case notes

A load of old rot

Long Grove Psychiatric Hospital in Epsom was built around 1900. It consisted of two main ward blocks joined by a central medical area with a clock tower. Long Grove had been closed in the early 1990s and by 1999 when Taylor Woodrow and Wimpey (the employers) wanted to turn it into flats it had fallen into disrepair.

A survey showed external dry and wet rot in the roof and floor timbers. In early 2000 the employers and Lawrence Foote & Partners (LFP) drew up a list of employers’ requirements for the conversion work, which required the contractor to remove any rotten timber.

Barnes & Elliott inserted a couple of qualifications in its tender, as the extent of the repairs and renovations was difficult to determine.

The first limited B&E’s dry rot replacement to set percentages and the second similarly limited the amount of external brickwork cleaning and repair.

When the employers asked B&E to withdraw its qualifications, it said it would do so for the roof repairs, but included a provisional sum for £180,000 for the internal elevations and structural work. B&E found it had to remove more dry rot than it had allowed for and had to replace infected masonry, provide temporary buttresses and install extra structural steel. B&E therefore claimed £11,889,114 in its final account but the employers agreed with only £7,027,941.

The court held that the employers had not retained the risk of the unforeseen works except for the external facade, which was subject to the £180,000 provisional sum.

Moral: Word post-tender agreements carefully.

^{Case: Taylor Woodrow Holdings Ltd and George Wimpey Southern Counties Ltd v Barnes & Elliott Ltd}

‘Minor tweak’ is a major headache

Graham Whitehouse Practice (GWP) was Hodson Developments’ (Hodson) architect responsible for obtaining planning and building control approvals on a housing scheme in Stowe, but was not employed for supervising the construction.

Mr Hodson was known to commit breaches of planning permissions if he thought no action would be taken against him. However, he was careful to negotiate with the planners and not to push things too far.

Hodson used GTA Civils to prepare setting out drawings. On June 11, 2001, Aylesbury Vale District Council granted Hodson planning permission for the 10-house development.

This was based on GWP’s drawings, including its architect’s layout. When GTA prepared the setting out drawings by merging GWP’s layouts with the survey plans it found that as the ground sloped severely, plots 9 and 10 were too close together.

GTA could either introduce a retaining wall or move plot 10 by 1.5m to the front of the site. GTA decided to move it but did not specifically tell either Hodson or GWP for work that it later called “a minor tweak”.

Hodson and GWP also made their own unofficial changes to the approved plans in external finishes, window design and a 340mm increase in size.

Plot 10 was high and prominent at the front of the development and the planners had been careful to ensure it had minimal impact on its surroundings. The council spotted plot 10’s unofficial movement and in early 2002 issued an enforcement notice insisting that the partly completed plot would be demolished and re-sited.

Hodson sued GWP and GTA, but GWP was held to be not liable as it had not supervised the work on site.

GTA argued that as others had also made changes, it could not be solely responsible for the enforcement notice. The judge disagreed as the evidence showed Mr Hodson may well have negotiated the other points with the planners and GTA had not proved its case. GTA was ordered to pay £115,457.

Moral: Tell someone if you alter plans.

^{Case: Hodson Developments Ltd v GTA Civils Ltd and Graham Whitehouse Practice. TCC July 13, 2006.}

Check guarantee

In April 2003 Thyssen Schachtbau GMBH (Thyssen) had an English subsidiary called Thyssen (Great Britain) Ltd. In turn, Thyssen (Great Britain) owned all the shares of Thyssen Construction. Thyssen sold Thyssen (Great Britain) Ltd to the Meade Corporation in September 2003.

In November 2003 Meade renamed Thyssen Construction Ltd as “Butterley”. (For clarity the name Butterley is used throughout.)

On December 2, 2004 Butterley went into administration and succumbed to liquidation on November 7, 2005.

Meanwhile, in early 2003 RWE was appointed as main contractor for installing desulfurisation units 2 and 3 at Cottam coal-fired power station. RWE subcontracted the civil works to Butterley for £9,745,364 but wanted a parent company guarantee. Butterley’s then parent, Thyssen, gave this. In April 2003 RWE and Butterley signed a Side Letter allowing RWE to extend the subcontract at any time until November 7, 2003, to include units 1 and 4.

Although RWE and Butterley had started negotiations in October 2003 for the additional units, agreement was not reached until Addendum No 1 was signed in late March or early April 2004 for £1,749,387 (ie after Meade had become Butterley’s parent company). When Butterley went bust in December 2004 its had not finished its work.

RWE claimed it cost £1,677,471.13 to complete all four units. In addition, RWE claimed it had overpaid Butterley £492,786 in interim valuations. RWE tried to use a court summary judgment to recover all its money from Thyssen under its original parent company guarantee.

The judge held that while Thyssen had a responsibility for units 2 and 3, it had no responsibility for units 1 and 4.

As the costs were not easily separable, RWE had to be content with a declaration of Thyssen’s liability for the actual sums until it could prove the figures in a full court hearing.

Moral: There is no such thing as a cast iron guarantee.

^{Case: RWE Industrie-Löesungen GmbH v Thyssen Schachtbau GmbH; and Meade Capital Management Ltd v Thyssen Schachtbau GmbH}