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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Farrans Construction v. RMC Ready Mixed Concrete [2004] ScotCS 51 (27 February 2004) URL: http://www.bailii.org/scot/cases/ScotCS/2004/51.html Cite as: [2004] ScotCS 51 |
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OUTER HOUSE, COURT OF SESSION |
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CA244/01
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OPINION OF LORD DRUMMOND YOUNG in the cause FARRANS CONSTRUCTION LIMITED Pursuers; against RMC READY MIXED CONCRETE (SCOTLAND) LIMITED Defenders:
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Pursuers: MacNeill; MacRoberts
Defenders: Borland; McGrigor Donald
27 February 2004
[1] The pursuers are civil engineering contractors and the defenders are suppliers of ready mixed concrete. The pursuers have raised the present action for losses that they claim to have sustained as a result of a breach of contract by the defenders. In essence, their claim is that they ordered a type of concrete known as C7 foamed concrete, which is relatively weak and thus can be easily drilled through and removed, but that the concrete supplied was of normal strength and was accordingly disconform to contract. On that basis the pursuers claim that the defenders were in breach of an express term of the contract. They also claim that the defenders were in breach of section 13(1) of the Sale of Goods Act 1979, in that the goods supplied did not comply with their description. The pursuers have a further claim that the defenders were in breach of section 14(3) of the 1979 Act, in that the concrete was not fit for the particular purpose of being used as temporary concrete that was suitable for drilling through and excavation. On 17 February 2003 I allowed a proof before answer restricted to the question of liability, with all issues of causation of loss and quantification of loss being reserved for further procedure, if that were necessary. In relation to the question of liability, three issues arise. The first is the terms of the contract concluded between the parties, a matter which includes the definition of C7 foamed concrete. The second is whether the concrete supplied by the defenders to the pursuers was in accordance with the parties' contract; if it was not, the contention for the pursuers was that there was a breach of either an express term of the contract or section 13(1) or section 14(3) of the Sale of Goods Act. The third is whether it was fair and reasonable to incorporate one of the clauses contained in the defenders' conditions of sale into the parties' contract, in terms of section 17 of the Unfair Contract Terms Act 1977; the particular clause, clause 9, sought to exclude liability for all consequential losses. In this opinion I will deal with each of these issues in turn. [2] The background to the present action, which was not in dispute between the parties, was as follows. In 1998 the pursuers entered into a contract with West of Scotland Water to construct two 350mm diameter sludge pipelines passing under the River Clyde at Dalmuir Sewage Treatment Works, Clydebank. The pursuers proposed to construct the pipeline by directional drilling underneath the river bed. They intended to drill a single hole of 1350mm diameter under the river. This would then be lined with a 900mm diameter pipe through which the two 350mm sludge pipelines would run. The drilling work was subcontracted to a specialist subcontractor, Avoidatrench Limited. In order that the drilling could take place at the correct angle and depth it was necessary to sink a reinforced concrete shaft on the north side of the river. The shaft incorporated non-reinforced segments to allow drilling to take place through the walls of the shaft. This would enable the subcontractor to set up drilling machinery on the surface and drill down towards the shaft at an angle of 15 degrees. The drill would be levelled off just before the entrance to the shaft, and the contractor would then drill through the shaft and onwards under the river bed. Eventually the drill would emerge on the bank on the other side of the river. The initial drill would be a pilot drill approximately 150mm in diameter. Thereafter drill heads with a progressively larger bore would be passed backwards and forwards to increase the diameter of the hole to the required size. The shaft had to be sunk before drilling began. It was sunk by the caisson method. This involved placing successive concrete rings on top of one another in such a way that the weight of the concrete sank the rings into the ground. The soil within the rings was excavated, in such a way as to form a shaft. Once the shaft had been sunk a concrete base plug was inserted in the bottom, and once it had cured the shaft was pumped dry. [3] Thereafter it was necessary to insert a further concrete plug at the foot of the shaft so that drilling operations could continue through the shaft without the ingress of sand, gravel and water. This plug was designed to allow the drill to pass through it. In this way the drill could be steered in the right direction as it moved into the hole under the Clyde. It was further intended that it should be easy to remove the concrete plug once drilling and pipe laying operations had ceased. [4] The pursuers decided to order the concrete for the plug from the defenders. They had ordered concrete from the defenders on many previous occasions. The procedure followed in such cases was that the defenders would batch and mix the concrete on their premises and then pour it into a delivery truck. The delivery truck would then drive to the site where the concrete was to be placed. When the truck arrived on site, the contract would be poured into the hopper of a concrete pump to enable it to be placed. The pump was owned and operated by a separate pumping contractor, who was engaged by the pursuers, not the defenders. The pumping contractor was then responsible for placing the concrete, under the direction of the pursuers. The important point for the purposes of the present case is that responsibility for the condition of the concrete passed from the defenders to the pursuers at the point when the concrete was poured from the defenders' delivery truck into the hopper on the pumping contractor's pump. That was a matter of agreement between the parties. [5] It was further agreed between the parties that in early December 1998 the parties concluded a contract for the supply of the concrete for the plug, and that the plug was poured on 18 December 1998. The precise terms of that contract and their significance were in dispute, however, and I must turn first to that issue.The terms of the parties' contract
[6] The parties' contract was concluded between Mr Gibby Gillanders on behalf of the pursuers and Mr David Hendry on behalf of the defenders, in the course of a telephone conversation that took place at some point between 3 and 15 December 1998. Mr Gillanders was the project manager responsible for the works being carried out by the pursuers at Dalmuir. Mr Hendry is currently the defenders' Area Technical Manager for the West of Scotland. Mr Gillanders had initially contacted the defenders' sales department, and they had referred him to Mr Hendry. Evidence about the conversation was given by both Mr Gillanders and Mr Hendry; Mr Hendry's evidence was perhaps the clearer. On the basis of the evidence about the conversation, I conclude that Mr Gillanders telephoned Mr Hendry and asked about the supply of foamed concrete. In the course of the conversation, the two men discussed the strength requirements of the concrete to be supplied, the method of placing the concrete, and the location where the concrete was to be placed. So far as strength was concerned, it was agreed that the concrete should have the characteristic strength known as C7. Mr Gillanders also told Mr Hendry that the concrete was to be pumped when it arrived on site, and that it was to be placed at the base of a shaft. He also stated that the concrete was to be removed later. There was no evidence, however, that Mr Hendry was told about the pursuers' methods of working on site, or that the concrete was to be drilled through. The depth of the shaft into which the concrete was to be placed does not appear to have been stated. Nor was any upper limit placed on the strength or density of the concrete, although for reasons that I will discuss in the next part of his opinion I conclude that an upper strength limit was implicit in the description "C7 foamed concrete". [7] In these circumstances I conclude that the contract between the parties was for the supply of C7 foamed concrete, in the sense discussed in the following section of this opinion. Mr Hendry did not, however, advise Mr Gillanders that C7 concrete or any other particular mix of concrete was suitable for any particular purpose that the pursuers had; that was conceded by Mr Gillanders during his cross-examination. Equally, when he was ordering the concrete from the defenders, Mr Gillanders did not rely on the skill and judgment of Mr Hendry in relation to the selection of C7 concrete as a mix suitable for any particular purpose; that was also conceded by Mr Gillanders during cross-examination. Mr Gillanders further stated that the decision to use C7 foamed concrete was made by the pursuers and Avoidatrench, and was approved by West of Scotland Water.The meaning of C7 foamed concrete
