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OUTER HOUSE, COURT OF SESSION
[2006] CSOH 39
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CA30/02
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OPINION OF LORD EASSIE
(No.2)
in the cause
MUSSELBURGH AND
FISHERROW CO-OPERATIVE SOCIETY LIMITED
Pursuers;
against
MOWLEM SCOTLAND
LIMITED
Defenders:
________________
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Pursuers: Buchanan;
Semple Fraser, W.S.
Defenders: Smith; Pinsent Masons
7 March
2006
Introductory
[1] This action is concerned
with certain defects in a swimming pool forming part of a leisure centre at
Fisherrow, Musselburgh. The leisure centre was constructed for the
pursuers by the defenders under a design and build contract. The defenders pled inter alia that any obligation which they may have had to pay
damages to the pursuers had been extinguished by the five year negative
prescription provided for under section 6 of the Prescription and
Limitation (Scotland) Act 1973. A preliminary proof before answer was held
dealing principally with the issues respecting prescription, there being a
question as to the starting date for the running of time, namely the date upon
which the pursuers first became, or could with reasonable diligence have become,
aware that they had suffered loss, injury or damage caused by the defenders'
act, neglect or default (cf. section 11(3) of the 1973 Act). The defects of which the pursuers claimed
were three in number and in the Opinion which I issued on 3 March
2004,
following the preliminary proof, I held that the defenders' obligation to pay
damages respecting two of the defects had been extinguished by prescription,
but that any obligation respecting the third had not been so extinguished. A further diet of proof has now been held
respecting the remaining issues in the case.
[2] In that earlier Opinion
I described in some detail the topography of the building, the duct around the
swimming pool tank and the three defects.
The descriptions are contained in paragraphs [2] to [7] of the
Opinion and, for convenience, I reproduce those paragraphs:
"[2] The room or hall within which is situated the swimming pool is
rectangular in plan, the long axis of the hall running roughly east/west. The wall at the eastern end separates the
swimming pool hall from the bar and restaurant area, access to which may be
gained through a door at the south-eastern corner of the hall. To the west of the swimming pool hall lie the
toilets, changing accommodation and the other leisure facilities and, at the
northern end of the western wall of the pool hall, the plantroom containing
various items of equipment necessary for the operation of the swimming pool
(and also the spa and children's pools which are adjacent to the main swimming
pool). The main swimming pool itself
may, with some loss of accuracy, be described as generally rectangular in plan,
its long axis also being approximately east/west. The deep end of the pool is at the east, the
shallow end at the west.
The duct
[3] Surrounding the swimming pool is, of course, a floor or deck,
spanning between the side of the pool and the outer walls of the swimming pool
hall. Underneath that floor or deck is a
void, or duct - 'the duct' - running round the swimming pool itself. The floor of the duct, in its east to west
sections on the north and south of the pool tank slopes downwards from west to
east commensurately with the decline of the pool floor itself from the shallow
to the deep end. In the sector of the
duct running along the northern side of the pool tank are to be found, among
other services, the hot water pipes supplying hot water to the plantroom and
the showers, toilet accommodation etc in the changing rooms which, as already
mentioned, lie to the west of the swimming pool hall. The hot water comes from the boilerhouse
serving the whole complex which is situated in the eastern part of the complex
containing the bar and restaurant facilities.
Access to the duct may be obtained via a number of manholes in the deck
or floor surrounding the swimming pool.
There is also an opening between the duct and the plantroom through
which pass various pipes, but the opening is too small for human passage.
[4] There are no drains leading from the floor of the duct. According to the surmise of some of the
witnesses, the probable reason for this is that the small elevation of the site
above sea level means that the floor of the duct is too close to the
water-table to enable drains to be constructed under it. The drawings which have been lodged in
process indicate that sumps were to be created to accommodate pumps in the
north-eastern and south-eastern corners of the duct. In the event, the floor of the duct was
formed without sumps and it appears that when this omission was noticed the
surveyors acting for the pursuers agreed, in the course of the process of
making good defects, that a dish or hollow in the floor be created in order to
assist the operation of the sump pumps provided for the event that it be
necessary to remove water from the duct.
Sump pumps of the general type supplied and fitted in the duct operate automatically,
in the sense that a device will activate the pump if the accumulated water
rises to a given level and the pump will thereafter operate until the water
level falls to another, lower given point.
The sump pumps at the Quayside Centre discharge via discharge pipes to
an open drain situated in the floor of the plantroom. An observer would be able to see water from
the outlet of the discharge pipe falling into the drain if either or both of
the sump pumps were in operation.
The pool construction
[5] Although there are certain pre-construction drawings
indicating an intention that the swimming pool tank be a monolithic
construction from concrete it is not in dispute - and was confirmed by the
intrusive investigation carried out on the pursuers' behalf by Mr David
Alexander, a chartered civil engineer and currently Divisional Director
(Building Structures) with Baptie Group Limited - that the swimming pool tank
is constructed using blockwork. The
likely construction is that shown in the drawing No F604/3 by Hillhead
Filtration and Engineering Limited (a sub-contractor of the defenders), a copy
of which is annexed to Mr Alexander's report (No 6/6 of process). The drawing shows two leaves of 'unicrete'
walling blocks with an internal core of steel reinforced concrete. Although not demonstrated in the drawings
lodged in process, such a construction implies the need for at least a
waterproof render between the poolward leaf of blockwork and the tiling visible
to the swimmer. The double leaf
blockwork construction constituting the swimming pool tank does not, however,
support the poolward edge of the floor slab of the walkway or deck surrounding
the swimming pool itself. That support
is provided by a separate blockwork construction erected immediately adjacent
to (but not structurally linked or connected to) the outer blockwork leaf of
the swimming pool tank. In other words,
proceeding from the duct towards the water in the pool one has successively (i)
the blockwork construction supporting the floor slab of the walkway around the
pool; (ii) the blockwork outer leaf of the swimming pool tank; (iii) the inner
core of reinforced concrete; (iv) the inner (or poolward) blockwork leaf of the
swimming pool tank; (v) the waterproof render applied to that inner leaf; and
(vi) finally, the ceramic tiles.
[6] The swimming pool was designed and constructed as a 'level
deck' swimming pool. There is
accordingly around the perimeter of the pool a continuous overflow channel,
surmounted by grating, which abuts and is approximately level with the upper
surface of the perimeter walkway. In
normal operating conditions water from the pool spills through the grating thus
maintaining the water level in the pool at approximately the same level as the
floor of the surrounding walkway. The
water which thus spills through the perimeter grating into the perimeter
overflow channel then drains from the overflow channel through seven drainage
holes in the base of the channel, the holes being located at intervals around
the perimeter of the pool. Each drainage
hole links to a drainage pipe which descends vertically for a short distance in
the structure of the swimming pool tank and then, turning through approximately
90o, proceeds broadly horizontally - though no doubt with a slight
fall - through the floor slab support wall to join a collector pipe taking the
collective overflow back to the plantroom for eventual re-circulation back to
the body of water in the swimming pool.
The defects
[7] Put very shortly, the primary complaint of the pursuers is
that water from the swimming pool continually leaks into the duct, from which
it requires to be removed by the sump pumps.
The continuing ingress of water led to the failure, in early 1999, of
the hot water supply pipe serving inter
alia the toilet and changing areas by reason of external corrosion of the
pipe. The failure in due course prompted
investigations leading to this litigation.
