Pitchmastic plc -v- Birse Construction Ltd [2000] TCC

© Daniel Atkinson 2001 31 October 2001

In Pitchmastic plc -v- Birse Construction Ltd [2000] TCC Pitchmastic undertook subcontract roofing works for Birse under an amended version of DOM/2 for the construction of a new national distribution centre for Tesco Stores Limited at Milton Keynes. A number of issues arose including the release of retention as well as claims and counterclaims for delay and disruption.

On the issue of retention, the SubContract provided, 5% retention applied until practical completion of the main contract works when half of the retention would be released. Pitchmastic was entitled to the second instalment (2.5%) of the retention only when the Certificate of Making Good had been issued under the main contract. No such Certificate was issued under the main contract. Birse conceded that there were no outstanding defects in any of the work undertaken by Pitchmastic.

Pitchmastic argued that Birse could not reply upon the absence of the Certificate of Making Good as a defence to the claim for the release of the final instalment of the retention money. Pitchmastic argued that the Court had jurisdiction provided by Clause 3.2 of the SubContract to determine the issue relating to any certificate issued under the main contract in order to determine the rights and liabilities under the contract. Clause 3.2 provided that insofar as the SubContract left any matter or thing for the decision or opinion of any person, that did not prevent the Court determining the rights and liabilities and from making any finding necessary to establish that such decision or opinion was correctly made on the facts found by the Court, or what decision or opinion should have been made or expressed. Pitchmastic argued that the Court should declare that a certificate of making good defects should have been issued in relation to Pitchmastic’s work.

It was held that Article 3.2 could not be used to confer rights on the parties which were inconsistent with the suncontract’s express terms. The parties had agreed that Pitchmastic would be entitled to the second instalment of the retention only when the Certificate of Making Good had been issued under the main contract. If it could be shown that Birse had prevented the issue of the certificate, then its absence would not be a bar to Pitchmastic’s recovery of the remaining instalment Roberts v Bury Commissioners [1870] and Panamena Europe Navigacon v Frederick Leyland [1947]. There was no evidence that Birse had prevented the issue of the certificate, nor any allegation to that extent. It was held that it was not sufficient for Pitchmastic merely to show that the Architect had withheld the certificate because of defects by others. Provided Birse and its subcontractors were proceeding with reasonable diligence to make good the defects, Birse was not preventing the issue of the certificate within the meaning of the Roberts v Bury Commissioners principle. Some defects take longer than others. There may be genuine difficulties in deciding what remedial work was required. It was held therefore that this part of the claim failed.

The next issue was Pitchmastic’s claim for variations involving the addition of roof lights and payment for the alleged resulting delay and disruption. Pitchmastic claimed for additional preliminaries to be included in the valuation of the variation under Clause 16.3.3.3, which provided that allowance should be made for any additional or reduction of preliminary items.

It was held that Clause 16.3.3.3 was not an apt peg on which to hang a claim for extended preliminaries due to prolongation caused by variations. Such a claim was conventionally made as a claim for loss and expense. In this case Clause 13.3.7 had been modified from the standard DOM/2 to exclude variation instructions from its ambit. It was held that Pitchmastic’s claim was a misconceived attempt to circumvent the clear intention of the parties that Pitchmastic should not be entitled to recover direct loss and expense for the consequences of variations instructions (whether in the shape of extended preliminaries or otherwise). The claim therefore failed.

It was also decided, that if it was necessary to decide, Dyson J would find that the claim had been settled by the payment of a 15% uplift to the measured value. It was inherently unlikely that Pitchmastic would have agreed valuations of the variations which included sums for profit and overheads, but not for extended preliminaries.

The next issue was Pitchmastic’s claim for loss of productivity in the laying Trocal decking caused by the variation. Pitchmastic based its claim on the difference between a tender productivity of 70m²

per man day and the actual productivity of 47m² per man day. Birse on the other hand stated that 60m² per man day was the best that Pitchmastic could reasonably achieve without the variation, taking account of its own inefficiencies and the exigencies of weather. Actual productivity was stated to have been 38m² per man day, but if time lost by the weather was removed, the averaged productivity achieved was 8/m².

