The true meaning of design development plus some finer points on SMM7 and soil conditions...
Co-operative Insurance Society Ltd v Henry Boot Scotland Ltd and others (1 July 2002)
The claimant ("CIS") was the freehold owner of a property in Glasgow. Boot (the first defendant) was employed to demolish, design and reconstruct the property. A consulting engineer employed by CIS, Crouch Hogg Waterman (CHW) was the third defendant. During execution of the works water and soil flooded into the sub-basement excavation. CIS brought a claim for the consequences of that flood. The first and the third defendants blamed each other. The parties brought a number of preliminary issues before the court.
Boot was engaged under a JCT80 form with Contractor's Designed Portion Supplement 1981 Edition (revised July 1994). The Contractor's Designed Portion included contiguous bored piled walls and temporary propping. CHW produced an outline design which was developed by Boot.
Design Development
The question arose as to Boot's responsibility for the whole design given that it was developing CHW's initial design. Boot said that its only obligations in respect of the design of the piled walls was to prepare working drawings. CIS said that Boot was responsible for the whole design.
The answer involved an analysis of Boot's obligations under clauses 2.1.2 and 2.7.1 of the contract. These say:
Clause 2.1.2: "for the purpose of .. carrying out and completing the Works the Contractor shall, in accordance with the Contract Drawings and the Contract Bills.. complete the design for the Contractor's Designed Portion..."
Clause 2.7.1: "Insofar as the design of the Contractor's Designed Portion is comprised in the Contractor's Proposals and what the Contractor is to complete under clause 2.1.2 and in accordance with the Employer's Requirements ... the Contractor shall have in respect of any defect or insufficiency in such design the like liability to the Employer.. as would an architect or, as the case may be, other appropriate professional designer holding himself out as competent to take on work for such design..."
The Judge (HHJ Seymour QC) agreed with CIS, who argued that Boot's obligation under clause 2.1.2 was to develop the conceptual design produced by CHW into a completed design capable of being constructed. This obligation necessarily included a duty to check the adequacy of any preliminary designs by others. This involved the need to understand the principles and form a view as to the sufficiency of the work. The Judge concluded that Boot had given an undertaking to complete a design started by someone else, and the result should be prepared with reasonable skill and care, however much of the design had been done before Boot took over.
This judgment may come as a shock to any design contractor who previously thought that "design development" was a lesser responsibility than full-scale design. The Judge did not consider where this left the consultant CHW, who was presumably the author of some errors in the initial design. If Boot's completion of the design alleviated CHW of liability for that design then it is unlikely that CHW would be responsible to CIS "for the same damage". Boot (who did not have a contract with CHW) would therefore have difficulties seeking a contribution from CHW.
SMM7, Contract Bills and Groundwater Levels
Clause 2.2.2.1 of the contract said that the Contract Bills were to have been prepared in accordance with the Standard Method of Measurement, 7th Edition. Clause 2.2.2.2 said that if there was any departure from SMM7, or any error in description or in quantity or omission of items then that error should be corrected, and any such correction would be a variation under clause 13.2.
Clause 2.2.2.3 of the contract said that any error in description or in quantity in the Contractor's Proposals should also be corrected, but there would be no addition to the Contract Sum.
The Bills, contrary to paragraph D20P1(a) of SMM7, failed to provide the groundwater level and the date when it was established (defined as the pre-contract water level). However, according to CIS, it was theoretically possible to calculate the pre-contract water level from information in the Bills.
The Judge said that this wasn't enough. In order to comply with SMM7 the Bills had to state the level and when it was measured.
Alright, said CIS, but anyway the earthwork support was part of the Contractor's Proposals. Therefore the correction of the water level should not be a variation: the excavation work should be remeasured instead.
The Judge disagreed and drew a distinction between an unexplained departure from the rules of SMM7 - as was the case here - and an incorrect pre-contract water level in the Bills. The latter is catered for in rule M5 of SMM7. This states that if the post-contract water level differs from the pre-contract water level (ie each time when excavation is carried out) then the measurements are to be revised accordingly.
The Bills did not provide any pre-contract groundwater level so they had to be corrected under clause 2.2.2.2 of the contract. Once the correction was made it was a variation. This should then be valued by reference to the post-contract water level.
If the Bills had included a groundwater level that was inaccurate, this should also be corrected. This time however the excavation would be remeasured in accordance with rule M5 of SMM7.
As a result Boot was entitled to be paid pursuant to clause 13.2 for work consequent upon a change in the prevailing ground conditions from those which should have been in the Bills.
That's not all...
This case also considered a number of other interesting points, such as whether or not the soil report was a Contract Document; whether Boot bore the risk of the ground conditions being different from those described in the soil report and other tricky every-day questions. Anyone currently struggling with the minutiae of soil reports, or the terms of the Contractor’s Designed Portion Supplement will find the case helpful.
For further information please contact Vanessa Hall at vanessa.hall@cms-cmck.com or on +44 (0)20 7367 2670.
