Global claim struck out

The pursuers bought premises in Perth with a view to converting them into licensed premises. The works were to be in two phases. The defenders were appointed as contractors for the works under a Scottish Building Contract without Quantities Contractors Design Portion (January 2000 Revision). The works commenced in May 2001, and there were disputes about progress which resulted in two adjudications. In the present proceedings, the pursuers made various payment claims, whilst the defenders counterclaimed for the recovery of retention. All these claims were ultimately settled apart from one relating to loss of profits caused by the delayed opening of the premises, which the pursuers alleged was caused by the defenders’ breaches of contract.

The particular instances of delay alleged were:

Delays to the stonework which caused delay and disruption to the fit out works;

The defenders’ workmen had left debris on the site which had to be cleared by the shop fitters before they could commence work;

The defenders’ underground drainage works had not been carries out properly, and had to be replaced. The works had also damaged the existing drains and remedial work had had to be carried out. This had again disrupted the fitting out works.

The defenders maintained that the pursuers had failed to prove that any money had been lost because of the alleged delay. The issues before the court, therefore, were whether there had been any defects, whether they had caused any delays and, if there had been delays, if they had caused any loss.

The court found that the pursuers had failed to make out the three essential elements of their claim. Even if such defects as alleged existed in the drainage works, they had failed to establish that they had caused any delay or the amount of any loss which they had sustained. They had relied upon a report prepared by Mr. Graham which contained a conventional calculation of the loss of profits and wasted costs caused by the late opening. The figures had been based on based on the trading figures for the premises disclosed in the management accounts for the first 11 months of trading, but excluding periods such as Christmas and the first 15 weeks of trading when conditions could not be described as normal.

A figure for "normal" monthly trading had been obtained, and this was attributed to the period of delay, bringing out the figure of £32,726. The additional and wasted costs were the cost of employing the staff for the premises during a 28 day period of delay. This included the cost of renting a flat in Perth for the manager of the nightclub during that period and certain travelling costs. It also included costs incurred in relation to telephone rental, insurance, and heat, light and power. Finally, finance costs in relation to the two previous elements were calculated, based on the rate of overdraft interest charged to the pursuers at the time.

The court found that there were defects in the information relied upon for the report. Firsrly, the loss of profit calculation had been based entirely on figures derived from the management accounts of the pursuers, which had not been prepared or audited by Mr. Graham. The failure to supply supporting material was a serious defect. Some of the costs alleged to have been wasted could not be categorised as being such. There had been no explanation abput why travelling costs had been incurred. The lack of supporting documentation was criticised by the judge, and the claim dismissed.

Castle Inns (Stirling) Ltd. (t/a Castle Leisure Group) v Clark Contracts Ltd.; 22 December 2009

Author: Ann Glacki

Date: January 2010

Ann Glacki

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