The defects said to contribute to the continual presence of water in the
duct may be described as follows:-
(i) The first defect relates to the design of the relationship
between the overflow channel and the surrounding walkway. The design, and eventual construction,
provided only for a sealant at the joint or interface between the outer face of
the overflow channel and the inner face of the walkway. According to both Mr Alexander and Mr David
Hutchison, the expert witness for the defenders, while a sealant may prevent
ingress of water for a short period of time, the eventual contraction of the
sealant and differential movement in the adjacent structures renders it
ineffective, thereby allowing water to penetrate through the joint between the
edge of the overflow channel and the surrounding walkway and, having so
penetrated, to descend to the floor of the duct. A sound and proper design would not have
relied upon a sealant at all but would have made provision for a water bar and
waterproof membrane underlying the whole of the floor slab and channel, the
membrane being brought down into the inner face of the tank wall.
(ii) The second defect relates to the junction between the seven
drainage holes in the overflow channel and the succeeding pipework taking the
overflow water from the channel back to the plantroom. Put shortly, and perhaps crudely, simply
inserting a pipe into the aperture in the earthenware or concrete channel does
not provide a watertight joint since the aperture is not created with such
precision that no gap or space will exist between the wall of the aperture and
the outer face of the pipe. Water can
therefore escape through that gap or space and run down the external surface of
the outlet pipe. One means of addressing
this problem is to fit a puddle flange.
The leaflet No 6/54 of process illustrates varieties of puddle
flange. Put in layman's terms, a puddle
flange consists of a washer-like disc, the central hole in which is constructed
with such precision as to enable a watertight junction between it and the
external wall of the pipe to be obtained.
The disc requires to be properly bedded or built into the masonry or
other structure through which the pipe passes, in such a way that water cannot
pass along and around the external circumference of the flange. A properly fitted puddle flange will not
normally be visible. The manner in which
the junction between the outflow aperture in the overflow channel and the
outlet pipe was to be made watertight is not detailed or described in any of
the available drawings lodged in process.
It appears that puddle flanges were provided in respect of at least some
of the outlets but were not properly fitted into the surrounding structures
since they were in some instances visible.
In due course measures were taken by the pursuers to deal with the
relatively significant quantities of water leaking from the defective
arrangements at the junction between the overflow channel outlets and the
pipework. These measures are described
later.
(iii) Thirdly, following further investigation after the raising of
the action, the pursuers contend that in addition to the ingress of water into
the duct resulting from the two foregoing defects (which are both related to
the level deck arrangements which involve water flowing over the channel
grating and into the channel to and drainage from that channel), there is also
a seepage of moisture from the body of water in the swimming pool through the
swimming pool tank construction itself.
The seepage indicates the absence, or failure, of a waterproof render to
the poolward side of the swimming pool tank construction. According to Mr Alexander, while the amount
of fluid entering the duct by reason of such seepage may be relatively small -
in the words of counsel for the defenders 'de
minimis' - its presence threatens the structural integrity of the tank by inter alia corroding the
reinforcement. On the assumption that
there was such seepage (at least the origins of which he disputed) I did not
understand Mr Hutchison, the defenders' expert witness, to disagree that the
seepage would ultimately be pernicious to the structure of the tank.
The defenders concede the
presence of the first and second of these defects and they accept that those
defects constitute breaches of contract on their part. They do not concede the existence of the
third defect. But as respects all of the
defects the defenders plead that the pursuers' claims have prescribed in terms
of the five-year prescription enacted under section 6 of the Prescription and
Limitation (Scotland) Act 1973 - 'the Act'.
And they refer to various matters arising in the defects liability
period and subsequently."
[3] As
already indicated I held on 4 March
2004 that any claim respecting defect (i) [the deck sealant design]
and defect (ii) [puddle flanges] had prescribed. As respects the third defect [failure or
absence of an adequate waterproof membrane to the inner side of the swimming
pool tank] - the existence of which was disputed by the defenders - I decided
that on such evidence as was then available the balance of probability favoured
the existence of that defect (see paragraph [47] of the earlier Opinion)
and I further concluded that any obligation to pay damages for loss flowing
from that defect had not been extinguished by prescription. The action therefore continued as respects
that defect.
Refurbishment works
[4] In
May 2003 the pursuers decided that it would be appropriate to proceed with
a programme of refurbishment works and these works duly proceeded a year later
(that is to say, after the issue of my earlier Opinion). At this stage it is sufficient to note that
the refurbishment works contemplated and in fact executed were not confined
simply to the rectification of the three defects with which this litigation has
been concerned. Instead they embraced a
general refurbishment of the swimming pool, gymnasium and changing room
facilities. According to the pursuers'
Chief Executive, Mr Thomas Lees, if these facilities at the leisure centre
were to close temporarily it was important to be able to promise to the members
a much better, more modern facility on re-opening. As part of the modernisation of the swimming
pool a decision was taken to "square off" the north-eastern and south-eastern
corners of the pool. As originally constructed
these corners were chamfered, or bevelled, and the intention was to remove the
bevel and produce a rectangle at each corner, which was perceived as being a
more attractive arrangement for the contemporary customer. From a technical point of view however, the
decision to square off the corners meant that at the relevant bevel locations
the existing structure of the pool tank wall would require to be demolished and
reconstructed on different lines and a new waterproof membrane would be
required - at least for the reconstructed portions of the tank wall.
[5] The
refurbishment works carried out to the pool itself - particularly the
demolition of the chamfered corner walls and the removal of the tiling and
waterproof membrane material - thus provided an opportunity to obtain further
evidence on whether seepage was occurring by reason of a failure of the
waterproof membrane.
The seepage defect
[6] The conclusion which I reached
in my Opinion of 3 March 2004
was of course based on a weighing of the then available evidence. In his closing submissions following the
later diet of proof Mr Buchanan, for the pursuers, suggested that the
question whether seepage was occurring by reason of deficiencies in the
waterproof membrane was effectively foreclosed by my earlier Opinion and that
the existence of a defective membrane had to be taken as a given, irrespective
of what might subsequently have been revealed by the intrusive investigations
inherent in the refurbishment programme.
I do not agree with this suggestion.
The refurbishment works involved the partial demolition of the pool tank
walls, the removal of all of the tiling and the removal of the membrane or
render of which complaint is made. They
clearly provided possible evidence which might either support or confound the
conclusion reached on the basis of the earlier limited evidence. The question whether what had been revealed
in the intrusive aspects of the refurbishment works was explored in detail in
the evidence led at this second diet of proof without objection from counsel
for the pursuers. Indeed the topic was
relatively extensively canvassed by counsel for the pursuers in adducing
evidence in chief from witnesses for the pursuers. Having been provided with that evidence it
would, in my view, not be appropriate for the court to ignore it simply because
it comes (without objection) at a later stage in the first instance process of
adjudication. I must therefore consider
whether the new evidence on the topic results in a different conclusion from
that reached on the basis of the earlier, limited evidence.
[7] During
the course of the refurbishment works a number of photographs were taken at
various stages and these are to be found in the appendices to Production No.6/60. Unfortunately no evidence was adduced as to
the precise dates upon which the photographs were taken or how those dates
related to the dates upon which various stages in the works were
completed. To take an example,
photograph No.5 shows the pool wall at the chamfer after it has been partially
demolished to reveal inter alia the
reinforcement but it is not known from the evidence for how long the interior
of the wall and the reinforcement had been exposed to the atmosphere before the
photograph was taken.
