Cases - Royal Brompton Hospital NHS Trust v Frederick Alexander Hammond and others

Record details

Royal Brompton Hospital NHS Trust v Frederick Alexander Hammond and others
[1999]; [2002]
BLR 162; EWHC 2037 (TCC)
Sale of goods - measure of damages – settlement of other proceedings – compromise of other dispute – reasonableness of settlement – settlement on legal advice – whether settlement of other proceedings admissible – liability of third party – requirement for competent legal advice and expert quantum advice - whether reasonable settlement can be used as evidence of amount of damages payable by a third party - construction claims

The defendant consulting mechanical and electrical engineers were part of a large team of professional advisors for a hospital development scheme. The work was late and the claimant argued that the defendant (among others) was responsible for the delay and disruption caused.

One of the alleged reasons for the delay and disruption was that the defendant had failed to provide the contractor with co-ordination drawings in sufficient time to carry out the works to programme.

It was held on the terms of the defendant's retainer that it was obliged to use reasonable skill, care and diligence to ensure that the co-ordination drawings were produced in time. This duty was not diluted by any co-ordination obligations which were contained within the building contract.

This case confirmed that for a settlement to be relied on against third parties, competent legal advice on liability must be obtained beforehand, along with expert quantum advice.

The House of Lords considered the proper interpretation of the statute that allows the courts to apportion liability between different defendants who were found liable to the same claimant. Their Lordships applied a restrictive construction to section 1(1) of the Civil Liability (Contribution) Act 1978 which on the face of it allowed a defendant to claim a contribution from a third party who was wholly or partially liable to the claimant for the same damaged being claimed against him.

Section 1(1) provides:

'Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).'

The employer alleged that the architect was negligent in that he should have known that the contractor was not entitled to an architect's instruction to lay a moisture resistant membrane and the employer sought to recover damages from the architect. The employer claimed (1) sums paid to the contractor in respect of and consequential on the instruction; (2) the recovery of liquidated damages paid to the contractor upon the instruction; and/or (3) any other sums paid to the contractor in consequence of the instruction, extensions of time and/or prolongation. The employer said it was entitled to these sums because they were the same damage for the purposes of the section 1(1) of the Contribution Act as set out above.

In its defence, the architect denied that it was negligent. In the alternative, it said that if it was negligent in granting the extensions of time to the contractor, then the contractor was also liable to the employer in respect of the same damage which was the subject matter of the action against the architect and thus was liable to contribute to the extent of a complete indemnity for such loss as the architect may be held liable to the employer pursuant to the same provision of the Contribution Act as the employer relied on.

Their Lordships held that 'same damage' could not be given a wide interpretation such that it meant 'substantially or materially the same damage'. It had to be exactly the same. Accordingly, when a claim for contribution arises the questions to be asked are: (i) What damage had Party A suffered? (ii) Was Party B liable in respect of that damage? and (iii) Was Party C also liable to A in respect of that damage or some of it?

In the circumstances, both claims for contribution (i.e. by the contractor and the architect) failed because they were not for the same damage. The employer's claim against the contractor was for late delivery of the building, while the essence of the case against the architects was that their breach of duty had changed detrimentally the employer's contractual position against the contractor.

Per HHJ Havery QC:

'Under the JCT conditions, as used here, there can be no doubt that if an architect is required to form an opinion then, if there is then unused float for the benefit of the contractor (and not for another reason such as to deal with p.c. or provisional sums or items), then the architect is bound to take it into account since an extension is only to be granted if completion would otherwise be delayed beyond the then current completion date. This may seem hard to a contractor but the objects of an extension of time clause are to avoid the contractor being liable for liquidated damages where there has been delay for which it is not responsible, and still to establish a new completion date to which the contractor should work so that both the employer and the contractor know where they stand. The architect should in such circumstances inform the contractor that, if thereafter events occur for which an extension of time cannot be granted, and if, as a result, the contractor would be liable for liquidated damages then an appropriate extension, not exceeding the float, would be given. In that way the purposes of the clause can be met: the date for completion is always known; the position on liquidated damages is clear; yet the contractor is not deprived permanently of "its" float. Under these JCT Conditions the Architect cannot revise an extension once given so as to fix an earlier date (except in the limited circumstances set out in clauses 25.3.2 and 25.3.3). Thus to grant an extension which preserved the contractor's float would not be "fair and reasonable". Under clause 23.1 the employer is entitled to completion on or before the Completion Date so the employer is ultimately entitled to the benefit of any unused float that the contractor does not need. Few contractors wish to remain on a site any longer than is needed and employers are usually happy to take possession earlier, rather than later, and, if they are not, they have to accept the risk of early completion. In practice however architects are not normally concerned about these points and may reasonably take the view that, unless the float is obvious, its existence need not be discovered.'