[8] Evidence on this matter was given by the parties' two experts, Mr W B Revie for the pursuers and Mr J M Dransfield for the defenders, and also by certain other witnesses, notably Mr Gillanders, Mr James Hannah and Mr Clifford Spence. Foamed concrete is technically a foamed mortar, as the aggregate used in it has a maximum size of 5mm, but it is generally referred to as foamed concrete. Mr Dransfield gave evidence that it typically contains 35 to 65% air, which is introduced to the premixed mortar in the form of what is known as a pre foam. The amount of pre foam that is added controls the density of the concrete. Mr Revie considered that concrete could be considered "foamed" if it contained more than 25% of air by volume. [9] The letter "C" refers to the characteristic strength of the concrete. The definition of characteristic strength, accepted by both experts and set out in the relevant British Standard, BS5328, is the strength in Newtons per square millimetre below which 5% of the population of all possible strength measurements of the specified concrete are expected to fall, measured 28 days after the concrete is poured. The strength of samples of concrete is not uniform, but follows a normal distribution. Such distribution can be shown by means of a distribution curve, which takes the characteristic form of a bell curve, with the highest concentration of samples around the mean strength and the other samples tailing away upwards and downwards. The precise shape of the curve depends on the quality and consistency of the materials that are used to make the concrete, the control and efficiency of the batching plant and the inherent variability in the manufacture of concrete. The width of the curve is statistically defined by a standard deviation, and from this it is possible to calculate the proportion of tests of the concrete that will fall below a certain strength relative to the mean strength. In the case of C7 concrete, therefore, 5% of the population of all possible strength measurements are expected to fall below a strength of 7 N/mm2; that is the significance of the figure "7". In the distribution curve for such concrete, both experts agreed that the mean strength of the concrete, representing the mid-point of the distribution curve, would be a figure of 14 or 14.5 N/mm2. Both experts further agreed that, towards the upper end of the distribution curve, 5% of the samples would fall above a strength of 21 or 22 N/mm2. It follows that 90% of the samples would fall between strength of 7 and 21 or 22 N/mm2, with 5% outwith that range at each end. [10] Mr Dransfield, the defenders' expert, expressed the opinion that, if C7 concrete is ordered, that indicates that no more than 5% of samples should have a strength of less than 7 N/mm2 but does not indicate any upper strength limit. That view was based on the terms of BS5328, the main standard used in the United Kingdom for the specification of concrete. That standard did not specify any upper strength limit for concrete. Consequently, unless a customer specified an upper strength limit, a supplier would be entitled to assume that a reference to a particular characteristic strength of concrete did not imply any such limit. In cross-examination, Mr Revie, the pursuers' expert, was referred to the definition in BS5328, and asked whether concrete with a characteristic strength, as defined above, of 7 N/mm2 complied with the definition there of "C7 concrete"; he agreed. [11] It is clear that, if the criteria in BS5328 are used, the definition of "C7 concrete" must be as indicated by Mr Dransfield. BS 5328 does not specify any upper strength limit. I am not persuaded, however, that the definition in BS 5328 is what a reasonable civil engineer or concrete supplier would have in mind if an order were placed for "C7 concrete". Instead, I am of opinion that reasonable men in the position of the parties would have had regard to the typical purposes for which C7 foamed concrete is used, and the typical characteristics that cause it to be used for those purposes. Those purposes and characteristics were spoken to by a number of witnesses, including Mr Revie, Mr Gillanders, Mr James Hannah, who was Scottish Water's clerk of works, and Mr Clifford Spence, a director of the pursuers and experienced civil engineer, and also by Mr Hendry and Mr Dransfield. The main characteristic of foamed concrete is the high level of entrained air, which reduces its density and strength by comparison with normal concrete; concrete used for ordinary load-bearing purposes tends to have a characteristic strength of about 35 N/mm2. Foamed concrete has high thermal and acoustic properties, and is sometimes used in construction where load-bearing is not important. More important for present purposes, however, is the fact that it is relatively easy to excavate or drill through concrete with low density and low strength. Consequently foamed concrete is used for encasing service pipes, where ease of excavation may be important. Mr Hannah, whom I thought an impressive witness, stated that he had encountered foamed concrete many times before; he had seen it used to fill abandoned sewers and to encase services where they crossed roads. Mr Hannah explained that foamed concrete is used for these purposes because it can be broken easily, and thus access can be obtained readily. He stated that the fact that such concrete could be broken and removed easily was a very important property. Mr Gillanders gave evidence to similar effect; he had used C7 foamed concrete on other projects, and he explained that the reason for using it was to enable easy excavation should that be necessary. Likewise, Mr Spence stated that C7 concrete had a low strength, and was used in trench backfill. It was strong enough to be used for that purpose, but it was easily removed. [12] Mr Hendry stated that he would design C7 concrete to that characteristic strength, but would expect most of the concrete to have a strength of between 10 and 14 N/mm2. He agreed that foamed and unfoamed concrete were not used interchangeably, and that if foamed concrete were ordered the customer would want low characteristic strength; ease of removal might also be important. Consequently, if a customer asked for foamed concrete and the concrete had the physical properties of unfoamed concrete, Mr Hendry agreed that the customer would not be getting what he asked for. Mr Dransfield had written a paper on foamed concrete (No 7/4/5 of process), in which he made reference to applications of such concrete where strength is not an issue and the requirement may even be for a controlled low strength with the ability to deform under sustained pressure. That applied, for example, to trench fill applications. In the last paragraph of this paper, dealing with Mr Dransfield's conclusions, it is stated that foamed concrete offers unique combinations of properties which make it a very effective option where the requirement is for a combination of two or more of certain properties, which include low density and low strength. I accordingly infer that Mr Dransfield accepted that the low density and low strength of foamed concrete might be important characteristics when such concrete was ordered. In addition, as indicated in paragraph [9] above, concrete with a characteristic strength of 7 N/mm2 has a typical strength distribution centred around a mean strength of 14 or 14.5 N/mm2. On the same typical strength distribution, only 5% of samples will fall above a strength of 21 or 22 N/mm2. Thus concrete designed to the C7 standard will contain a typical range of strengths which is plainly compatible with the characteristics and purposes described in the last paragraph of Mr Dransfield's paper. Finally, Mr Revie stated that in his opinion it was incorrect to say that there was no upper limit on the compressive strength of concrete supplied as C7 concrete. While the compressive strength would extend a reasonable amount above 7 N/mm2, it would be based on a normal distribution. Thus it would be expected that 5% of samples would be in excess of about 21 N/mm2. [13] On the basis of the considerations discussed in the last two paragraphs, I am of opinion that when a civil engineer orders "C7 foamed concrete" from a concrete supplier, that would be understood by reasonable men in the position of both parties as indicating two things. First, the concrete will be of relatively low strength and low density. In technical terms, the mean strength will be approximately 14 N/mm2, and the distribution curve of typical strengths will be approximately as described in paragraph [9] above. Secondly, the strength of the concrete will be such that it can be broken easily, and thus put to the uses that are characteristic of C7 foamed concrete. In my opinion it is that meaning of the expression "C7 foamed concrete" that applies to the parties' contract. If, therefore, concrete was supplied with typical compressive strengths in excess of 35 N/mm2, that would not conform to the description "C7 foamed concrete".The condition of the concrete supplied by the defenders
