Mitsui Construction Co Ltd v. Attorney General
Read the full judgment text of CACV 92/1983 on BabelCite. This Court of Appeal judgment.
1. Whatever else this case may establish, the civil engineers are likely to think it establishes that they have adjusted to the needs of the modern world better than the lawyers. The Water Works Office of the Public Works Department, as it then was, decided to bring water in large quantities from the west of the New Territories to Plover Cove in the east. A range of mountains stood in the way and it was decided that a tunnel should be bored through the mountains for the purpose. The Contractors
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CACV000092/1983
----------- Coram: Sir Alan Huggins, V.-P., Cons & Fuad, JJ.A. __________ JUDGMENT __________ Sir Alan Huggins, V.-P.: 1. Whatever else this case may establish, the civil engineers are likely to think it establishes that they have adjusted to the needs of the modern world better than the lawyers. The Water Works Office of the Public Works Department, as it then was, decided to bring water in large quantities from the west of the New Territories to Plover Cove in the east. A range of mountains stood in the way and it was decided that a tunnel should be bored through the mountains for the purpose. The Contractors were engaged to undertake the work and it was eventually completed. However, the construction had taken more than four years instead of the estimated two and the Contractors claimed that they should be paid, pursuant to the terms of their contract, more than the Government ("the Employer") considers it is bound to pay. The matter was referred to an arbitrator, who stated a case for the opinion of the High Court. It is against the decision of the High Court that the Employer now appeals. 2. As is customary for civil engineering projects of this magnitude, the contract was contained in several documents, but it was expressly agreed by cl.6(l) of the General Conditions of Contract ("the General Conditions") as follows:
By cl.l of the General Conditions the "Contract" was defined as meaning
In the event the issues we have to decide arise not from any discrepancies between the different documents but from an alleged ambiguity in the terms of the General Conditions, an ambiguity which the Engineer would not acknowledge, with the result that he declined to certify that the Contractor had been involved in an expense which it had no reason to anticipate. 3. The Tender documents included drawings, specifications and a bill of quantities. From these it appeared that the tunnel with which we are concerned would be approximately 3,227 metres in length "with an unlined diameter 3.30 metres". The documents provided for the lining of the tunnel where necessary. The necessity for lining and the nature of the lining, if needed, depended upon the nature of the ground surrounding the excavation, which could not be determined with any degree of accuracy before tunnelling commenced. Accordingly six different designs had been prepared, one for unlined sections of tunnel and five, giving different degrees of support, for sections of tunnel which would require permanent lining. The decision as to which permanent lining (if any) was to be inserted was to be decided by the Engineer when the beginning of each new section of tunnel was reached, and he was given power to change his mind after each section had actually been excavated. Some geological exploration had been made, but it is common ground that such information as had been obtained left much uncertinty as to what length of each of the permanent linings would be required. Nevertheless a Bill of quantities had been prepared by the Employer and it contained estimates of the lengths which would have to be constructed. It is the fact that those estimates proved to bear little relation to the lengths actually required which has led to the present dispute. For example, the estimated length of the most expensive type of lining was 275 metres and the actual length constructed was 2,448 metres. The quantity of steel estimated as being required for the linings was 40 metric tons and the quantity actually used was 2,943.681 metric tons. The Contractor's Tender quoted rates for all the relevant work done and materials supplied, and these rates have been paid by the Employer, but the Contractor contends that the rates were based on the estimated quantities and are unreasonable for the actual quantities executed, and it says that the Engineer has power to vary the rates accordingly. 4. As I understood him, counsel for the Employer at the very end of his reply was in effect contending that the claim for additional payment now made by the Contractor was expressly forbidden by cl. 15 of the General Conditions, although he disclaimed any intention to rely on cl.15 for this purpose. Clause 15 reads:
It was certainly suggested that the Contractor was making his claim because the rates quoted were based upon the estimated quantities, that it would have quoted higher rates if it had appreciated that the nature of the ground and sub-soil was as it was found to be, that the quotation of the lower rates was due to the Contractor's failure to obtain correct and sufficient information and that the claim was therefore made "on the ground of [a] misunderstanding or misapprehension in respect of the matters referred to in sub-clause (1) ...... or on the ground of ... the failure on his part to obtain correct and sufficient information". If that was in truth being advanced as an argument for rejecting the Contractor's claim in limine, I would reject it on two grounds. First, such a contention had not been advanced before and it was too late to raise it by way of reply on an appeal. Secondly, for reasons which I will have to elaborate later, I think this contract was concluded on the basis that it was not reasonably practicable to obtain "correct and sufficient information" in the sense of precise information which would enable the Contractor to know in advance what lengths of each type of lining the engineer might properly order. I do not accept that the present is the sort of claim which is forbidden by cl.15(2). 5. It is unquestionably part of the Employer's case that the claim was barred by cl.65(4) of the General Conditions by reason of the granting of an extension of time for completion of the Works. It is common ground that the Engineer did issue an order extending the time. It was in these terms:
