Loss Prevention Alerts

Alert No 20 - AN EXAMPLE OF ECONOMIC LOSS

A recent Court of Appeal decision, BICC Limited v. Cumbrian Industrials Limited [30 October 2001], provides an interesting example of how liability can arise in reclamation projects. It also hints at some of the pitfalls to avoid when negotiating contracts, the crucial role of the expert witness and the care that needs to be taken when experts are uncovering the facts which inform their opinion.

Facts

BICC, who for many years manufactured electronic batteries and cables at a site in Cheshire, used to tip waste and by-products from these processes onto an 8 acre site near their Works. BICC wanted to reclaim the waste tip for redevelopment for light industrial purposes.

To this end, BICC instructed Parkman Consulting Engineers. Parkman advised that the tip should be rendered watertight so that no water could enter the contaminated soil and no contaminated water could leave it, except through drains which were provided for the purpose. Parkman advised that the tip could be contained in the following ways:

A wall or "bund" of clay should be built around the perimeter of the site. In order to ensure a watertight seal at the foot of the bund, the trench had to be excavated at least 1 metre into the boulder clay which underlay the whole area.

A 2 millimetre thick high density polythene should be placed as a membrane over the whole of the tip.

Parkman further advised that the boulder clay was impermeable and that neither water ingress nor water egress could occur through it. Cumbrian International were employed to construct the bund and install the membrane under supervision from Parkman.

It was obviously envisaged that the amount of leachate that was collected through the drains would diminish over time as the tip dried out. In fact, the leachate increased and it was clear that one or more of the containment measures put in place was not working properly. As a result, BICC incurred significantly greater costs than was predicted in treating leachate from the site. They sued Parkman and Cumbrian, and Parkman served a contribution notice on Cumbrian (together with third party proceedings on various other parties who do not figure prominently in the Court of Appeal's deliberations).

The case itself involves few significant points of legal principle. As is the case with construction disputes, the facts are complicated and the various arguments difficult to summarise. The judgment by the trial judge was very long and detailed and it gave rise to 25 separate points of appeal which the Court of Appeal had to consider. For our purposes, the case was a useful reminder of the following issues.

The nature of the contractor's obligation

The contract between Cumbrian and BICC incorporated the ICE Conditions, clause 13 of which provides:

"Save insofar as it is legally or physically impossible the Contractor shall construct and complete the Works in strict accordance with Contract to the satisfaction of the Engineer …"

It was suggested that Cumbrian's contractual obligation was simply to provide an impermeable membrane: an obvious fitness for purpose obligation. In this case the point on appeal was whether the trial judge had in fact treated Cumbrian's contractual undertaking as a fitness for purpose obligation when in fact clause 13 attenuated that obligation but the case still represents a warning to contractors and consultants alike who, knowingly or unwittingly, promise to provide an actual result.

The allocation of responsibility between contractors and supervisors

In many cases, workmanship failures committed by contractors will involve the consultant in liability where he has supervisory duties over the contractor. The extent of the liability will depend on the circumstances such as the extent of the supervisor's presence but this case confirms the accepted wisdom that between 20% to 33% of the liability for defective construction will be attributed to negligent supervision. It follows that those offered a supervision brief should ensure that they have (and are paid for employing) the resources necessary to do the job properly, or should decline to do the job at all.

The activities of experts

The case also highlights the fact that the way in which experts conduct themselves, and the nature of expert investigations, can have a very significant bearing on the facts as they unfold. For example, in this case, it was alleged that pin pricks and tears in the landfill membrane were caused by the opening up process conducted by the expert. Experts need to be very careful when the act of observing can alter the nature of the thing being observed.

The case also highlights how judges make their decisions when there is a discrepancy between expert investigations and site records. In this case, probes were drilled to establish whether the clay bund went down, as it should have done, to a depth of 1 metre below the natural in situ boulder clay layer. Although there was evidence that the experts had used appropriate standards for the probe tests, it was suggested that the drill was not centred at the top of the bund so that it deviated from the vertical and the probe holder allowed to merge from the side of the bund before reaching its foundation in the bolder clay. If this occurred, the probe would encounter alluvium at levels which were in fact above the foundation of the bund. Indeed, there was evidence that two of the probe holes were re-drilled because the first attempts were not on the centre line of the bund. However, there were also criticisms of the site documents created during (and to record) the original construction activities. The judge commented that conditions on the site were not easy for making accurate measurements. On balance, the judge preferred the evidence of the probehole results but, it must be said, had the contemporary site records been better, then he might have decided differently.

Conclusion

We can expect there to be more cases of this nature. The rehabilitation of brownfield sites is now a major policy aim. However, conditions on site are often difficult, clients may have unrealistic expectations and there may be difficulties co-ordinating the activities of all of those involved. In such an environment, it is particularly important that consultants and contractors execute contracts which accurately reflect the obligations they want to assume.

This loss prevention alert has been produced by the Loss Prevention Working Group (LPWG) of the AGS. It highlights issues that the LPWG considers may be of relevance to members. It is not intended to provide a definitive response to any issues and before taking action members should consider carefully whether they need to seek independent legal advice.

Prepared for the Members of the AGS by Steven Francis, DLA

Date of Issue: 13 May 2002