What price defects?

It is usual for construction work to be completed to the exact requirements of the drawings and specification. Engineers and architects for the most part are vigilant in spotting nonconforming work but there is often some defective work that slips through the net. Often these matters are minor and never come to light. In other cases, when the work comes into use the fault is obvious.

What is the owner's remedy in this situation? It is usual for the contractor to be given the option of putting the work right or paying the cost of others doing the work. This type of situation can lead to a dispute as it is often argued by the contractor that the fault is not causing any difficulty with the use of the facility and the owner is only looking to make a windfall profit from the situation.

This type of argument arose in the English case of Ruxley Electronics v Forsyth (1995). Mr Forsyth entered into a contract for the construction of a swimming pool in his garden. The specification called for the pool at its deepest point to be 7 feet 6 inches in depth. After the pool had been in use for a short while it became clear that the maximum depth was in fact only 6 feet 9 inches. The cost of correcting the problem was estimated to be £21 560.

Needless to say, the contractor refused to pay and the matter was referred to court. It became a long running, expensive affair that finished up in the House of Lords.

The Lower Court and the House of Lords took the view that, while the normal measure of damages for defective work is the reinstatement costs, it does not apply if the cost is out of all proportion to what putting the work right will achieve.

In this case it was considered that a swimming pool that is 6 feet 9 inches deep is perfectly suitable for swimming and diving, and that there would be little achieved in reconstructing it to the increased depth of 7 feet 6 inches. The House of Lords, in any case, was not convinced that if the money were to be awarded to Mr Forsyth he would spend it on putting the pool right.

A sum of £2500 was therefore awarded for what was termed loss of amenity. The Court of Appeal, whose decision was overruled by the House of Lords, considered that to allow the contractor to escape by paying only a nominal amount would send out the wrong message to contractors. However, the House of Lords is always right as its decision is the last one in the line.

The Scottish decision
The Ruxley decision was much discussed in the Scottish case of McLaren Murdock and Hamilton v The Abercromby Motor Group (2002).

The normal measure of damages for defective work does not apply if the cost is out of proportion to what putting it right will achieve

Working in winter in places such as Scotland when the heating system is not performing in a satisfactory manner can be trying to even the most hardy of us. A dispute arose over the architect's choice of a heating system used in the construction of a new car showroom and workshop.

An underfloor electric system, which used electricity on a cheap night tariff to heat up the concrete floors to provide warmth for the building's occupants during the day, was specified. This method of heating was unsatisfactory as there were large external doors to the workshop for the mechanics to bring the cars in and out. Opening these doors led to severe heat loss. The showroom was designed as would be expected with large areas of glass, which again made heat retention difficult.

The owner decided to replace the heating system with a gas-fired alternative and sought to recover the cost from the architect. It was argued on behalf of the architect that a replacement of the whole system was unnecessary as the problem could have been solved at much less cost by the installation of a supplementary heating system. When all was said and done, the system had not failed, it was just that at certain times in winter there was insufficient heat for the comfort of the building users.

The court examined the Ruxley decision and asked whether the amount spent on the replacement heating system was out of proportion to the benefit gained. They also took into account that an injured party is entitled to be placed in as good a position financially as they would have been if the contract had been properly performed. It was deemed that the architect had made a serious error and the actions taken by the owner were not unreasonable. The architect was ordered to pay the total cost of the new heating installation.

Owners' entitlements
Both of these cases show a differing aspect of the same problem. In the Ruxley case, the work was manifestly wrong in that the swimming pool was too shallow. In the case of the architect's design of the heating system for the car showroom and workshop, they obviously made an error when choosing the heating system.

The reason for what appears to be an inconsistency between the two decisions is that Mr Forsyth could use the pool satisfactorily without carrying out any remedial works. To carry on using the car showroom and workshop without correcting the heating problem would make the use of the premises during some of the winter months very difficult.