[14] After the concrete plug had been poured on 18 December 1998, work on site had stopped over the Christmas and New Year period. In January work resumed, and Avoidatrench began their drilling operations. Mr Gillanders gave evidence that, when the drill entered the concrete plug, the drill bit broke, and it was realised that the concrete was much harder than C7 foamed concrete. The concrete plug was then excavated, and in doing that it was necessary to use special equipment which would not have been required had the concrete been C7 foamed concrete. On 12 February 1999 Mr Gillanders complained about the condition of the concrete to the defenders, and Mr Hendry attended on site and took samples from a hole that had been dug in the concrete by miners. The density of the samples was tested, and found to range between 1580 and 1940 kg/m3; the target density was 1550 kg/m3. [15] On 20 March 1999 Mr Hendry visited the site again and had four cores taken from the top of the foamed concrete. Three of these cores were tested by Stanger Testing Services Limited on 29 March 1999. The compressive strengths of the three cores were found to be respectively 44, 43 and 42 N/mm2. The age of the cores at the time of testing was 89 days. Evidence was given by Mr Lawrence Murphy, the managing director of Stanger Testing Services Limited. He stated that there would be a difference in compressive strengths at 28 days and 89 days, but that it would be small, of the order of 5 N/mm2. Mr Revie, the pursuers' expert, gave evidence that the difference in compressive strength over that period would be at the lower end of the range 5-10%; generally speaking, compressive strength stabilises after 28 days, which is why the British Standard uses 28 days as a reference point for concrete. On the basis of the evidence of these two witnesses I conclude that the compressive strength of the concrete at 28 days would have been of the order of 38 to 40 N/mm2. Mr Revie gave evidence that the compressive strengths found by Stangers were inconsistent with C7 foamed concrete. I accept that conclusion. I should add that, when Stangers analysed the concrete, they did not realise that it was supposed to be foamed concrete because of the high density. In particular, Mr Murphy gave evidence that the difference between the dry and saturated densities of the three cores was what would be expected from non-foamed concrete. The densities of the three cores were found to be 2130, 2110 and 2120 kg/m3. Mr Revie gave evidence that that was also inconsistent with C7 foamed concrete. Once again I accept that conclusion. [16] Five further cores were taken from the concrete on 3 July 1999, on the instructions of the pursuers. These were taken at various locations across the diameter of the shaft. Those cores were tested by Stangers between 10 and 14 July, and the densities were found to be respectively 1890, 1990, 1790, 1720 and 1630 kg/m3. Mr Revie expressed the opinion that a density of 1700 kg/m3 was well outwith the range to be expected of C7 foamed concrete, and that a density of 1990 kg/m3 indicated that there was effectively no entrained air. The Stangers employees who carried out the tests made certain comments on the samples. These included a statement that no foaming additive was present. Mr Murphy accepted that no tests had been carried out that would show the presence of foaming additive, and no such test would have been effective in any event because of the lapse of time since the concrete was poured. The comment was made on the basis of the appearance of the cores and the lack of entrained air that was observed by the testers. [17] The defenders criticised the pursuers' evidence based on the examination of the cores. In doing so, they relied in particular on the evidence of their expert, Mr Dransfield. He stated that it was very important to know the locations in the plug from which the cores had been taken. If the cores were to be treated as representative of the entire shaft, it was necessary to ensure that they were taken in a way that was statistically representative, in terms of depth from the surface. No adequate evidence was available, however, as to the locations from which the cores had been taken. No coring records had been produced, and Mr Revie had accepted that he had not seen coring records for the cores taken by the defenders and did not know the locations from which the cores instructed by the pursuers had been taken. Mr Dransfield indicated that, without adequate records, it was difficult to place much reliance on either set of test results. [18] I accept that there is some force in the comments that Mr Dransfield made about reliance on the cores. Nevertheless, the critical question is whether the pursuers have proved on a balance of probabilities that the concrete in the plug did not fit the definition of C7 concrete. In my opinion the evidence relating to the cores is clearly relevant to that question. It is significant, in particular, that on the basis of Mr Revie's evidence, which I accept on this matter, all but one of the cores disclosed either compressive strengths or densities that were well outwith the range expected from C7 foamed concrete. It seems unlikely that so many of the cores could have exhibited that characteristic if the problem had been a merely localised one. Moreover, the evidence relating to the testing of the cores does not stand alone; further evidence, described in the following paragraphs, was available as to the conditions that the pursuers and their subcontractors encountered on site. I find that evidence to be significant, and on the basis of that evidence taken together with the evidence about the cores I consider that I am able to reach a firm conclusion about the condition of the concrete in the plug. [19] When the concrete came to be removed from the shaft, it was clear that it was necessary to use much more powerful equipment than would normally be required for C7 foamed concrete. Mr Gillanders gave evidence that when Avoidatrench attempted to drill through the concrete the drill bit broke. Thereafter an attempt was made to excavate the concrete, and problems became apparent at once; the concrete was so hard that it was impossible to dig it out. That was so even though heavy pneumatic tools were used; the concrete was like whinstone. With C7 concrete Mr Gillanders would have expected the task of digging it out to be much easier. Mr Michael McBreardy of Northern Tunnelling, the firm that had been responsible for sinking the shaft, was involved in the excavation work. He expressed the view that the concrete was like ordinary concrete rather than foamed concrete. To remove it it would be necessary to use special heavy-duty hydraulic equipment, of the sort used to remove rock. Mr John Gaughan, also of Northern Tunnelling, stated that in removing the concrete he had arranged originally for the use of small breakers and a mini-digger. The concrete turned out, however, to be much harder than expected, and the equipment provided had not worked. Consequently it had been necessary to obtain special hydraulic equipment of the sort used for removing rock. In my opinion the evidence of the foregoing witnesses is persuasive that the concrete was in fact very much harder than would be expected of C7 foamed concrete. [20] Some further support for the view that the concrete in the bottom of the shaft was not properly foamed is found in a discrepancy between the volume supplied according to the defenders' delivery dockets and the volume actually occupied by the concrete in the bottom of the shaft. Mr Gillanders' calculations indicated that the concrete in the shaft occupied a volume of 103m3, whereas the delivery dockets stated that 125m3 had been delivered. That suggests that the concrete placed in the shaft did not achieve the volume that was intended. Mr Hendry indicated that, if the concrete had not been foamed, the concrete would have occupied a volume of 87.5m3. This evidence accordingly indicates that the concrete as placed was partially foamed. [21] On the basis of the foregoing evidence, I conclude that the concrete as placed in the bottom of the shaft did not conform to the description of C7 foamed concrete as specified in the parties' contract. The mean strength of the concrete was clearly well in excess of that expected from C7 foamed concrete, and the concrete was not capable of being broken easily, or of being put to uses characteristic of C7 foamed concrete.The production of the concrete
[22] The evidence on this matter came from Mr Hendry and from certain of the defenders' productions. Evidence about the mixing of concrete was also given by Mr Revie and Mr Dransfield, but it is Mr Hendry's evidence that is critical, as he was responsible for the production of the concrete and he personally added the foaming agent. Mr Hendry had great experience in the production of concrete; he had been with the defenders for 32 years, and had worked for other producers of concrete since leaving school. His current responsibilities included the quality control of the defenders' product in the west of Scotland. I found Mr Hendry to be altogether a credible and reliable witness, and I accept his evidence on the production and foaming of the concrete. Mr Hendry stated that the concrete supplied to the pursuers had been produced on 18 December 1998 at the defenders'Clyde Tunnel plant. He had taken personal charge of the production and foaming of the concrete because on that day the defenders were short of trained technicians. [23] The procedures used to mix the concrete are set out in a method statement prepared by Mr Hendry (No 7/3/30 of process). He started by calculating the mix proportions according to a technical note prepared by the defenders for that purpose. In calculating the mix proportions, Mr Hendry aimed for a density of 1,550 kg/m3; he stated that that density was recommended for pumping foamed concrete. The technical note allowed him to calculate the proportions of materials to be used in the mix to achieve that density. The actual weights of materials used in the production of the concrete, other than the foaming agent, are set out in the defenders' certificate of mix design dated 22 March 2002 (No 7/4/2 of process, second certificate). In fact two certificates of mix design were produced by the defenders. The first of these, dated 10 February 1999, was taken from the company computer system as opposed to the plant computer system. As a result that certificate reflected the original weights that Mr Hendry intended to use following his calculation of the mix. When the concrete was produced, however, certain adjustments were made to the weights of materials used. The plant computer system recorded the weights that were actually used in the production of the concrete. The second certificate of mix design, dated 22 March 2002, was based on the plant computer system and accordingly showed the weights of materials actually used in the production of the concrete. The weights of materials actually used are further stated in the defenders' autographic records (No 7/3/13 of