your own loss and not for the losses sustained by other persons". That might be true if Lloyd's were not trustees, but I am of opinion that Mr. Justice Fry was well warranted in the conclusion at which he arrived, that the engagement was made with the committee as trustees for and on behalf of the persons beneficially interested. That brings the case within the authorities, of which there are more than one, viz. Gregory v. Williams before Sir William Grant, Lamb v. Vice , and many other cases which proceed on an obvious principle, that if A. is trustee for B., A. can sue on behalf of B. It is a very common case for a person to enter into a policy of insurance with a broker on behalf of the persons interested, it is one of the most common forms of policy of Lloyd's itself, and nobody ever supposed that a broker could not sue on such a policy for the benefit of the persons interested. It appears to me therefore that that contention fails."
"Then it was said that this was a contract only with a committee managing the affairs of Lloyd's, and was to be taken as only guaranteeing the son's engagements with that committee. But and this is material on another point the committee were, in my opinion, obtaining this guarantee not only on their own behalf (for of course this guarantee would cover all engagements with them made by Mr. Harper, jun., as an underwriting member), but for the benefit of all those with whom Mr. Harper, jun., should enter into contracts of insurance, and that being so, the words cannot be limited so as to confine them to engagements with the managing committee of Lloyd's."
"I reach the same result, however, by a slightly different route which was put forward by an amendment to the council's notice of appeal which we allowed in the course of the appeal. The amendment added an additional ground:
"(e) that Morgan Grenfell were constructive trustees for [the council] of the benefit of any rights under or for breach of the building contracts against Wiltshier and as such would have been entitled, but for the assignment, to recover substantial damages for and on behalf of [the council]. Accordingly, by the assignment [the council] is seeking to recover a head of loss which would have been available to Morgan Grenfell and the burden on Wiltshier is not thereby increased because Morgan Grenfell would have been entitled, but for the assignment, to substantial damages as constructive trustees."
In the light of clause 3(4) of the covenant agreement, if Morgan Grenfell had, before any assignment, sued in its own name for damages for the alleged breaches of the building contracts, it would have held any damages recovered as a constructive trustee for the council and would have been accountable accordingly in equity. Lloyd's v. Harper, 16 Ch D 290 is thus analogous, and Morgan Grenfell could have recovered from Wiltshier the losses of the council to whom it stood, in that respect, in a fiduciary relationship."
"I find no reason to question the general principle that a plaintiff may only recover damages for a loss which he has himself suffered. But there are exceptions to that principle. One is where the one party expressly enters a contract as agent or trustee for another. The existence of this category of case was recognised in Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd. [1980] 1 WLR 277. In such a case the contracting party may be entitled to recover damages for all the loss which his principal has suffered."
Mr. Marrin also invited me to consider a passage in the speech of Lord Millett at page 581:-
"There are several apparent but well-established exceptions to the general rule of English law that in an action for breach of contract a plaintiff can only recover substantial damages for the loss which he has himself sustained. I say "apparent exceptions", for I regard most of them as explicable in a manner consistent with the rule. The first is the right of a trustee to recover damages for breach of contract in respect of the loss sustained by the beneficiaries. But an action for damages for breach of contract is an action at common law, and in the eyes of the common law it is the trustee who sustains the loss. The fact that a court of equity will compel him to hold the benefit of the contract and any damages recovered for its breach in trust for the beneficiaries is neither here nor there."
The rule in Dunlop v. Lambert
"The only way in which I find it possible to rationalise the rule in Dunlop v. Lambert so that it may fit into the pattern of English law is to treat it as an application of the principle, accepted also in relation to policies of insurance upon goods, that in a commercial contract concerning goods where it is in the contemplation of the parties that the proprietary interests in the goods may be transferred from one owner to another after the contract has been entered into and before the breach which causes loss or damage to the goods, an original party to the contract, if such be the intention of them both, is to be treated in law as having entered into the contract for the benefit of all persons who have or may acquire an interest in the goods before they are lost or damaged, and is entitled to recover by way of damages for breach of contract the actual loss sustained by those for whose benefit the contract is entered into."
"In my judgment the present case [in fact, St. Martins Property Corporation Ltd. v. Sir Robert McAlpine Ltd.] falls within the rationale of the exceptions to the general rule that a plaintiff can only recover damages for his own loss. The contract was for a large development of property which, to the knowledge of both Corporation and McAlpine, was going to be occupied, and possibly purchased, by third parties and not by Corporation itself. Therefore it could be foreseen that damage caused by a breach would cause loss to a later owner and not merely to the original contracting party, Corporation. As in contracts for the carriage of goods by land, there would be no automatic vesting in the occupier or owners of the property for the time being who sustained the loss of any right of suit against McAlpine. On the contrary, McAlpine had specifically contracted that the rights of action under the building contract could not without McAlpine's consent be transferred to third parties who became owners or occupiers and might suffer loss. In such a case, it seems to me proper, as in the case of the carriage of goods by land, to treat the parties as having entered into the contract on the footing that Corporation would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract, could not acquire any right to hold McAlpine liable for breach. It is truly a case in which the rule provides " a remedy where no other would be available to a person sustaining loss which under a rational legal system ought to be compensated by the person who has caused it"."