[8] The
first witness with whom the effectiveness or quality of the waterproof membrane
was raised was Mr Philip Jones, the managing director of JBC (Scotland)
Limited, the contractor engaged for the refurbishment works. Mr Jones was by way of background a
quantity surveyor but with many years of experience in the construction and
building industry. Mr Jones
expressed some diffidence about interpreting what might appear on certain of
the photographs without knowing when the photographs had been taken. The squaring off of the pool was one of the
first things done on the contract and Mr Jones' recollection - on which he
preferred to go - was that when it was exposed the blockwork at this location
was wet. Mr Jones was further
surprised by the extent of the corrosion on the steel reinforcement within the
blockwork construction. When taken to
photograph No.7, which showed the base of the small (children's) pool, the
witness confirmed that what was shown on the photograph demonstrated an
insufficiently thick render - "virtually non-existent". The immediately following photographs
depicting dark patches on the base of the small pool indicated areas in which
the render had been ineffective.
Mr Jones thought that about two-thirds of the main pool had been in
a similar state. Photograph No.11 was
apparently taken when his operatives were removing the render to the floor and
wall of the small pool. The render was
exceedingly damp. Other photographs
(such as Nos.13 or 16) showed similar dampness in the floor and immediately
adjacent part of the vertical pool wall.
Similar photographic depiction of the defective render in the walls was
to be seen in photograph No.17. According
to Mr Jones, photographs Nos.18-22 showed that the waterproof render
at the base of the wall and at its junction with the vertical walls of the pool
had failed. That was in accordance with
his recollection. He recollected that
the render was damp and clearly not waterproof.
[9] The
pursuers' civil engineer, Mr David Alexander, described in evidence certain
exploratory work which was carried out in late March 2004 and which involved
coring into the wall with a view to locating reinforcement. The cores did not in fact succeed in locating
the reinforcement but Mr Alexander dried off the surfaces of the wall
surrounding the area from which the core had been taken and on the following
day he noticed that some seepage - albeit minimal - was evident. From the presence of rust on the
reinforcement exposed on breaking up the wall as part of the squaring off of
the corners, he felt further confirmed in the view that seepage was indeed
occurring, but the limited extent of the corrosion suggested to him that the
exposure to moisture was relatively recent.
I would here interpose the comment that if the exposure were relatively
recent that might by implication support Mr Alexander's belief that
moisture in the blockwork of the pool tank came from seepage through defects in
the poolside render, rather than the "prescribed" defects, which had been
present for much longer but which would not result in percolation into the tank
structure, the vertical descent of water from the prescribed defects taking a
route down the separate leaf or wall supporting the deck surrounding the pool
(cf. first Opinion paragraph [39]).
On being taken through the photographs Mr Alexander gave evidence
which may be summarised as being to the effect that the photographs evidenced
various degrees of dampness in the walls and in the render. In particular, photographs Nos.7-9
indicated areas in which the render itself was damp. Photograph No.11 detailed the joint at the
base of the wall when the contractors had to take out the render. The render was in fact damp. Subsequent photographs all evidenced dampness
indicating that the waterproof render had failed.
[10] The only contrary evidence suggestive of the waterproof
membrane having been sound came from the defenders' consulting engineer,
Mr David Hutchison. He made a visit
to the site on 4 May 2004. By that stage the pool had been emptied; all of the tiles had been removed from the
walls and the floor of the pool, and partial demolition of the splayed or
chamfered walls had already been carried out.
According to Mr Hutchison's observation, on its face and in general
the exposed render looked intact. It did
not display any obvious cracking or crazing.
Mr Hutchison looked at the render in the cross-section of part of
the partially demolished splayed walls and it appeared to be dry. Mr Hutchison did not however touch
it. He agreed however that the blockwork
was damp. When shown the photographs
Mr Hutchison accepted that on his visit he had not seen the mottled effect
on the poolside face of the render which is shown, for example, in photograph
No.7, and which he agreed would be indicative of dampness in the render from
the ingress of water from the pool. The
same applied in relation to photograph No.13. Perhaps more importantly, Mr Hutchison
accepted that photographs Nos.19-21 readily indicated that the render
looked exceedingly damp, having been saturated by the pool water. On no view could this saturation (being to
the floor of the pool) have come about by reason of the prescribed defects.
[11] I would record at this point that in submitting that the
evidence disclosed the render to have been adequate, counsel for the defenders
founded not only on Mr Hutchison's evidence that the cross-section of
render which he viewed appeared visually to be dry, but also on a passage in
the evidence of Mr Jones in which, according to counsel, Mr Jones had
also deponed that the render to the walls of the pool looked dry (Day 3,
1040 hrs approx). However,
according to my notes, it is apparent that at that point the witness was
speaking of the condition of the floor slab prior to the application of the
replacement render which did not "take", because, it was believed, the interior
of the floor slab was in fact still wet, only its surface having dried (the
problem of the new render not "taking" is referred to, in among other
documentary productions, Nos.6/117 and 6/118 of process).
[12] In these circumstances I consider that the additional evidence put
forward at this second diet of proof supports the conclusion reached on
weighing the more limited evidence available at the preliminary diet on
prescription. While the surface of the
render exposed in the cross-section of the partially demolished splayed wall
may well have looked dry when observed by Mr Hutchison it is also possible
that the surface may have dried in the interval since it was first
exposed. That indeed appears to have
occurred elsewhere, since Mr Hutchison accepted that the mottled effect
seen in, for example, photograph No.7 indicated dampness in the render but that
mottled effect was not observable by him on his visit to the site. Importantly, it seems to me,
Mr Hutchison agreed that what was shown in photographs Nos.19-21 indicated
a saturated membrane which could not be explained by either of the other
defects. The saturated membrane, clearly
demonstrated in those photographs, was at the base of the pool. Mr Alexander expressed the view that it
was highly unlikely that in constructing the pool a different waterproof render
would have been applied to the floor as opposed to that applied to the
walls. Although Mr Alexander did
not elaborate on the reasons for that view at that point in his evidence it is,
I think, entirely consistent with the importance which he (and
Mr Hutchison) attach to the continuity of the waterproof membrane to which
I shall shortly come. Mr Alexander
was not cross-examined on this point. Faced
with the difficulty that the waterproof render in the floor had clearly failed
and his opinion that the wall render was dry, Mr Hutchison, in his
testimony, suggested only that some further investigation might be required
and, I thought somewhat hesitatingly, that it might possibly be that different
materials had been used on the floor and walls respectively. For my part, I accept Mr Alexander's
evidence that it was highly unlikely that a different waterproof membrane would
have been used for the base of the pool as opposed to its walls. I would add that the defenders, as building
contractor, ought to be in a position to say whether a different membrane had
been used. The clear undisputed evidence
of failure of the base membrane allows one thus to infer that similar failures
are likely to have occurred in the render membrane applied to the walls and
that inference supports the other evidence indicative of seepage into the walls
of the pool.