process), which are printouts from the plant computer system at the Clyde Tunnel plant. These show the quantities of materials used to produce each batch of concrete delivered to the site. Mr Dransfield expressed the opinion that the defenders' autographic records showed that the mix was produced according to Mr Hendry's mix design, as stated in the certificate of mix design dated 22 March 2002; he stated that the autographic records and the certificate were what he would deem to be essentially the same. [24] Once the mix design had been calculated by Mr Hendry, the plant supervisor keyed certain crucial figures into the plant's computerised batching system, and the materials were then weighed automatically. The autographic records disclosed that the sand content for the first four loads was approximately 500kg less than that used for the remaining loads (4,160-4,230kg per load as against 4,620-4,760kg). Mr Hendry explained that the water content of the sand had turned out to be lower than expected. He had noticed this on the plant computer screen after the first load, but he waited until the fourth load in order to eliminate the effect of variations. At that point, he had increased the weights of sand used. Mr Dransfield's opinion on the mix used by Mr Hendry was that it would produce concrete with a density after foaming of approximately 1,550kg/m3; it was normal to work to a tolerance of + 100 kg/mm3, which Mr Dransfield considered reasonable. It was more difficult to predict the likely compressive strength, because every mix is slightly different in this respect; nevertheless, he would expect the compressive strength to be somewhat in excess of 7 N/mm3, ranging up to 15 N/mm3. On the basis of work that he had undertaken in the past, he considered that at a density in the order of 1,600 kg/m3, the strength should be 8 to 10 N/mm2. Such results would obviously be in accordance with the definition of C7 foamed concrete stated in paragraph [13] above, and would fall within the normal distribution of 7 to 21 or 22 N/mm2 stated in paragraph [9] above. Mr Revie agreed with this view (report, no 6/7 of process, page 24). [25] Mr Hendry also gave evidence that, after the problems relating to the concrete supplied to the pursuers had become apparent, he had carried out trials using the same batch weights as those used in the production of the concrete supplied on 18 December 1998. These were foamed with the same foaming agent. When tested, the mix had a density of 1,570kg/m3. That concrete was then transported for a similar distance to that between the Clyde Tunnel plant and the Dalmuir site, and tested again. A density of 1,550 kg/m3 was recorded. Mr Dransfield expressed the view that this indicated that the mix used by the defender for production of the concrete in question was inherently stable. I accept that evidence. [26] In view of the evidence summarised in the last three paragraphs, I conclude on the balance of probabilities that the concrete supplied by the defenders from their Clyde Bridge plant was of the correct mix and density for C7 concrete. [27] Mr Hendry then gave evidence about the foaming of the concrete. The relevant materials were batched and mixed in the plant, and then discharged into the mixer drum of the truck that was to take the concrete to the pursuers' site. Immediately thereafter Mr Hendry personally added the foaming agent to the concrete in the drum. Before foaming each load, he visually checked the mix in the drum. He gave evidence that, on the basis of those visual inspections, he was satisfied with the workability of all of the loads supplied. The mixer drum was rotated at full speed to ensure that the foam would be properly mixed into the concrete. Mr Dransfield expressed the view that this should have given complete uniformity of mixing. After his visual inspection of the concrete Mr Hendry injected the foam into the concrete mix using a gun designed for that purpose. In order to determine the amount of foam injected, he operated the gun for a particular number of seconds, by reference to his watch. He stated that was the only method of timing that he knew to be used in the industry. He then carried out certain checks to ensure that he had used the correct foaming time. First, he checked that the mix was moving up the drum towards him as the air supplied by the foaming additive was entrained; the effect of the air ought to be to produce an increase in volume. Secondly, he checked to ensure that the mix was becoming more fluid and that it was taking on a creamer appearance, as is typical of foamed concrete. Thirdly, he weighed samples of the concrete and checked their density. Mr Hendry stated that the volume of the loads was as he would have expected after foaming; it reached the second blade of the drum of the concrete mixer. The fluidity and appearance of the loads were also as he would have expected of foamed concrete, and he was satisfied as to the workability of the loads. The most significant check carried out, however, was the third, involving the weighing of samples of concrete. For this purpose Mr Hendry used a calibrated cylinder and scales to check the density of the mix in the concrete mixer. Such checks were carried out on the first three to five loads, and thereafter sample checks were carried out on at least every third load. The checks carried out on the first and second loads indicated that the density was outwith the range 1,500-1,600 kg/m3; those figures represented the target density of 1,550 kg/m3 + 50 kg/m3. He therefore added extra foam to those loads. Otherwise, every load that he tested had a density within the foregoing range. Mr Hendry stated that, if he had not achieved a density result in the region of 1,550 kg/m3, he would not have allowed the load in question to leave the defenders' plant. After each load had been foamed, the truck left for the pursuers' site, and Mr Hendry refilled the foaming gun with foaming agent, ready for the next load. Mr Hendry stated that he was completely satisfied that the amount of foaming time that he had allowed was sufficient. He further stated that he was satisfied that the mortar mix had been properly mixed through with foam, and that the samples that he had taken were representative of the loads that left the defenders' plant for the pursuers' site. He also stated that he was completely satisfied that the pursuers had been supplied with what they had asked for, namely C7 foamed concrete. [28] Mr Dransfield gave evidence about the procedures used by Mr Hendry. He stated that he had carried out foaming himself, and that he was of opinion that the procedures that Mr Hendry had used were almost identical to his own procedures; he described them as very thorough. That related in particular to the checking procedures. In relation to these, Mr Dransfield stated that he would not have regarded it as necessary to carry out density checks on every load. He would have checked the first four loads, and every second load thereafter on two or three occasions. Thereafter, if results were still within the target level, he would have reduced his checks to every fourth or fifth load. Nevertheless, he regarded the procedures followed by Mr Hendry as acceptable. Mr Dransfield further stated that, if the person who checked the foaming of the concrete achieved the target density of 1,550 kg/m3, that would suggest that the amount of foam used and the ability of the concrete mix to accept the foam were both excellent. In all the circumstances, Mr Dransfield expressed the opinion that it was most improbable that the concrete had not been properly foamed. [29] In my opinion the testing carried out by Mr Hendry was of great significance. I accept Mr Dransfield's evidence that the method used was an appropriate one. The density checks, in particular, were important because they demonstrated consistency in the density achieved. That in itself shows that the foaming was carried out consistently. In these circumstances I conclude that the concrete supplied by the defenders had been properly foamed by Mr Hendry. Counsel for the pursuers made a number of criticisms of Mr Hendry's evidence. He pointed out that Mr Hendry's evidence was uncorroborated, and that no record had been made of the amount of foaming additive used in each case. The amount of additive used for each load was determined using a wrist watch, and no evidence was led that the foaming gun had been checked. The checks carried out to ensure proper foaming were largely visual, and apart from the density checks no measurements had been made. Not all of the batches had been tested before leaving the plant. Moreover, Mr Revie had given unchallenged evidence that concrete could be pumped even if it were not properly foamed, and that it was not easy to identify visually whether concrete had been fully or partially foamed. While there is some validity in each of these points, they do not, either singly or collectively, alter my basic opinion of Mr Hendry's evidence. In this connection, I have had regard to Mr Dransfield's evidence, which provides very substantial support for Mr Hendry. I thought it clear from Mr Dransfield's evidence that the operation of foaming concrete is relatively straightforward and can normally be achieved without difficulty. Mr Dransfield concluded that he had "very little doubt" that the concrete was not correctly foamed at the time when it left the defenders' plant, and that it was then of the correct strength. It is also clear that Mr Hendry was very experienced in the supply of ready mixed concrete. In addition, it is of great importance that, when density checks were carried out, they achieved consistent results.Transport of the concrete to the site