Dyson J found that it was not possible to ascertain what Pitchmastic had allowed in its tender productivity rates for the effects of weather. This was an important gap in the evidence. If there was an underallowance for weather then this could have accounted for the shortfall between the average output achieved and the assumed reasonable tender allowance. It was also found that Pitchmastic had made no allowance for any other disrupting factors which may have affected its progress. It was found that there were significant other factors. There had been delay and disruption due to suspension of Pitchmastic’s work due to

1. safety issues,
2. poor workmanship needing Pitchmastic to rectify defects,
3. insufficient labour by Pitchmastic,
4. bad weather,
5. Pitchmastic’s failure to organise the work properly causing damage to the roof and lost time rectifying it,
6. time lost rectifying storm damage which occurred over the Christmas break.

It was held that even if the court was satisfied that Pitchmastic did suffer some disruption, it was impossible on the material presented to quantify it. In the absence of evidence as to what allowance was included in the tender for loss of output due to bad weather, any allowance that would be assessed would be a guess. No allowance had been made for consequences of "storm damage" and loss of productivity due to inefficiencies. For these reasons Pitchmastics claim failed.

The next issue was Birse’s counterclaims for delay and disruption of SubContractors.

The delays of various subcontractors and whether or not caused by Pitchmastic were examined. The logical approach taken by Dyson J in relation to each structure, the warehouse and the VMU Building is instructive. First on the warehouse and in relation to one SubContractor, Stuart, Dyson J considered it was not surprising that once the smooth flow of slab work was interrupted and Stuart left the site, arrangements could not be made for them to return to site immediately work was available. It was considered obviously sensible that Stuart did not remain on site, incurring costs. In relation to another SubContractor, Bliss, it was found that but for the delays on the part of Pitchmastic the floor slab by Stuart would have been laid in sufficient time to enable Bliss to complete the brickwork earlier than it did. It was found that an additional three weeks delay was attributable to Bliss. If Bliss had completed its work three weeks earlier than it did, then the next SubContractor, Essex, ought to have been able to complete its work three weeks earlier than it did. Dyson J therefore ascribed three weeks of the delay suffered by Essex to Bliss and the balance of five weeks to Pitchmastic. A similar approach was taken on the VMU Building.

The claims for disruption to various SubContractors was examined, all of which had been settled. The SubContractor, Essex, based his claim on loss of productivity based on productivity assumed in the tende. Birse paid 25% of the amount claimed. It was held that the settlement sum was reasonable. The issue was how much to apportion to Pitchmastic. Dyson J had some difficulty in assessing the apportionment but considered that a very significant contribution was to be made by Pitchmastic. In view of the paucity of evidence it was considered necessary to err on the side of caution. Dyson J considered that Pitchmastic was responsible for more than 50% of the £68,285 settlement and then awarded £25,000 on the basis that this would not overcompensate Birse for the consequences of Pitchmastic’s breaches of contract. A similar approach was taken of all other SubContract claims.

Birse also claimed percentages to be applied to the amounts awarded on SubContractor claims as 4.79% for head office overheads, 6.43% for site overheads and 0.76% for profit. The first and third percentages came from Company accounts. The claim was rejected. The cost of negotiating and settling the claims had not caused any loss of profit. Nor was there an entitlement to recover overheads. Any contractor must be taken to include in his tender price an element to reflect the cost that is likely to be incurred in settling accounts and claims by SubContractors against it, as well as settling accounts and claims made by it against the Employer. In an exceptional case the contractor may be able to show that he has incurred exceptionally heavy costs in meeting claims by a SubContractor as a result of breach of contract by another SubContractor. But that would have to be demonstrated and the additional costs proved. Simply to apply a percentage figure to the amounts settled was wholly arbitrary and unacceptable.