Remedial measures
[13] Whatever difference of view
existed between Mr Alexander and Mr Hutchison in relation to the
existence of seepage into the structure of the pool tank, both were agreed on
what was advisable and appropriate to remedy both that defect (assuming, so far
as Mr Hutchison was concerned, its existence) and also the prescribed
defects. From an engineering standpoint
the desirable solution was the provision of a continuous waterproof membrane
extending horizontally over the base of the pool, vertically up its walls,
thereafter in a broadly horizontal direction under the overflow channel, and
thereafter over the floor slab of the deck surrounding the pool. However, if one were to assume the existence
of an effective membrane over the floor slab and under the channel but a
defective membrane in the pool itself, it might be possible to replace the pool
membrane alone and to tack it into the (assumed) sound channel and deck floor
slab membrane but the result would not be satisfactory. Conversely, were the pool membrane
satisfactory but the channel and deck floor slab membrane absent or defective,
one could provide a membrane for the latter which was taken some distance down
the internal wall of the pool and then tucked in or joined to the pool membrane. But, while possible, from an engineering
standpoint that too would not be a desirable solution. Both engineers were agreed that in technical
terms continuity of a waterproof membrane is important. A joint between old and new waterproof
membranes presents problems of compatibility of materials and differential ageing. In commercial terms that may give rise to
disputes over liability for failure of the "patched" membrane and excludes the
provision of a warranty or guarantee by the provider of the replaced
membrane.
[14] Accordingly, if acting in accordance with professional advice,
in order to remedy the prescribed defects the pursuers would require to take
steps which de facto would involve
remedying the non-prescribed defect ("seepage"). Equally, if remedying that non-prescribed
defect the pursuers would, in technical terms, be advised to replace the
(absent) membrane represented by the prescribed defects. Although in this context I have followed the
shorthand usage adopted at the proof of referring collectively to the
"prescribed defects", it should be borne in mind that, unlike defect (i), the
second prescribed defect (defect (ii) - puddle flanges) was not concerned with
the existence or integrity of the waterproof membrane. However, there is the limited overlap between
it and the other defects in that the installation of the puddle flanges would
entail the lifting and replacing of at least some portions of the gratings and
the channel around the pool.
[15] It is convenient at this point to record that in his evidence
Mr Lees suggested that it was only the concern over seepage and its
possible consequences for the structural integrity of the pool tank which
prompted the carrying out of any refurbishment works. He deponed that in his view the problem of
the puddle flanges had been satisfactorily dealt with by the fitting of the "top
hats" (cf. paragraph [23] of the earlier Opinion) and that the defective
design at the interface between the overflow channel and the walkway
surrounding the pool could be dealt with by renewing the sealant from time to
time. According to Mr Lees, he was
advised by Mr Alexander that this would be an adequate and permanent
solution to what were to become the "prescribed" defects. I am unable to accept this part of Mr Lees' evidence. It is clear from Mr Alexander's evidence
that at no time did he regard those measures as an adequate, let alone
permanent, solution to the problem of the prescribed defects. On the contrary he said in evidence that he
had advised and persuaded Mr Lees that simply renewing the sealant and
inserting the top hats was not a long-term solution. I prefer Mr Alexander's evidence on this
matter. I have also to say that I was
not impressed by this particular chapter of Mr Lees' evidence. I think he was giving expression to wishful
thinking. It is also to be noted that
the question of possible seepage through the render applied to the tank of the
pool only arose after these proceedings were initiated. Further, although in his discussion of the
evidence counsel for the pursuers adverted to this passage in Mr Lees'
evidence I did not understand counsel for the pursuers to submit that the
insertion of "top hats" and the replacement at intervals of the sealant were
appropriate solutions (indeed the design defect complained of was the fact of
employment of a sealant liable to fail at intervals, rather than a waterproof
membrane) and that the risk to the structural integrity of the tank was the
only ground for seeking damages.
The membrane liability issue
[16] The fact that the pursuers
have acted in accordance with their professional advice and thus in replacing
the waterproof membrane within the pool tank have also extended that waterproof
membrane under the channel and over the floor slab of the surrounding walkway,
raises questions under the law of damages.
Are the pursuers entitled to recover the whole amount of the repairs? Or should the defenders be exonerated from
any responsibility for the corrective remedial works on the basis that the
pursuers - acting in accordance with advice - would in any event have to carry
out the works in their entirety if only to remedy the absence of a waterproof
membrane at the channel and the floor slab and have therefore suffered no
further loss? Or, alternatively, should
there be some form of apportionment?
[17] Counsel for the pursuers addressed those questions by
submitting that there was a single "loss" namely the need to replace the
waterproof membrane, both within the tank structure and underneath the overflow
channel and on top of the floor slab, to which, as I understood the submission,
the defenders' breach of contract had made a "material contribution". The defenders were thus liable for the whole
amount of the expense of all the remedial works in question. Counsel referred to the discussion on
causation in McBryde on Contract (2nd
ed.) paragraphs 22.16-22.19 and to the discussion of the same topic in Treitel on Contract, page 975. Counsel thereafter cited Smith Hogg & Company Limited v Black Sea & Baltic General Insurance Company Limited [1940]
A.C. 997, particularly the speech of Lord Wright at 1005ff; A/B
Karlshamms Oljefabriker v Monarch
Steam Ship Co 1949 SC (HL) 1;
and also Royal Brompton Hospital
NHS Trust v Hammond and Others [2002] UKHL 14; [2002] 1 WLR 1397. According to counsel for the pursuers, the
pursuers' claim related to a single item of damage, which was "the
non-provision of a water-retaining structure".
Taking that view of the nature of the damage suffered by the pursuers, counsel
submitted that the seepage through the defective render in the pool tank, the
absence of a membrane at the floor deck level and the defective puddle flanges
were three concurrent causes of a single harm.
Since the defect for which the defenders were responsible (see page) was
one of those causes, that was sufficient to enable the pursuers to recover the
totality of the expenditure (and consequential losses).
[18] On the hypothesis that the seepage defect had been established,
counsel for the defenders submitted that the approach adopted by counsel for
the pursuers and its invocation of the concept of material contribution was
erroneous. What was claimed was the
global cost of rectifying three separate defects in circumstances in which the
work necessary to remedy defects (i) and (ii) - the prescribed defects -
required replacement of the pool render even if that render were perfectly
sound. By comparison the seepage defect
was minimal.
[19] Counsel for the defenders further submitted that in respect
that a total or global cost was claimed in respect of different defects,
equiparated with "competing causes", the proper approach was that discussed in John Doyle Construction Limited v Laing Management (Scotland) Limited 2004 SC 713. The primary requirement of a
global cost claim was that the claimant eliminate from the causes of his loss
and expense all matters not the legal responsibility of the party against whom
the claim is directed. Since the
pursuers had plainly not eliminated, as a cause of their expenditure on the
relevant material works, the prescribed defects (for which the defenders now
had no legal responsibility) that primary requirement was not satisfied. However, it was recognised that that
requirement might be mitigated or avoided by other considerations discussed in
the opinion delivered by the court, namely:
(i) that a particular dominant cause might be identified between matters
for which the defender was responsible and individual items of loss; (ii) if there was a dominant cause of the
loss in question, that might be treated as the operative cause; and (iii) if it could not be said that the
events for which the defending party was responsible were the dominant cause,
it might be possible to apportion responsibility between the events for which
responsibility was present and those for which responsibility on the part of
the defender was lacking. Counsel for
the defenders then referred to Keating on
Building Contracts, paras.8-22ff and the examples there given.
[20] Counsel for the defenders then submitted that the dominant
cause of the need to provide new waterproofing for the pool and the surrounding
walkway was the existence of the prescribed defects. It was clear that they were by far the major
sources of escape of water from the pool (and the sole cause of the need to
replace the mechanical and electrical services in the duct). At best for the pursuers, Mr Alexander had
expressed the view that as respects the need for rectification the defects were
equally important. If each were equally
important it could not be said that seepage was the dominant cause. So, even taking on board the pursuers'
approach of seeing three concurrent causes of one loss, since the appropriate
test of liability for such a global loss was that of the dominant cause and
seepage was not the dominant cause the pursuers' claim, which was advanced as a
global claim, should fail.