[30] After it had been foamed by Mr Hendry, the concrete was delivered to the pursuers' site at Dalmuir. That site was approximately five miles from the defenders' Clyde Bridge plant. The trucks that carried the concrete belonged to independent hauliers employed by the defenders; consequently, during transit, its condition was still the defenders' responsibility. Evidence about the deliveries was given by Mr Hendry. The journey was on relatively major roads, whose condition was described by Mr Hendry as "typical" of such roads. During the journey, the drum on the truck was rotated at 2 rpm, to ensure that separation did not occur. Mr Dransfield stated that, unless the road was very rough, there was no reason to presume that the air entrained in the contract would have been lost in the course of the journey, provided that the concrete was agitated. In his report, Mr Dransfield also indicated that, if the concrete was agitated during the journey, there should have been relatively little change in its density between the plant and the site. The foregoing evidence was not challenged to any significant extent. On the basis of that evidence, I conclude that the condition of the concrete did not alter significantly between leaving the defenders' Clyde Bridge plant and its delivery to the pursuers' site at Dalmuir.Delivery of the concrete on site
[31] When the concrete was delivered to the pursuers' site, the haulage contractors made no complaints that the concrete was difficult to pump; that was clear from the evidence of Mr Gillanders, Mr Hannah and Mr Hendry. Mr Hendry indicated that, if difficulties had been experienced in pumping the concrete, it would be expected that the haulage contractors would complain because delays would have resulted. Nor were there any other complaints that the concrete had been difficult to pump; I accept the evidence of Mr Hendry on this matter. The delivery dockets for the concrete were available (numbers 7/3/15-17 of process); these indicated that the discharge of the concrete from the trucks was completed within ten minutes on each occasion. In addition, Mr Hannah, Scottish Water's clerk of works, whom I found to be a careful witness, stated that when the concrete was placed there was no problem with its workability, and that it self-levelled in the manner expected of C7 foamed concrete. There had been no need to vibrate it in order to make it flow. Mr Dransfield stated that, if foaming had not taken place, the volume of concrete in the trucks would have been significantly less than expected (3.5 m3 as against 5 m3). Mr Gillanders and Mr Hendry both stated that no complaints had been made of low volumes in the trucks. On the basis of the foregoing evidence, Mr Dransfield concluded that it seemed "almost certain" that there was a significant level of air present at the point of pumping, as the pumping and placing could be carried out without difficulty (report, No 7/1/1 of process, section 4.3). I accept this conclusion. I should observe that, in his evidence in court, Mr Dransfield stated that he had chosen the wording used in the relevant part of his report carefully. He further indicated, in a later part of his report (section 4.5) that"If the mix had not been foamed, the low workability of the mortar mix would have almost certainly given pumping difficulties and been slower to pump than the 10 minutes stated by Farrans. This is a strong indicator that there was a significant level of foam in the mix at this point".
I accept this conclusion.
[32] Support for Mr Dransfield's conclusions is found in my opinion in the evidence of Mr Hannah, who was present when the pumping of the concrete started. Mr Hannah stated that foamed concrete had gone down the shaft. Foamed concrete is easily distinguished, as it is almost fluid. Ordinary concrete can almost be shaped with the hands, but foamed concrete would go through your fingers. He stated that that was what the concrete was like on this occasion. As I have indicated, I found Mr Hannah to be a careful witness, and I accept his evidence on this matter. That evidence and the evidence summarised in the last paragraph provides strong support in my opinion for the conclusion that what the defenders supplied to the Dalmuir site was indeed C7 foamed concrete. I should add that Mr M J McBreardy, another witness who was present when the concrete was poured, described it as being like toothpaste or soft ice cream, thicker than water. It was clear from his evidence that that was how he expected foamed concrete to look. Counsel for the defenders submitted that there was a material difference between the descriptions of the concrete given by Mr Hannah and Mr McBreardy, and that that indicated that the consistency of the concrete had altered between the time when it was discharged by mixer trucks into the pump and the time when it reached the bottom of the shaft; Mr McBreardy's observations had largely been made when he went down the shaft after the pour. In my opinion it is impossible to draw any such conclusion. The descriptions of concrete as being "almost fluid", "going through your fingers", "like toothpaste" or "like soft ice cream, thicker than water" are obviously imprecise, and in my view it would not be satisfactory to base any firm conclusions on such differences in wording. In any event, it was not clear on the evidence that Mr Hannah was describing only the consistency of the concrete at the top of the shaft and Mr McBreardy only the consistency of the concrete at the foot of the shaft. I consider that both Mr Hannah and Mr McBreardy were talking about essentially the same thing, the appearance of the concrete as it was poured, and that the concrete that they observed was as they expected foamed concrete to be. [33] I accordingly reach the following conclusions about the condition of the concrete at the point when it was delivered by the defenders to the pursuers.Pumping of the concrete
[34] The main argument against the foregoing conclusions is the fact that the concrete as placed in the bottom of the pursuers' shaft did not conform to the description of C7 foamed concrete as discussed in paragraph [13] above. The condition of the concrete in the shaft can in my opinion be explained by the manner in which the concrete was pumped into the shaft. In this respect I rely principally on the evidence of Mr Dransfield, and to some extent Mr Revie, and on the evidence of the witnesses who saw the concrete being pumped into position. [35] The pumping of the contract was carried out by Raynesway, a specialist pumping contractor employed by the pursuers. Expert evidence on the manner in which pumping contractors carry out their work was given by Mr J N McGuire, who was the Northern Area General Manager for Pochin Concrete Pumping. He had worked for that company for 23 years, and had considerable previous experience in the field. Mr McGuire was not cross examined, and no competing evidence was led. I accordingly accept his evidence on the practice of pumping contractors. He described the manner in which concrete is normally pumped. This is done through an expanding boom, made of steel sections, with a rubber hose fitted to the end. Mr McGuire was asked where the pump operator would want to maintain the boom rubber in relation to the concrete that was being discharged. He replied that in the majority of jobs the boom rubber would be maintained approximately 300 mm, or 12 inches, above the level of the concrete. That was subject to an exception where concrete was being placed under water; otherwise, however, the boom rubber would be kept above the level of the concrete. Mr McGuire was further asked what would happen to the hydraulic pressure of the pump if the boom rubber were inserted into the concrete during pumping. He replied that the pressure would increase as back pressure was generated in the boom and boom rubber. The pressure gauges on the pump would indicate increasing pressure. Such pressure could create a blockage if it increased to such an extent that it stopped pumping from taking place. Pump operators kept the boom rubber above the level of the concrete to avoid such back pressure and the possibility of a blockage. [36] In relation to the actual placing of the concrete on 18 December 1998, Mr Hannah gave evidence that the end of the boom rubber was sometimes just below the level of the concrete and sometimes above it, at a height of two or three inches. In cross-examination he stated that as the concrete was placed the boom rubber was withdrawn, and was sometimes above the level of the concrete; the gap could have been more than two to three inches. In general, the pumping of the concrete took place as he would have expected from previous experience. Mr M J McBreardy, one of the tunnel miners working on site, also witnessed the pumping operation. He stated that the end of the boom was kept near the concrete, inches above the surface; sometimes, however, it entered the concrete. Mr Gillanders did not witness the pumping operation, but he stated that the usual practice was that the end of the boom rubber was kept in the concrete or up to a foot above its surface, and he understood that that had happened on this occasion. On the basis the foregoing evidence, including that of Mr McGuire, I conclude that for at least a significant part of the pumping operation the end of the boom rubber was kept above the level of the concrete in the bottom of the shaft. The conclusion is further supported by the evidence of Mr McBreardy, who gave evidence that, after the concrete had been poured into the shaft, splash marks were visible on the walls of the shaft extending upwards for approximately 1 metre. Mr Dransfield stated that marks of that sort would indicate that there had been some free fall from the end of the pipeline. [37] In his report, Mr Dransfield made the following comments about the pumping of concrete (no 7/1/1 of process, section 4.5):"The deep shaft could have resulted in significant free fall, in the order of 23 metres, for the foamed concrete within the pump line.
