| Date | 19 April 2006 |
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| Judgment | Plymouth & South West Co-operative Society Limited v Architecture, Structure & Management Limited, TCC, 10 January 2006 |
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| The Issue | The quantification of loss in cases of professional negligence. |
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| Implication |
In cases where the claimant is prevented from demonstrating a loss incurred due to the defendants breach of contract the absence of documentation need not be a bar to the recovery of damages. |
printIn 1993, The Plymouth and South West Co-operative Society (“Plymco”) decided to redevelop their flagship store, Co-operative House in Derry’s Cross, Plymouth. Plymco appointed Architecture, Structure and Management Limited (“ASM”) to carry out the design, implementation of tenders, contract procurement, cost control and certification procedures and general liaison with the contractor on programming and cost planning matters. Plymco provided ASM with a budget figure of £5 million for the redevelopment. In May 1996 ASM prepared a budget estimate for the works in an overall figure of £5.65 million and made it clear that they could tailor the development to meet the stated budget. During this initial phase, Plymco had only secured one tenant for the new development. That tenant was Argos. It was always a requirement of Plymco’s, which was accepted and understood by ASM, that the work to the proposed Argos store would be the first to be started and that the completion of the Argos works had to be achieved by the end of April 1997. ASM proceeded with the design of the project and in view of the tight timescales for the production of the design opted for a two stage tendering process. In September 1996 ASM sent out first stage tenders to potential contractors. Unfortunately, at this stage ASM had not finalised any part of the design and a significant element of the detail had yet to be started. As a result, the majority of the works included in the first stage tender documents were described as provisional. The only detailed design undertaken at this stage related to the Argos store. Tenders were received and a preferred contractor was chosen. In November 1996 ASM issued the second stage tender document. However, during the second stage, little or no design progress had been made and nearly 90% of the works remained as undefined provisional or prime cost sums. ASM issued a letter of intent to the contractor and commenced preparation of the formal contract. Given the situation with the design, the JCT Standard Form of Building Contract with Approximate Quantities was adopted. When Plymco expressed concerns to ASM at the amount of provisional sums within the bills of quantities ASM reassured Plymco that during the course of the works provisional sums would be monitored against actual expenditure and if it transpired that greater costs were being expended then savings from other allowances would be made. Confident that these assurances would allow the project to be completed on budget, Plymco proceeded. The works progressed but, as a result of the significant volume of provisional work, over 7,500 variation instructions were issued and substantial cost overruns occurred. Plymco instigated proceedings against ASM alleging that much of the additional cost could have been avoided had ASM performed its services professionally and with reasonable skill and care. The mainstay of Plymco's case was that ASM made a fundamental error in advising Plymco that it could safely enter into a contract with the contractor. They stated that there was, in view of the provisional nature of the design, no real prospect of the project being delivered for £5.6 million and ASM should have realised this and warned Plymco. Plymco also suggested that ASM could, and should, have divided the works into two separate contracts. This option, dubbed the ’Argos first’ solution, would have involved ASM procuring the project in two distinct parts. Firstly, a contract for the construction of the Argos store, for which the design had been developed. Secondly, the remainder of the units would be procured approximately six months later once the design was adequately advanced. Plymco maintained during the case that this was the only viable means of achieving the completion of the project at a reasonable cost and had they received this advice that course of action would have been followed. In hearing these matters, His Honour Judge Thornton QC considered the ‘Argos first’ solution and found it to be both a commercial and technical possibility. He also found that had Plymco been offered the correct advice they would, albeit reluctantly, have accepted it and postponed all but the Argos works until such a time as the design was sufficiently advanced. Accordingly the Judge duly found ASM was in breach of their duty in not advising Plymco to adopt the ‘Argos first solution’ in late October 1996. The case then turned to the question of loss and quantum. Plymco had considerable difficulty in establishing what levels of additional costs were incurred as a result to the failure to adopt an ‘Argos first’ approach. The reason for this difficulty was two-fold. Firstly, ASM were never able to provide any detailed explanation for the £2.2m cost increase on the project and secondly few of the relevant documents, drawings, cost breakdowns and accounts were available that would ordinarily be needed for the purpose of assessing Plymco’s loss. Despite the ‘almost complete absence of relevant documentation’ Judge Thornton QC was sympathetic with Plymco’s position and noted that: “Plymco cannot be reasonably blamed for any failure to produce a more detailed case as to its loss since the documents it would need to do so were not available due to ASM’s default in undertaking its professional services”.Given the absence of documents the quantum exercise carried out by the quantity surveying experts turned upon the hypothetical evaluation of what cost would, or would not, have occurred had the project been divided. In finding ASM liable for over £1.3 million of Plymco’s loss, the Judge acknowledged the expert’s hypothetical method of assessing the loss and added that “without an assessment exercise of this kind being undertaken, it would have been impossible for Plymco to have ascertained what loss it had suffered.”
CJ-0615
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