Background

In 2005, Bracewell were appointed by the Council as Lead Consultant under a Framework Agreement for the construction of new build social housing across various sites, each subject to a Build Specific Contract for each project. As the area had a history of mine working, the Council appointed Blyth & Blyth Limited (“Blyth & Blyth”) and Raeburn Drilling & Geotechnical Ltd (“Raeburn”) to carry out ground investigations. The Council’s position was that these investigations should have revealed the need for a gas membrane to prevent ingress, and failure to recommend this amounted to a breach of duty. All parties rejected any allegations of negligence.

The Council did not argue that Bracewell had made any error in performing their own professional services. Instead, the Council claimed that taking into account the contractual framework agreed between it and the Council, Bracewell had assumed liability not just for sub-consultants appointed by Bracewell themselves, but also for consultants appointed by the Council – and that this was so even where (as with Raeburn and Blyth & Blyth) the relevant services had been performed prior to Bracewell’s appointment.

The Outer House of the Court of Session

The Council’s claim against Bracewell was dismissed at first instance in August 2017 (the full judgment can be accessed here). The judgement is a comprehensive overview of the principles to be applied when interpreting contractual terms, focussing on the principles in the recent Supreme Court decision of Arnold v Britton. The Court focussed on the language used by the parties to ascertain what a reasonable person, with all the background knowledge that the parties had, would have understood the language to have meant. Where the language used means that there are two possible ways of construing the clause, the Court was entitled to prefer the one that was consistent with business common sense.

On that basis, it was held that the wording of the agreements did not clearly and unequivocally support the position put forward by the Council. Instead, the wording of the contract as a whole suggested that the obligation on Bracewell was limited to site investigation works carried out by them (or for which they were contractually responsible); not to site investigation works generally, regardless of who those works were undertaken by.

The Inner House of the Court of Session

On appeal, the Council argued that the language of the Framework Agreement and the Build Specific Agreement was sufficiently plain and unambiguous to rebut any presumption that Bracewell did not accept liability for services provided by other parties. Even if the contractual language was not clear and unambiguous, there was nothing to support the judge’s assertion that entering into such an onerous obligation would not accord with business common sense.

The Appeal Court rejected this position - their view was that parties’ intentions were clear from the language used in its context. Bracewell were not agreeing to an “acceptance of liability for anything that might ultimately go wrong with the design, no matter what its cause” (paragraph 20). There was no suggestion that the obligations imposed on the architects for the whole design of the development extended beyond the architects’ usual responsibilities for overall co-ordination of the design of the works.

The Court added that, even if that interpretation were not the only possible one, it was the most consistent with business common sense. The Pursuer’s interpretation, in contrast, would be “an unusual step and one carrying very considerable risks” (paragraph 25) and so if this was what was intended, it would be expected that parties would take care to ensure that this was expressly and clearly set out in the contract.

Comment

The issue of contractual interpretation has been well explored by the Supreme Court in recent years, and this is the latest case to explore the Scottish Courts’ interpretation of this case-law.

Comfortingly for the industry, the Council’s attempt to extend their consultants’ scope of services was answered in the negative. The case as a whole reinforces the Court’s focus on the express terms of the contract and reiterates that the Courts will not apply business common sense to “correct” a bad bargain. Parties are at liberty to assume an onerous level of responsibility. However, the wording used must be clear and express if the claiming party is to succeed in proving the assumption of unusually onerous obligations.Equally, where the level of liability is intended to be limited, care should be taken carefully to delineate the scope of liability when (as in this case) taking on the role of Lead Consultant.

The judgement also sets out useful guidance on what the Courts will consider when looking at ‘business common sense’ in the context of two professional parties experienced in negotiating commercial contracts. In particular the Court noted that where (as is common in the construction industry) the overall project involved multiple appointments with various consultants, they will consider the interaction of the various appointments – it was noted in this case that the Council’s interpretation of the appointment would lead to an anomaly where Bracewell would be subject to a higher liability for the works of others than for their own services – reinforcing the importance of ensuring that professional appointments are aligned.

The Inner House decision can be accessed here.