When high workability concrete is being pumped, great care is required if there is a vertically downward section in the pipe. In these sections, gravity can draw the concrete downward faster than it is being pumped and air or water can easily be drawn up into the line. Turbulent flow then results in very significant intermixing and or segregation of the mix. The situation is exacerbated if there are breaks in the pumping operation where the line can refill with air or water....
In a dry line, air turbulence could break up and release many of the foam bubbles.... [A] significant increase in the average density of the mix could be expected. The extent to which this would happen probably increases with reducing mix density so foamed concrete would suffer more than a normal density mix....
When these situations are likely to occur, good practice suggests that flow down the line is restricted and controlled. A valve can be placed at the lower end or a foam ball passed down the line ahead of the first charge of concrete. The end of the line is thereafter always maintained below the concrete surface to ensure that air or water cannot re-enter the line.... There is no evidence that such precautions were taken by Farrans and or the pumping contractor".
In his evidence, Mr Dransfield stated that the increase in the density of the mix resulting from the processes described in the foregoing passage could range from 5 or 10% up to the whole of the air. He stated that, when pumping starts, free fall down the line is inevitable, but it is necessary to start with the line as close to the bottom of the shaft as possible. Once the concrete has covered the bottom of the shaft to a reasonable depth, the pumping contractor should take care to maintain the line below the surface at all times, even if he is trying to move the line sideways. When asked about the word "always", Mr Dransfield stated that he chose it carefully. Even a short break in contact with the concrete can allow material to flow out under gravity, and air to flow back in.
[38] Mr Dransfield further explained that, if the end of the line from the pump is maintained a few inches above the level of the advancing concrete, a significant loss of air in the concrete mix is likely to result. The effect of that is that both the density and strength of the concrete will increase. If the end of the line is sometimes maintained below the level of the concrete and sometimes above it, the effect is likely to be variable; nevertheless, density and strength will both increase. Mr Dransfield's final opinion on this matter was that air had clearly been lost at some point in the manufacture and placing of the concrete; that was likely to have occurred at the pumping stage, if the line had sometimes been maintained below the level of the concrete surface and sometimes above it. [39] Mr Revie's evidence provided some support for these views. In his report he makes the following statement (no 6/7 of process, lines 1077-1088):"It is acknowledged that if the concrete had been allowed to fall from the pump onto the base of the shaft and if the pump line had been lifted gradually to maintain its level above that of the advancing concrete front, then separation and loss of air would have been expected. However, it is good practice when placing concrete in a shaft to leave the discharge pipe below the level of the concrete to permit a column of concrete to be built up in the pump line to prevent segregation.
It is similarly acknowledged that the first batch of concrete through the pump will have fallen down the pipeline and that some loss of air from this mix will have occurred but in its placing the end of the pump line will have been covered permitting the remainder to be placed by displacing that already in the shaft. The line is then gradually drawn up the shaft keeping the discharge below the level of the concrete".
Mr Dransfield described this passage as consistent with his own evidence.
[40] There was a clear conflict between the evidence of Mr Dransfield and Mr Revie on one hand and Mr McGuire on the other as to what was proper practice during the pumping of concrete. Mr Dransfield and Mr Revie stated that the end of the line should be kept below the surface of the concrete at all times, except at the point when pouring starts; Mr McGuire indicated that it was normal to keep the line some distance above the concrete to prevent back pressure from building up. Mr McGuire was to some extent supported by Mr Hannah, who stated that the way in which he had seen the concrete being poured, with the line above the surface at times, was normal. Mr McGuire was undoubtedly very experienced in the field of concrete pumping, and Mr Hannah was an excellent witness. I am quite ready to accept that what they described was the practice that is normally followed by pumping contractors. It does not follow, however, that that is the proper practice, or that it will avoid the risk that air will enter the bottom of the line, causing intermixing or segregation of the concrete mix and a consequent loss of entrained air. On these matters I prefer the evidence of Mr Dransfield and Mr Revie. Both of these men were specialists in the field of concrete technology, and it is clear that both of them possessed great knowledge of and experience in that field. Their evidence was, moreover, firmly founded on a scientific and engineering background. In these circumstances I am of opinion that their evidence of proper practice is more likely to be reliable. In addition, I found their explanation of the likely consequences of keeping the end of the line above the level of the concrete to be cogent, based as it was on a full scientific understanding of the subject. [41] On the basis of the foregoing evidence given by Mr Dransfield and Mr Revie, I conclude that the probable explanation for the state of the concrete when it was ultimately placed in the shaft was a loss of entrained air during the pumping operation. That was caused by the pumping contractor's failure to maintain the end of his line below the level of the concrete as it was being pumped. Mr Dransfield indicated that that could lead to a significant loss of entrained air in the concrete, with a consequent increase in the density and strength of the concrete. That confirms my earlier conclusion, that the concrete supplied by the defenders fitted the description of C7 foamed concrete. [42] In these circumstances, I conclude that the defenders were not in breach of the express term of the parties' contract that the defenders should supply C7 foamed concrete. I likewise conclude that there was no breach of the implied term contained in section 13(1) of the Sale of Goods Act 1979, in that the concrete supplied complied with the description "C7 foamed concrete". In relation to the implied term contained in section 14(3) of the 1979 Act, the pursuers contended as part of their main argument that a term must be implied that the concrete was capable of being removed relatively easily at a later date. I conclude that that contention must fail, because the concrete supplied was C7 foamed concrete and accordingly should have been capable of removal with relative ease.Suitability of the concrete for placing at the foot of a shaft
[43] The pursuers' main argument was that the concrete supplied by the defenders did not conform to the parties' contract, and that the defenders were accordingly in breach of both an express term of the parties'contract and sections 13(1) and 14(3) of the Sale of Goods Act 1979. They advanced an alternative case based on section 14(3) of the 1979 Act. This proceeded on the hypothesis that the true explanation for the loss of entrained air from the concrete was that it was lost as it was placed by pump in the shaft. On that hypothesis, the pursuers contended that Mr Gillanders had made known to Mr Hendry that the concrete was to be placed by pump in the shaft, with the implication that the concrete should be fit for that purpose. The concrete supplied, however, was not fit for placing by pump. Mr Dransfield's evidence was that, if the end of the discharge pipe was kept above the level of the rising concrete to any substantial extent, that would result in air entering the pipe, causing turbulence within the pipe and the loss of entrained air from the concrete mix. The problem was caused by a combination of the fluidity of the mix and the pump operator's keeping the end of the pipe above the rising level of the concrete. The evidence of Mr McGuire and others, however, was that the normal, if not universal, practice of pump operators was to keep their pipes above the rising level of the concrete. In that event, it was said, the mix was not suitable for being placed by pump. Mr Dransfield had stated that, in the mechanism that he described whereby air entering the discharge pipe caused turbulence and a loss of entrained air, the importance of the vertical drop was not very high. The defenders had been told that the concrete was to be placed by pump at the foot of a shaft; consequently they were aware that a drop of some length was planned, and it was immaterial that they were not aware of the precise extent of that drop. [44] When counsel for the pursuers asked Mr Dransfield for his opinion on whether the concrete mix was suitable for being placed by pump, counsel for the defenders objected to the question on the ground of lack of record. I repelled the objection under reservation of all questions of relevancy and competency, and the matter was argued once again in counsel's submissions. In support of the question objected to, and indeed the general line of evidence, counsel for the pursuers founded on an averment to the following effect:"It was a term implied, in the circumstances, by section 14(3) of [the Sale of Goods Act 1979] that the concrete would be fit for the particular purpose of being used as temporary concrete within the shaft...".
