| Date | 28 March 1996 |
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| Judgment | Clarksteel Limited -v- Birse Construction Ltd 1996 |
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| The Issue | The use of schedules of rates as the application of 'extra-over' rates. |
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| Implication |
Schedule of Rates for Extra-Over Work held appropriate for pricing even where the additional work occurs as a result of breach of contract. |
printJudges of the Official Referees Court are an adaptable lot. It is highly unlikely that any will have stood in a muddy field welding steel pipes together, but this does not stop them from very rapidly becoming the font of all knowledge in such matters. The case of Clarksteel -v- Birse Construction decided on 20th February 1996, demonstrated that the Official Referees are perfectly willing to grapple with the pedantic minutiae of technical engineering disputes with a train spotter's attention to detail. The dispute between Birse and Clarksteel concerned a sub-contract for the welding of approximately 45 kilometres of steel pipes which were to be installed by Birse under a contract with Anglian Water, for a new water main near Grimsby. The Sub-Contract was under the FCEC Blue Form revised September 1984, for a total of £201,563 or such other sum as would be ascertained by the measurement and valuation of the works. The pipes were between 500 mm and 1000 mm in diameter and were to be fabricated to BS 3601 with short sleeve joints which were to be welded with a full strength internal weld and a sealing weld externally. Not long after the start of the work, Clarksteel complained that they were being required to weld gaps for the pipe joints at an excessive width. Measurements were taken and correspondence ensued. The correspondence placed Birse in the typical quandary of the Main Contractor - how far should it go to acknowledge the merit of Clarksteel's case when it was itself putting forward that case to the Engineer and Anglian Water without any necessary expectation that the latter would accept it. If the case were not accepted by Anglian Water, liability might by then have been conceded under the sub-contract. In the event, Clarksteel issued a writ against Birse, claiming damages approaching £700,000 as additional costs incurred in welding excessive and non-uniform joint widths around the circumference of the pipes. The claim was of the usual belt, brace, buckle and velcro type. It was claimed on the basis that the sub-contract price was not fixed and that the sub-contractor was entitled to a reasonable sum. It was also claimed as a variation of the sub-contract. It was claimed as an overall quantum meruit and finally there were additional claims for delay and suspension of the sub-contract works. Now increasingly trials of this type are becoming trial by expert. Because of the technical nature of the dispute, his Honour Judge Humphrey Lloyd QC permitted both parties experts to express opinions about the matters which might not otherwise have been known to the Court, and also in matters directly the subject of the preliminary issues. For this reason, the credibility of the expert witness evidence became crucial and it is clear that the Judge preferred the evidence of the expert called by Birse. Two clear reasons seem to underpin this. Firstly, Birse's expert was clearly a leader in his field, his primary degree was in Metallurgy, he was a Fellow of the Institute of Materials and a Fellow and member of the governing council of the Welding Institute. His opponent was a Mechanical Engineer, who had been a member of the British Standard Institution committees on machinery standards, but who could not lay claim to such immediate and direct experience. Secondly, and most tellingly, Birse's expert had not been involved in the dispute during the construction activity and approached the matter in a wholly independent manner. The same it seems could not be said of Clarksteel's expert, who had been closely involved with Clarksteel in preparing the claims and presentation of these matters to Birse prior to litigation. In the event, the Judge held that the contract documents through their reference to British Standards were perfectly clear in identifying the range of welding that the sub-contractor would be required to undertake. He was generally satisfied that the sub-contract schedule of extra-over rates would apply in all cases where the dimension of the welding was in excess of the tolerances identified in the British Standards. Nor was he impressed by the sub-contractor's argument that the Schedule of Rates could not apply if the reason why the gap was greater than the British Standard tolerance was because the pipes were not manufactured in accordance with British Standards or were not installed properly by Birse. Judge Lloyd considered the schedule of extra-over rates was in fact directly designed to deal with the consequences of such situations, even though they might arise from a breach of contract. In this respect, he likened the Schedule of Rates to a liquidated damages clause, which not only fixed the amount of compensation payable for a breach of contract but effectively limited it. Although the matter has therefore been found in favour of the Main Contractor to the extent that the Schedule of Rates must apply despite these being unsatisfactory to the sub-contractor, the Judge left the door slightly ajar. He concluded that it would be a matter for further investigation and decision as to what work was the subject of the variation, what the circumstances were in which the work came to be carried out, and whether in all the circumstances the Schedule of Extra-Over Rates remained appropriate.
CJ-9611
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