[21] The pursuers could only avoid that result if they set up a
basis for apportionment. But, said
counsel, there was no basis for apportionment in the pleadings and no-one had
spoken to a basis for apportionment.
However, if it were to be concluded that apportionment were appropriate,
the submission of counsel for the defenders was that liability should be split
three-ways with only one-third attributable to the defenders; but the costs of replacing the mechanical and
electrical services in the ducts should on any view be excluded from the sum to
be apportioned.
[22] In my opinion, of the two competing submissions, the analysis
and approach of counsel for the defenders is to be preferred. It appears to me that the argument for the
pursuers is predicated on the premise of a single injury or harm to which
contributing causes may be attributed.
But in my view that is in many ways an over-simplification of matters
and involves a confusion of the existence of the separate defects with the technical
desirability of their conjoined resolution.
The defect relating to the waterproofing of the interface between the
overflow channel and the surrounding walkway may be seen as a design defect. The failure of the render within the pool is,
at least prima facie, a
constructional supply defect and the provision of a defective render is not, in
my view, a contributory cause respecting the absence of waterproofing at the
channel interface. The argument now
advanced by counsel for the pursuers does not, I think, sit happily with the
approach which was adopted by the pursuers in the preliminary proof on
prescription in which they were at pains to distinguish the defects and the rights
of action respecting each (cf. Opinion, paragraph [48]ff). Were it correct that there was a single item
of damage in the form of the non-provision of a water retaining structure, the
approach of considering the discrete defects as giving rise to discrete rights
of action, which was advanced successfully by counsel for the pursuers in
relation to prescription, would be open to question. If the correct view were that the defect
consisting in the omission of a waterproof membrane under the channel and
walkway caused a single loss, which embraced the need to replace the existing membrane
to the pool walls and floor, the pursuers claim for reparation for that single
damage would also have prescribed and would arguably not be saved by the later
emergence of knowledge of another possible contributory cause.
[23] In my view one is not properly in the territory of the cases,
to which Mr Buchanan referred, of an undisputed notion of the loss or
harm, but as respects which there is dispute as to the appropriate cause. Thus in Smith
Hogg there was no issue as to what was the loss or damage - namely the loss
of the cargo. The issue related to
whether the cause of that loss (which occurred when the ship rolled on to her
beam and then required to be beached), was due to the temporarily prior event
of the ship having been in an initial unseaworthy state in leaving
St Petersburg or, on the other hand, the temporarily later event of some
specific fault of the master in bunkering the ship in Stornoway. Likewise in the British Monarch case the harm suffered was delay and the question
was whether that delay had been brought about by the initial unseaworthiness of
the vessel rather than the later intervention by the authorities to prevent the
ship from proceeding to Sweden.
[24] Favouring, as I do, the general approach of counsel for the
defenders in preference to that of counsel for the pursuers, the first question
arising is whether the pursuers may recover the entire cost of replacing the
partially absent and otherwise defective membrane on the view that the seepage
was the "dominant" cause of the global expense claimed as respects that
replacement. As already stated, I am
unwilling to accept Mr Lees' evidence to the effect that, but for the
seepage, the replacement of the membrane was unnecessary and that renewal of
the sealant at intervals was all that was required to correct the first prescribed
defect. So far as expert witness
evidence goes, neither engineer suggested seepage as the dominant cause. Mr Hutchison's position was that it did
not exist. Mr Alexander thought all
three defects to be of equal importance but, of course, the water escaping from
the pool by means of seepage was, in his view, minimal. Accordingly, complete recovery of the expense
of replacing the absent/defective membrane on the basis of the seepage being
the dominant cause is not, in my view, open to the pursuers. Similarly, I do not think it can properly be
said that the defective design, omitting the provision of a membrane at deck
level, is the dominant cause of the need to replace the pool membrane, to the
complete exoneration of the defenders. The
question then arising is whether the expense involved in replacing and
extending the waterproof membrane may be apportioned, and if so, in what
proportions.
[25] Only Mr Hutchison was expressly asked about apportionment
of the expense. His answer was that if
he had had to undertake the exercise of apportioning responsibility he would
split it three-ways. It was a single
question to which a single answer naturally followed and the reasons for the
answer were not explored by the examiner in chief. Mr Hutchison was not cross-examined on
that aspect of his evidence.
[26] While I naturally take note of Mr Hutchison's view, it was
not one which was subject to any exploration in the evidence and my impression
was that Mr Hutchison had not had the opportunity of prior, considered
reflection. More importantly, perhaps,
the issue of apportionment is ultimately for the court, in light of all the
material available to it. In that
respect, closer consideration of the nature of the defects leads me to think
that a simple three-way apportionment on the basis of there being three defects
is to over-simplify matters.
[27] While the resolution of the first prescribed defect and the
seepage problem both involve the provision of a continuous waterproof membrane,
the second of the prescribed defects (puddle flanges) is of a different nature
in that it is not related to the presence or absence of the membrane, but to
the detail of the pipework draining the overflow water in the channel. The desiderated membrane would pass below the
channel from which the seven drainage pipes descend at intervals around the
pool (cf. among others, drawings No.6/136 and No.6/137). As I understand matters, the aspects in which
rectifying the puddle flange defect would have elements in common with the
waterproof membrane work is the lifting and replacing of the channel and
gutter. The cost attributed to the
removal of grating and channel and their replacement using new materials amount
to approximately 11% of the waterproofing and directly related works included
in the pursuers' claim (No.6/339 of process, sections 1-8). As already mentioned, the technical reason
for which it was thought desirable, if remedying the seepage or remedying the
first prescribed defect, to have a complete new waterproof membrane was the
undesirability of there being a join between membranes of different age or
material. In these circumstances, I have
come to the conclusion that the appropriate way of apportioning costs relating
to the overall waterproofing of the pool is firstly, to apportion the cost of
removal and replacement of the channel and gratings into three shares, with the
remainder of the costs included in the waterproofing and related works being
split equally. Before coming to the
figures relating to the replacement of the waterproofing membrane however it is
convenient to consider the claim in so far as it consists of renewal of the
mechanical and electrical services in the duct.
M & E services
[28] The duct surrounding the
swimming pool tank contains on its north and south sides various water pipes
and electricity supply cables and the sum sought by the pursuers in this action
includes the cost of replacing these. It
is not disputed that these had suffered serious corrosion. (Indeed as described in my earlier Opinion at
paragraph [21]ff the hot water supply to the pool and changing
accommodation failed, by reason of severe corrosion in 1999.) At the second diet of proof Mr Douglas
Blair, a principal engineer with Baptie, gave evidence that when he first
visited the site on 22 November 2002 all the steel pipework was heavily
corroded (apart from the pipe which had been replaced in 1999); insulation material on the pipework was
soaking and hanging off and the cable trays carrying the electrical cables were
corroded, in some places to the extent that the trays had become detached from
the walkway slab from which they were originally suspended. The duct floor was flooded to the extent that
it came almost to the top of his boots (300mm).
The question is simply whether the seepage problem has played a role in
producing this severe corrosion of the pipework and cable trays.
[29] In my view, the evidence invites a negative reply to that
question. It is clear that from an early
stage the prescribed defects resulted in substantial quantities of water
falling into the duct from the general area of the surrounding walkway floor
slab (cf. paragraphs [19] and [21] of the earlier Opinion). By contrast, Mr Alexander was clear that
the seepage problem involved only minimal quantities of water and his concern
in relation to the seepage problem was with its possible structural
consequences from the steel reinforcement in the pool tank. Mr Alexander agreed that judging by the
extent of corrosion to the steel reinforcement the seepage had begun recently
and Mr Alexander was also clear that the corrosion and the damage to the
pipework and cables in the duct was much more likely to have been caused by the
prescribed defects.