He also referred to an earlier averment:
"Mr Hendry was told that the concrete required to be of a C7 foamed mix which would be placed by means of a pump at the base of a shaft".
The latter averment was admitted by Mr Hendry in his evidence.
[45] It seems clear that the pursuers' alternative case, based on section 14(3) of the 1979 Act, was not at the forefront of the pleader's mind when the pleadings were drafted. This is perhaps confirmed by the fact that the alternative case was not put to Mr Hendry in cross-examination, at least in any detail. I am nevertheless of opinion that there is sufficient in the averments quoted in the last paragraph to justify the question objected to and the line of evidence that it introduced. I will accordingly repel the relevant objection. [46] I am nevertheless of opinion that the pursuers' alternative argument fails on the evidence. I have already found, at paragraph [7] above, that Mr Gillanders did not rely on the skill and judgment of Mr Hendry in relation to the selection of C7 concrete as a mix suitable for any particular purpose. That point was conceded by Mr Gillanders in cross-examination. Indeed, Mr Gillanders accepted that the decision to use C7 foamed concrete had been made by the pursuers in consultation with Avoidatrench. Moreover, it appeared from the evidence that Mr Hendry was not told anything about the pursuers' method of working on site, and was not informed of the depth of the shaft into which the concrete was to be placed. Nor did Mr Gillanders and Mr Hendry discuss how the pumping operation was to be carried out by the pumping contractor. These circumstances strongly support the concession that no reliance was placed on Mr Hendry's judgment in the selection of C7 concrete as a mix suitable for any particular purpose. [47] Section 14(3) of the Sale of Goods Act 1979 is in the following terms:"Where the seller sells goods in the course of business and the buyer, expressly or by implication, makes known --
(a) to the seller...
any particular purpose for which the goods are being bought, there is a implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which the goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill and judgment of the seller...".
The finding that Mr Gillanders did not rely on the skill and judgment of Mr Hendry in relation to the selection of C7 concrete as a mix suitable for any particular purpose brings the present case quite clearly within the first part of the exception found at the end of section 14(3). I am further of opinion that the present case falls within the second part of the exception. The pursuers had employed Avoidatrench as a specialist drilling subcontractor; moreover, the pursuers themselves were clearly very experienced civil engineering contractors. Mr Gillanders stated that the decision to use C7 foamed concrete had been made by the pursuers and Avoidatrench. In addition, Mr Gillanders did not tell Mr Hendry how the pumping operation was to be carried out by the pumping contractor, nor inform him of the pursuers' proposed method of working on site, nor tell him the depth of the shaft into which the concrete was to be poured. In these circumstances I do not consider it reasonable for the pursuers to rely on the skill and judgment of the defenders in the selection of C7 concrete as suitable for being placed by pump. I accordingly reject the pursuers' alternative argument based on section 14(3) of the 1979 Act.
Unfair Contract Terms Act 1977
[48] The defenders make use of standard conditions of sale, and it was a matter of agreement between the parties that those conditions had been incorporated into their contract. Clause 9 of those conditions, so far as material, is in the following terms:"... [L]iability in respect of any... breach shall be limited to the direct costs which would necessarily be incurred by the Customer in the breaking out and in the removal of any concrete in question and to any replacement by RMC of the concrete in question and to any other direct costs which would necessarily be incurred by the Customer in carrying out repair or reinstatement. RMC shall not be liable for indirect or consequential damage or loss in relation to any breach...".
The defenders rely on clause 9 to exclude any liability on their part for indirect or consequential damage sustained by the pursuers. The pursuers respond that section 17 of the Unfair Contract Terms Act 1977 applies to clause 9, and that in terms of that section it was not fair and reasonable to incorporate the clause into the contract. (I should add that both sections 17 and 20 of the 1977 Act are relied on in the pursuers' pleadings, but in his submissions made at the close of the proof the pursuers' counsel relied only on section 17).
[49] Section 17 is in the following terms:"(1) Any term of a contract which is a... standard form contract shall have no effect for the purpose of enabling a party to the contract --
(a) who is in breach of a contractual obligation, to exclude or restrict any liability of his to the... customer in respect of the breach;
...
if it was not fair and reasonable to incorporate the term in the contract.
(2) In this section, 'customer' means a party to a standard form contract who deals on the basis of written standard terms of business of the other party who himself deals in the course of a business".
Section 24 of the 1977 Act, so far as material, provides as follows:
"(1) In determining for the purposes of this Part of the Act whether it was fair and reasonable to incorporate a term in the contract, regard shall be had only to the circumstances which were or ought reasonably to have been in the contemplation of the parties to the contract at the time the contract was made.
...
(4) The onus of proving that it was fair and reasonable to incorporate a term in a contract... shall lie on the party so contending".
Thus it is the defenders who must undertake the onus of establishing that it is fair and reasonable to incorporate clause 9 into the parties' contract.