The words in quotation marks at the end of that passage are a formulation of the circumstances in which it can be said that a claim falls into a legal "black hole".
"The present case is, in my judgment, a fortiori since, so far from there being a prohibition on the assignment of Morgan Grenfell's rights against Wiltshier under the building contracts, the covenant agreement, of which Wiltshier was aware, gave the council the right to call for an assignment of such rights."
"It is particularly this passage in Lord Diplock's speech which has given rise to a question discussed in the present appeal whether The Albazero exception is a rule of law or is based upon the intention of the parties. The issue was identified by my noble and learned friend, Lord Goff of Chieveley, in his speech in White v. Jones [1995] 2 AC 207,267. The problem arises from two phrases in the speech of Lord Diplock the mutual relationship between which may not be immediately obvious. The two phrases, in the reverse order than that in which they appear, are "is to be treated in law as having entered into the contract" and "if such be the intention of the parties". In my view it is preferable to regard it as a solution imposed by the law and not as arising from the supposed intention of the parties, who may in reality not have applied their minds to the point. On the other hand if they deliberately provided for a remedy for a third party it can readily be concluded that they have intended to exclude the operation of the solution which would otherwise have been imposed by law. The terms and provisions of the contract will then require to be studied to see if the parties have excluded the operation of the exception.
That appears to have been the conclusion adopted in [the Lenesta Sludge Case] where my noble and learned friend, Lord Browne-Wilkinson, observed, at p 115:
"In such a case, it seems to me proper, as in the case of the carriage of goods by land, to treat the parties as having entered into the contract on the footing that Corporation would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract, could not acquire any right to hold McAlpine liable for the breach."
In that case the point was made that the contractor and the employer were both aware that the property was going to be occupied and possibly purchased by third parties so that it could be foreseen that a breach of the contract might cause loss to others than the employer. But such foresight may be an unnecessary factor in the applicability of the exception. So also an intention of the parties to benefit a third person may be unnecessary. Foreseeability may be relevant to the question of damages under the rule in Hadley v. Baxendale (1854) 9 Exch 341, but in the context of liability it is a concept which is more at home in the law of tort than in the law of contract. If the exception is founded primarily upon a principle of law, and not upon the particular knowledge of the parties to the contract, then it is not easy to see why the necessity for the contemplation of the parties that there will be potential losses by third parties is essential. It appears that in the St Martins case [1994] 1 AC 85 the damages claimed were in respect of the cost of remedial work which had been carried out. I see no reason why consequential losses should not also be recoverable under this exception where such loss occurs and the third party should have a right to recover for himself all the damages won by the original party on his behalf."
It is difficult to know what to derive from this passage. Mr. Marrin seemed to suggest that it meant that in the view of Lord Clyde there were no conditions to be satisfied if a party to a contract sought to recover damages in fact sustained by a non-party as a result of a breach of the contract. I do not consider that that is what Lord Clyde meant. He had already said at page 522 of the report that he found no reason to question the general principle that a claimant could only recover damages for a loss which he himself had suffered. If that is the general principle, there must be something exceptional about any case in which that principle did not apply. In the passage to which Mr. Marrin drew my attention Lord Clyde seemed to be considering, without expressing any concluded view, how appropriate the particular circumstances identified by Lord Diplock were as conditions to be met if the exception were to apply.
The "broad ground"
"In my view neither of these considerations provide McAlpine with a defence to Corporation's claim. I cannot accept that in a contract of this nature, namely for work, labour and the supply of materials, the recovery of more than nominal damages for breach of contract is dependent upon the plaintiff having a proprietary interest in the subject matter of the contract at the date of breach. In everyday life contracts for work and labour are constantly being placed by those who have no proprietary interest in the subject matter of the contract. To take a common example, the matrimonial home is owned by the wife and the couple's remaining assets are owned by the husband and he is the sole earner. The house requires a new roof and the husband places a contract with a builder to carry out the work. The husband is not acting as agent for his wife, he makes the contract as principal because only he can pay for it. The builder fails to replace the roof properly and the husband has to call in and pay another builder to complete the work. Is it to be said that the husband has suffered no damage because he does not own the property? Such a result would in my view be absurd and the answer is that the husband has suffered loss because he did not receive the bargain for which he had contracted with the first builder and the measure of damages is the cost of securing the performance of that bargain by completing the roof repairs properly by the second builder."
Conclusions
1. The Second Claimant entered into the Definitive Design Contract as principal.
2. No.
3. Yes, in their entirety, although the effect in detail of that having been done is a question of construction of the Definitive Design Contract.
4(a). Yes.
4(b). No.
5(a). No.
5(b). No.
6. No.
7. No.