[30] In these circumstances I consider that, if not the sole cause,
the prescribed defects were clearly the dominant cause of the very extensive
damage to the hot water and heating pipes and the electrical services running
through the duct. I accordingly consider
that the costs incurred in their replacement are no longer recoverable from the
defenders.
Quantification
[31] As previously mentioned, the
works necessary to remedy the defects with which this action has been concerned
were carried out as part of a larger refurbishment project. The contract for those works was not subject
to a competitive tendering process, since the pursuers preferred to deal with a
single contractor - JBC (Scotland) Limited - and rely on advice from a quantity
surveyor within Mr Alexander's firm on whether the figures from that
contractor were reasonable. Various
estimates and costings were prepared at different stages as the refurbishment
project was developed. However (subject
to an alternative suggestion ultimately advanced by counsel for the pursuers,
to which I shall return in para.[36] infra)
the claim ultimately advanced by the pursuers is that which is set out in
No.6/339 of process, the total amount claimed being £280,702.35. I understand the document to be have been compiled
by Stuart McConnachie, a civil engineer with Bapties, who was the contract
supervisor. In his evidence
Mr McConnachie indicated that he had put it together using the information
available to him and taking - so far as relevant - the prices or rates contained
in the final tender by JBC (Scotland) Limited for the refurbishment works.
[32] Although at certain points in his cross-examination of the
pursuers' witnesses Mr Smith for the defenders queried the soundness of
the decision not to seek competitive tenders, in his submissions counsel did
not submit that the figures in No.6/339 of process, so far as based on the JBC
(Scotland)
Limited tender rates, were vitiated on that account. In the event, as respects the entries
contained in sections 1-8 of that document, counsel for the defenders took
issue in his closing submissions with only two matters.
[33] The first matter was the cost of supplying and fixing replacement
tiles to the pool, the contention being that there should be a reduction in the
cost of supplying the tiles for the pool on the basis that the ultimate cost
reflected a decision to use a more expensive tile than the relatively basic
tile envisaged in earlier estimates. It
is clear that there was an increase in the cost of tiling between the original
costings and the ultimate figures because the earlier estimates assumed a basic
tile, whereas that chosen was more expensive.
The tile in question was selected by the architect, Mr Neil Macrae,
who had been engaged to advise on the interior design aspects of the
refurbished pool. In his evidence
Mr Macrae accepted that a cheaper tile could have been found, but his firm
had selected a tile which they thought appropriate for the refurbishment and
presented it to the client, who was happy with it. Mr Brian Barclay, an experienced
quantity surveyor adduced on behalf of the pursuers, had minuted in No.6/97 of
process that the tile in issue was expensive and in his evidence he was of the
view that the architect, or the client, could have chosen an alternative
cheaper tile. The difference in the cost
of purchasing the expensive tile as opposed to the basic tile is around £5,000. I do not consider that the pursuers were
bound to select only the cheapest tile available, but it does appear that the
tile ultimately selected was of a materially superior quality to what was being
replaced. To reflect the existence of
this element of betterment, I shall approach matters broadly and reduce the
tiling costs by the sum of £2,500.
[34] The second matter raised was the fact that the provision of the
new waterproof render was accompanied by a guarantee from the manufacturer
(Fosroc). The supplier of the original
waterproof membrane had not provided such a guarantee and it was submitted by
Mr Smith that accordingly there was a degree of betterment. Mr Alexander gave evidence that, so far
as he could recollect, the value attributed to the guarantee, which was
included in the Fosroc quotation, was probably around £7,000 and I understood
Mr Hutchison to agree with that approximate figure. Given that the original contractual
arrangements whereby the pursuers acquired the swimming pool did not provide a
guarantee of the waterproof render, whereas the replacement render came with
the manufacturer's guarantee, it is difficult to avoid the conclusion that the
pursuers have obtained an element of betterment. They have obtained additional contractual
rights for which, it appears, the premium amounts to approximately £7,000. That premium falls to be deducted.
[35] The total amount claimed in sections 1-8 of No.6/339 of
process is £136,759.04. The costs
relating to the removal and replacement of the gratings and channel amount to
£15,049.71. As indicated earlier, I
consider that the latter figure should be apportioned three-ways, of which one
of the thirds, £5,016.57, is recoverable from the defenders. After allowing for the amount subject to that
three-way apportionment and the elements of betterment just discussed, the sum
which falls to be apportioned equally amounts to £115,709.33. One-half of that figure is £57,854.66. The total sum recoverable under these two
apportionments from the defenders is thus £62,871.24.
[36] At this point it is convenient to deal with the submission of
counsel for the pursuers, advanced very much as a long-stop alternative, to the
effect that if the pursuers were not entitled to recover the entirety of the
costs claimed in No.6/339 of process on the basis that the seepage problem made
a material contribution to a single harm, the alternative course was simply to
deduct from the cumulo sum brought
out in No.6/339 of process an early estimate for rectification of the
prescribed defects which is contained in No.6/63 of process. That estimate was prepared on the assumption
that a membrane might be provided under the pool surround slab and "tucked in"
to the existing pool wall membrane. I am
not prepared fully to accept Mr Buchanan's alternative suggestion. While it is true that in his evidence in
chief Mr Alexander identified the documents Nos.6/62-6/64 for what they
bore to be, that was in the context of a discussion of the proper technical way
of dealing with the problem and it was not suggested to him or any other
witness that an approach to the assessment of quantification of damages was that
which was eventually put forward by Mr Buchanan as very much an
alternative. Nor was it advanced as an
alternative claim in the pleadings. It
may be that questions would have arisen concerning the extent to which the
membrane would require to be carried down into the pool. It is also to be noted that No.6/63 makes the
assumption that the gratings and channels would be largely reused and not
replaced with new. However, if one were
to concentrate on the works covered by sections 1-8 of No.6/339, the corresponding
entries in No.6/63 (sections 1-7) may provide a rough basis for
cross-testing the apportionment which I have adopted. Thus, after allowing for betterment, the
total for sections 1-8 of No.6/339 is £127,259. If one then deducts from that figure the
total of sections 1-6 of No.6/63 (£46,618.82) and the equivalent amount
for the supply and fixing of new channel and grating which appears in No.6/339,
(£14,349.71) the resulting figure is not markedly divergent from that adduced
by the apportionment of costs.
[37] Section 9 of the schedule in No.6/339 consists of the
costs for the mechanical and electrical replacement works in the duct and for
the reasons already given I do not regard these as being recoverable to any
extent. Section 10 of that schedule
reads "Electrical Works (estimate as omitting breakdown)". According to Mr McConnachie, the figure (£4,000)
derived from the breakdown of the contractors' figure for electrical work in
No.6/101 and proceeded on an estimate of 25% of that figure as the proportion
which might be attributable to the rectification of the pool render works. Mr McConnachie was unable to recollect
the precise justification for the selection of that percentage, but I did not
understand the matter to be challenged by counsel for the defenders. I shall apportion this item equally between
parties.