[50] Each party led evidence on this issue from one of its directors, Mr J C Spence for the pursuers and Mr B W Abel for the defenders; Mr Abel was the defenders' general manager for ready mixed concrete in Scotland. Each party also led evidence on the availability of insurance to cover risks in a contract such as the present. For the pursuers, such evidence was led from Mr K C Harte, who was an insurance broker with Alexander Forbes Risk Services (UK) Limited and a specialist in this area of insurance, and for the defenders such evidence was led from Mr T C Ridgewell, who is a risk and insurance executive with RMC Group Services Limited. [51] Certain parts of the evidence on this matter were not in dispute. Both Mr Spence and Mr Abel gave evidence that the manufacture of concrete is a relatively reliable activity, and that the risk that the defenders will supply defective concrete is low. Mr Spence stated that he would not consider the risk that concrete was defective to be of significance in an engineering project using concrete. The ability of ready mixed concrete suppliers to provide the correct product has improved over the years; Mr Spence had only come across one other case where defective concrete had been supplied. Both Mr Spence and Mr Abel accepted that conditions similar or identical to the defenders' clause 9 were almost universal in the industry. A number of sets of standard conditions incorporating virtually identical clauses were lodged in process. Consequently it would be impossible, or virtually impossible, for the pursuers to obtain concrete from other reputable suppliers without such a condition being imposed. [52] Mr Abel stated that, for the defenders, an exemption such as that in clause 9 was absolutely essential from a commercial point of view; he considered that without such a provision they would be unable to trade to any great degree. The reason for this was that the defenders could only have limited information about their customers and the contracts into which the customers had entered. They were accordingly unable to quantify any consequential costs that a customer might incur as a result of the supply of defective concrete. Thus they were unable to factor into the price of their products the potential liabilities that they might face from any particular customer. The industry as a whole was very competitive, and the price of ready mixed concrete was accordingly very sensitive. That made it impossible to take out expensive insurance coverage against consequential losses that might be suffered by customers as a result of the supply of defective concrete. The defenders relied principally on these factors in arguing that imposition of clause 9 was fair and reasonable in all the circumstances. [53] For the pursuers, reliance was placed on a number of features of the parties' contract. In the first place, the contractual term to which the exemption in clause 9 related was the obligation to deliver concrete in conformity to the parties' contract. That was the only obligation, apart from delivery, that the defenders had undertaken. Consequently the exemption went to a fundamental part of the contract. In the second place, it was not suggested that it was anything other than reasonable to expect at the time when the contract was concluded that compliance with the mix description would be practicable. The practicability of compliance is the fourth of the guidelines mentioned in Schedule 2 to the 1977 Act. While those guidelines do not apply expressly to cases under section 17, they have in practice been taken into account in considering what is fair and reasonable under that section: Chitty on Contracts, paragraph 14-082. In the third place, the goods in question had been manufactured to the special order of the customer, in that the customer had specified that the concrete was to be C7 foamed concrete and capable of easy removal. The fifth of the guidelines in Schedule 2 was that the goods were manufactured, processed or adapted to the special order of the customer. In the fourth place, the mix of the concrete was wholly within the control of the manufacturer, and only the manufacturer had knowledge or could have knowledge of what was in the mix. In the fifth place, it would not necessarily be apparent to the customer whether the concrete complied with the description of goods ordered until after it had been placed. By then it was too late for the customer to mitigate its loss. [54] In relation to insurance, the evidence for the pursuers was that it was generally expected in the industry that a contractor's works policy would protect the contractor against damage to other parts of the works caused by use of a defective product. It would not, however, cover the cost of replacing or rectifying the defective product itself. The risk of replacing the defective product was considered to fall on the supplier of such product. For a contractor to insure against the risk of defective materials, it was necessary to obtain a type of cover known as DE5. Such cover involved a high premium and a high excess. DE5 cover would not help in relation to temporary works, however, because in such a case the faulty materials were not part of the works; in order to trigger liability under a DE5 clause, it was necessary that there should be damage to property forming part of the works, other than to the material supplied. Moreover, DE5 cover would not apply to consequential losses. The evidence for the defenders was that they carried ordinary product liability insurance, which covered damage to the property of third parties. That insurance, however, was subject to a number of exclusions, including what was known as the "rip and tear" exclusion; this excluded the cost of removing the defective product and replacing it. In order to overcome the "rip and tear" exclusion, it is possible for the defenders to take out "product guarantees/financial loss" insurance. This covers legal liability arising out of the supply of defective products. It is, however, difficult to purchase. In general, the insurance market sees itself as providing compensation for fortuitous incidents, such as accidents, and not for ordinary business production problems. Such insurance is in practice only available for catastrophe cover. That involves a very large excess; in the year 1998/99 the defenders' excess in respect of such cover was £2.75 million. That meant that the defenders were self-insured up to that level. Any attempt to reduce that excess would result in a large increase in premiums. [55] I regard the arguments of the parties on this issue as finely balanced. I have come to the conclusion, however, that it is fair and reasonable to incorporate clause 9 into the parties' contract. In reaching this conclusion, I have had particular regard to the precise scope of clause 9. That clause does not contain a total exclusion of liability. It preserves liability for direct costs, in the form of breaking out and removing the concrete in question and replacing that concrete, together with any other direct costs that would necessarily be incurred by the pursuers in carrying out such repair or reinstatement. The exclusion relates only to indirect or consequential losses. From the defenders' standpoint, the problem about such losses is that they are wholly unquantifiable. The defenders are normally unaware of the terms of their customer's contract, and are thus unable to form any estimate of the consequential losses that are likely to flow from the supply of defective concrete. It is, moreover, impossible in practice for the defenders to obtain insurance against such losses, apart from the catastrophe cover referred to in Mr Ridgewell's evidence; that cover, however, was subject to an excess of £2.75 million, which means that the defenders would be self-insured for the present claim. [56] It is true that the pursuers, too, are unable to obtain insurance against any consequential losses that might result from the supply of defective concrete, at least in relation to temporary works. The main problem is no doubt that identified by Mr Ridgewell, that the insurance industry sees itself as providing compensation for fortuitous incidents rather than funding production problems; that consideration obviously applies to both contractors and their suppliers. Nevertheless, the pursuers are in a much better position to quantify such losses. That applies to consequential losses caused not only by the supply of defective concrete but also by losses caused by other factors, such as defective workmanship by the pursuers' own employees or by subcontractors. The pursuers are in a better position than the defenders to form some sort of estimate of the likely risk of consequential losses in the course of executing the contract works, and to factor that into their price. [57] The pursuers placed particular reliance on the fact that the obligation to supply concrete conforming to a particular mix description was the defenders' only obligation under the contract apart from delivery. In this connection, however, I think it is significant that clause 9 does not seek to exclude the defenders' liability; it merely limits such liability to direct costs. In relation to indirect costs, the considerations discussed in the two preceding paragraphs seem relevant. The same general point applies to the other factors relied on by the pursuers, as set out in paragraph [53] above. While there is considerable force in each of those factors, it is essential to bear in mind that the result of clause 9 is not to exclude any liability for the supply of defective concrete, but merely to exclude liability for consequential losses. In the end of the day, the pursuers are in a significantly better position than the defenders to estimate the risk and magnitude of such losses. As a result they are in a better position to determine what allowance to make in their contract (in this case, the construction contract) to cover the possibility of such losses [58] It was clear that both parties would have found it very difficult or impossible to obtain insurance against consequential losses. Both are effectively operating in the same insurance market, and the reluctance of the insurance industry to provide cover against production problems no doubt applies equally to both parties. Ultimately, therefore, I think that the non-availability of insurance must be neutral as between the parties; that will usually be the case where a factor affects the parties equally. Another factor that I consider neutral between the parties is the near-universal imposition of conditions such as clause 9 by suppliers of ready mixed concrete. That obviously makes it impossible for their customers to obtain concrete without an exclusion for consequential losses, but the almost invariable use of such limitations is likely to reflect the commercial considerations spoken to by Mr Abel, as summarised in paragraph [52] above.Conclusion
[59] In conclusion, therefore, I answer the parties' first question by holding that the terms of their contract were as described in paragraph [13] above. The pursuers ordered C7 foamed concrete from the defenders, and that is properly to be understood as indicating two things. First, the concrete will be of relatively low strength and low density; the mean strength will be approximately 14 N/mm2, and the distribution curve of typical strengths will be approximately as described in paragraph [9] above. Secondly, the strength of the concrete will be such that it can be broken easily, and thus put to the uses that are characteristic of C7 foamed concrete. I answer the parties' second question by holding, as indicated in paragraph [42] above, that the defenders were not in breach of the express term of the parties' contract that the concrete supplied should be C7 foamed concrete; nor were they in breach of the implied terms contained in sections 13(1) and 14(3) of the Sale of Goods Act 1979. I answer the parties' third question by holding that it was fair and reasonable to incorporate clause 9 of the defenders' standard terms and conditions into the contract. The answers to the first and, in particular, the second of these questions are obviously conclusive as to the liability of the defenders to the pursuers. In these circumstances I consider it appropriate to sustain the third and fourth pleas-in-law for the defenders and to assoilzie the defenders from the conclusions of the summons.