[38] Section 11 of the schedule in No.6/339 claims a decorating
allowance of £6,000. I did not
understand this item ultimately to be in dispute, subject of course to any
issue of apportionment. The puddle
flange defect alone would not have been likely to have caused for the extensive
redecoration outwith the normal cycle of redecoration and, while it would have
occasioned, I suppose, some additional cleaning, I think that the appropriate
course is simply to divide this sum equally between parties with the result
that the sum payable to the pursuers under this head is £3,000.
[39] Section 12 of the schedule (£5,620.74) relates to what is
described as "Variation 1 - preparation of pool floors for waterproofing
(including attendances)". The
circumstances relating to this item were explored in evidence and can be
briefly described. Having removed the
existing tiles and render on the internal surfaces of the pool tank, the
contractors proceeded to lay a new waterproof membrane in the belief that the
concrete structure of the tank floor was dry.
In the event the new membrane did not adhere because, it is thought, of
residual dampness in that concrete structure.
The defenders' engineer was advised of the problem but was told by
Mr McConnachie, the contract manager, that there were "no cost
implications" - presumably on the view that it was the responsibility of the
contractor carrying out the remedial works to test and ensure that the base was
dry. In the light of that representation
Mr Hutchison concluded that there was no ground for his attendance. It is not for me, in this process, finally to
determine whether the costs of re-applying the membrane are the initial
responsibility of the contractor or the pursuers as employers under their
contract with JSB (Scotland) Ltd, but given the representation to
Mr Hutchison that no cost implications were involved which assumes a
contractual responsibility on JSB and the absence of any evidence to contradict
that assumption I regard this item as being irrecoverable.
[40] Since the next two sections in the schedule in No.6/339 relate
to the main contractor's profit (5%) and professional fees, which are also
proportionate to the principal sums, it is appropriate at this point to
summarise and total the direct contractor's costs which I judge to be
recoverable. I do so by reference to the
sections in the schedule in No.6/339:-
|
(a)
|
Sections 1-8
|
£62,871.24
|
|
(b)
|
Section 10
|
£2,000.00
|
|
(c)
|
Section 11
|
£3,000.00
|
|
|
|
£67,871.24
|
In light of that total, bringing
into account the contractor's profit percentage results in the addition of
£3,393.56, being 5% of £67,871.24. The
sum claimed for professional fees requires to be adjusted to reflect the
difference between the amount of the works claimed in No.6/339 and the
recoverable amount. Ignoring pence, the
ratio is 195720:67871. The amount of the
professional fees claimed in No.6/339 is £29,750. Applying the ratio produces a result of
£10,316.58. Accordingly with that
scaling down of the professional fees, the direct loss and expense recoverable
amounts to £81,581.38 made up thus:-
|
(a)
|
No.6/339 sections 1-12
|
£67,871.24
|
|
(b)
|
Section 13 - Contractor's profit
|
£3,393.56
|
|
(c)
|
Section 14 - Professional fees
|
£10,316.58
|
[41] I turn now to the claim for more indirect or revenue losses,
namely those claimed in section 15 of No.6/339. Three items are claimed, namely
(i) "lost revenue 6 weeks" £23,414.77;
(ii) "lost membership" £19,053.99; and
(iii) "hire of pool" £2,978.00.
The last item is relatively
straightforward. In order to provide
something by way of alternative facilities for their members while the pool was
closed to enable the refurbishment to be carried out, the pursuers negotiated
an arrangement with East Lothian Council whereby for the sum of £2,978 the
Council granted the pursuers' members free admission to the Council's swimming
facilities. I did not understand this
element of the claim to be controversial.
[42] The remainder of this head of claim presents more
difficulty. The pursuers' income from
the leisure centre comes from membership subscriptions and also from direct
sales of drinks etc to those who use the facilities. Some subscriptions are payable annually,
others monthly. There are different
classes of membership. The figures in
heads (i) and (ii) of section 15 of No.6/339 of process derive principally
from the documents Nos.6/164 and 6/165 of process, each of which is a single
sheet. As I understand it, the basis
adopted in No.6/164 for calculating heading (i) - "lost revenue" - is to take
the annual revenue (of the leisure centre) from all sources for the financial
year ending on 31 January 2004 and calculate a monthly average. That monthly average for that accounting year
is then divided by the number of members as at 31 January 2004 and the product of that division is
then translated into a weekly average income per member of £5.05. In the event, because of a posting error
whereby income from other parts of the pursuers' business was wrongly
attributed to the leisure centre, the weekly average income, calculated in
accordance with the same method, ought to have been £4.73. The posting errors were discovered by the
pursuers' accountant, Mr Primrose, when he was asked to review Mr Lees'
calculations in No.6/164 and No.6/165.
The methodology adopted by Mr Lees in No.6/164 then proceeds on the
assumption that the membership as at January 2004 would suffer no greater
diminution prior to the end of June 2004 (when the pool re-opened after
nine weeks' closure) than was suffered in the equivalent period of January to
June in 2003 (namely a nett loss of 7 members).
On that view, a desiderated income for the two months of May and June
2004 is stated by multiplying the average weekly income per member (£5.05) by
the adjusted (minus 7) membership producing the figure of £69,731.53. That averaged, 9 week, figure is then
contrasted with what is labelled the "actual" income for those 9 weeks of
£34,609.36, giving what is termed in No.6/164 the "actual loss" of £35,122.17.
[43] However, that last mentioned figure is not the figure entered
in No.6/339 of process. Apart from the
posting errors, Mr Lees explained in his evidence in chief that taking
9 weeks as the duration of the closure of the pool was not justified since
it had been prolonged for other reasons.
The duration should be 6 weeks and on that basis the appropriate
figure which should have been included in No.6/339 was £23,414.77.
[44] The figure entered as respects "lost membership" (£19,053.99)
is calculated in this manner.
Mr Lees concluded that during the period between January 2004 and
July 2004 the nett loss of membership was greater than the nett loss in the
same months of the preceding year by a total of 145. It was considered in July 2004, when Nos.6/164
and 6/165 were prepared, that it would take six months to recover that nett
loss of membership. The basis for that
was simply the view of the manager and the assistant manager employed at the
leisure centre. The figure of £19,053
was therefore reached by multiplying the average income per member per week
(£5.05) by the "lost" members (145), the product of that multiplication being
further multiplied by 26 (representing the 6 month period). If account is taken of the posting error
identified by Mr Primrose and the figure of £4.73 is substituted for
£5.05, the final product of the multiplication reduces from £19,053.99 to
£17,832.
[45] It appears therefore that on any view of the evidence offered
by the pursuers the first two figures in section 15 of No.6/339 reduce to
£23,414.77 and £17,832 respectively.
[46] However, counsel for the defenders, both in his
cross-examination of the witnesses and in his submissions, was critical of the
methodology which had been adopted. The
appropriate closure period was now accepted to be 6 weeks (rather than
9 weeks) but the pursuers had selected a period of 7 months from
January 2004 as a basis for claiming their losses. However, the pool was open and functioning
normally apart from the 9 week closure.
Further, there was no rational basis for comparing membership movements
in January to July 2004 only with the same months in the preceding year. There was no suggestion that seasonal factors
applied in this case. The figures in No.6/165
for the 5 months preceding January 2004 revealed that the leisure centre
had suffered a steady nett loss of membership (79) and no reason had been
suggested for ignoring this. The claim
respecting the "recovery period" was speculative with no real explanation why
the manager and the assistant manager should have selected 6 months as the
appropriate period. There was no reason
why it should be assumed that (if there had been a nett loss of membership in
advance of re-opening) there should not be a gradual return of membership over
that period. Further, although actual
data was available in advance of the proof, those conducting the litigation on
behalf of the pursuers had chosen to rely on a speculation compiled in July
2004 in preference to such results as might be revealed by what had actually happened
after the pool re-opened.
[47] In my view there is force in the criticisms advanced by counsel
for the defenders. I appreciate that in
a business such as that of the pursuers, where much of the income comes from
membership subscriptions, quantifying any financial consequences flowing from
the need to close the pool for a period of 6 weeks is not entirely
straightforward. Unfortunately however,
the methodology for the assessment of revenue loss appears to have been left
principally to Mr Lees and while I can have some understanding for the way
in which he went about the task, it appears to me that it is seriously
flawed. The principal flaws are as
follows. First, there is an assumption
that any collective nett loss of membership in the months following the
refurbishment announcement in January 2004 which was not mirrored by an equal
loss in the equivalent period in the preceding year must ipso facto be attributed to the announcement of the closure of the
pool and hence be attributable to the defenders' breach of contract. But that is plainly over-simplistic. For example, it ignores movements within the
period, such as the fact that the nett loss recorded in June 2003 (46) was not
far short of the equivalent figure for June 2004, the critical month of closure
(57). It does not review the membership
pattern in any other year. Importantly,
no attention is given to the significant nett decline in the membership in the
last 5 months of 2003 - which cannot be attributed to the defenders. I would add that no attempt was made to
quantify the amount of lost sales of drinks, snacks etc., during the closure
period. Moreover, as respects the
"recovery period" claim, I have great difficulty in understanding why the court
should legitimately be asked to accept a flimsily based speculative estimate
prepared in July 2004 as to what might happen during the ensuing 6 months
when actual information for the period was clearly available well in advance of
the proof.
[48] Mr Lees' best efforts to estimate the loss of income were
subjected to review by Mr Primrose of Condies,
C.A., who reported by
means of the letter No.6/338 of process.
As already mentioned, Mr Primrose identified a posting error which
reduced Mr Lees' estimate of an average weekly income per member from
£5.05 to £4.73. For the rest,
Mr Primrose compared the actual sales income for the two periods of
January-July 2003 and January-July 2004 and identified that the total sales
income in the latter year was £31,793 less than in the equivalent period for
the preceding year, and that the reduction was thus rather smaller than
Mr Lees' figure of £35,122. As I
understand it, Mr Primrose's figures embrace the full 9 week closure
rather than the 6 week closure which Mr Lees accepted as
appropriate.
[49] Mr Lees also sought to support his calculations by
reference to annual sales figures contained in the management accounts. In re-examination he was taken to No.6/176 of
process, being an excerpt from the pursuers' management accounts for the
financial years ending at 31 January in the years 2002 to 2004 and to No.6/715
of process being a management account summary for the year ending in January
2005. The sales figure (in respect of
the leisure centre) for the year to January 2005 was £355,100 whereas the
equivalent figure for 2004 was £404,733.
The sales revenue in the year of the closure was thus lower than in the
year ending 2005 by some £49,633.
[50] While the sales figures for these two years do show that the sales
revenue dropped from £404,733 to £355,100 I do not find them to be of any real
assistance in quantifying the claim for loss of revenue. It was accepted by Mr Lees that the
leisure club industry was a competitive and volatile business and the fact that
in the year ending 2005 the sales income retreated almost to the level of the
year ending 2003 (£354,011) does not mean that the retreat was wholly, or even
predominantly, due to the fact of closure for refurbishment.
[51] In these circumstances I am unable to accept the particular bases
upon which the pursuers seek to establish and quantify the claim for loss of
revenue. Counsel for the defenders
submitted that on the assumption that I were to reach that view, there was no
room for a "broad axe" award and that the claim for loss of revenue should be
rejected in its totality. The onus was
on a pursuer to establish the measure of his loss. I did not however understand counsel for the
defenders to contend that where the particular measure of loss advanced by a
pursuer was judged unsatisfactory, no other broad axe assessment could ever be
possible. It depended on the
circumstances. With some hesitation I
have come to the view that in the circumstances of this particular case some
broad axe assessment is yet possible.
[52] Clearly, during the closure (which I take at 6 weeks) the
pursuers lost the direct sales to members of the club in their consumption of
drinks and snacks etc. These are a small
percentage of the total income of the leisure centre, but not
insignificant. At 10% of income (which
was an estimate mentioned in evidence), one is talking of approximately £3,300
per month, say £5,000 for a 6 week closure. In all probability the closure of the pool
must have had some negative effect on membership in that, for example, people
with a subscription expiring in the period between the closure announcement and
the projected date of re-opening, might defer renewal of their subscription
until the refurbished pool was in fact open.
There is also the possibility that others may have been attracted to
other leisure centres elsewhere and did not come back. Conversely new members may have been
attracted by the revamped facilities.
But in the absence of any coherent and detailed examination of the
consequences of the closure of the pool on membership any award in this respect
must be very moderate. In the whole
circumstances I shall allow a "broad axe" figure of £5,000 for loss of
subscription income, making a total award for loss of revenue of £12,978 (including
the sum for the hire of alternative facilities (£2,978)).
[53] Bringing matters together, before I turn to the question of
interest, the damages payable to the pursuers may be summarised thus by
reference to the sections in the schedule in No.6/339 of process:
|
(a)
|
Sections 1-8
|
£62,871.24
|
|
(b)
|
Section 9
|
Nil
|
|
(c)
|
Section 10
|
£2,000.00
|
|
(d)
|
Section 11
|
£3,000.00
|
|
(e)
|
Section 12
|
Nil
|
|
|
Total
|
£67,871.24
|
|
(f)
|
Section 13 (contractor's profit)
|
£3,393.56
|
|
(g)
|
Section 14 (prof. fees)
|
£10,316.58
|
|
|
Total direct costs:
|
£81,581.38
|
|
(h)
|
Section 15 (revenue etc.)
|
£12,978.00
|
|
|
Total
|
£94,559.38
|
Interest
[54] The submissions on the allowance of interest on the principal
sums of damages were relatively brief.
The schedule No.6/337 of process details the payments made, by cheque,
by the pursuers to the engineers, the contractor and the architect. But given that the works encompassed much
more than the rectification of three defects it is not really possible to relate
the items in No.6/339 of process to any particular payment noted in
No.6/337. The payments made to the
contractor are six in number and proceed at intervals from June 2004 to May
2005. Counsel for the defenders submitted
that an appropriate, though rough and ready, way to proceed was to apply a
median rate for that period. Counsel for
the pursuers did not offer any competing approach. I shall therefore allow interest at the rate
of 4% per annum on the direct costs
(£81,581.38) from 1 June 2004
to 31 May 2005. Ignoring pence, I calculate that amount of
interest in the sum of £3,263. From 1 June 2005 to date interest on
the sum of £81,581.38 should run at the full "judicial" rate of 8% per annum. I calculate that amount of interest to be
£4,895. So far as loss of revenue is
concerned, given that my award of damages is a "broad axe" award, the allowance
of interest thereon should follow a similar approach. I shall allow the full judicial rate from 1 September 2004 to date, a
period which I take as 18 months.
By my calculation interest, on that basis, on the revenue loss amounts
to £1,557. The total amount of interest
to be included in the ultimate figure for damages thus amounts to £9,715.
Outcome
[55] Adding the figure for
interest (£9,715) to the total brought out in the summary in paragraph [52]
supra (£94,559.38) results in a
figure of £104,274.38 for which I shall grant decree for payment by the
defenders to the pursuers.