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The Contractor's claim, it is then argued, was framed in para 4 of the Contractor's brief to the arbitrator as one for compensation for "reasonable and proper payment for the costs of that extra time, principally under clause 74(4) and (5) of the Conditions of Contract". Clause 65(4) of the General Conditions reads:
Therefore, counsel argues, the Contractor has expressly agreed that the compensation claimed should not be payable. As I understand it, the Contractor has now formulated its claim as one for loss related to, but not necessarily arising directly from, the extra time required. In the event nothing turns upon what might be described as a pleading point, because cl.65(4) is limited by the words "except as provided elsewhere in the Contract. " 6. The issues stated for the determination of the judge and falling for our decision on the appeal and cross-appeal were as follows:
The judge dealt first with issue (C) and we were invited to do the same. It must be borne in mind that issue (C) only arises if a negative answer is given to issue (B), for issue (C) presupposes that "an excess of executed over billed quantities as set out in the Statement of Agreed Facts" has not been "ordered by the Engineer as a variation". The judge, when embarking on his consideration of issue (C), stated it without the words which I have emphasised; i.e. he assumed that the particular excesses with which we are concerned had not been ordered by the Engineer, although it is, of course, true that he did eventually give a negative answer to issue (B). It has been the Contractor's contention, first, that the excesses were ordered by the Engineer as variations and, secondly, that even if they were not so ordered they were "within clause 74(4) of the General Conditions". It is important to bear the two contentions in mind throughout. 7. The Contractor's claim is made under cl.74(4) of the General Conditions, but for a proper understanding of the argument it is necessary to set out the fasciculus of clauses of which this forms part:
It will be seen at once that these clauses deal with "variations" and "additions", so that the question immediately arises Variations and additions to what? It is this question which is the root of the three issues which have been formulated for our opinion. The Contractor submits that what Mr. Waller has called "the Norm", but which I prefer to refer to as "the Base", is the quantity of work as estimated in the Bill of Quantities, whereas the Employer says that it is the quantity of work necessary to construct the tunnel in the form in which it was contemplated at the time the Contract was made. On the Employer's case, therefore, the Contractor's quoted rate for each item in the Bill of Quantities is applicable and conclusively binding even though the estimated quantities were greatly exceeded, whereas the Contractor contends that it ceases to be conclusively binding if the estimated quantities are so far exceeded that the rates become unreasonable. Here, the Contractor alleges, the rates have become unreasonable, and it is argued that it matters not why they have become unreasonable - whether as a result solely of the extra time necessary to do the work or as a result of a combination of that with other reasons, e.g. the expense of handling the extra materials required. 8. Since many of the terms used in the general Conditions have been defined in cl.l, I must set out those which are important to the argument:
"The Works" are differently defined in the recitals to the Articles of Agreement, which suggest that this was to be a lump-sum contract. The definition for the purpose of those Articles is:
The difficulty here is that "the Works shown in the Drawings and described in the Specifications" and "set forth in the Form of Tender ... and the Acceptance thereof" are not the same as those "set forth in Bills of Quantities". However, the operative words of the Articles of Agreement suggest that "the Works" for the purpose of the Articles are all the Works as defined in the General Conditions other than "Extra Works and Additional Works as may be ordered or required under the said Conditions". The operative words are inconsistent with a lump-sum contract, because the consideration expressed ignores the recited lump sum, the "Contract Sum" of the General Conditions not being a sum of which payment was to be made. When all the documents forming "the Contract" are considered, there is no room to doubt that this was a re-measurement contract, but that is in no way inconsistent with the Contractor's argument as to what constitutes a variation. Indeed, the Articles appear to contemplate "Additional Works" which are only "required" and not "ordered" under the General Conditions. 9. As is customary in definition provisions, the definitions in the General Clauses apply "except when the context otherwise requires" and it is obvious that the context requires different meanings to be assigned to the word "Works" on the first two occasions on which it is used in cl.73(1). The meaning assigned by the definition clause is appropriate on the second occasion but not on the first: "the Works" first referred to are the Base for the variations (if any) which will produce "the Works" as defined. Equally, the word "Contract" in para. (a) cannot mean the Contract as defined in cl.l. 10. Both counsel submit that their construction of cll. 73 to 75 produces a fair result. On the one hand it is said that, as the Contractor had agreed to insert any of the linings shown in the drawings upon receipt of information from the Engineer as to which he had chosen, the Contractor had assumed the risk that the Engineer would find it necessary, by reason of the ground met during tunnelling, to direct more of the stronger lining than had been estimated, so that it was fair that the Contractor should be held to his Tender rates, for he should have tendered on that basis. On the other hand it is said that in a civil engineering contract of this kind, where accurate assessment of the conditions underground was recognised to be impracticable and the Contract itself gave unilateral power to the Engineer to choose which lining was to be used, the parties cannot have intended in effect to embark upon a gigantic gamble: the greater the obvious risk of gross errors in the Bill of Quantities the more likely the parties would be to make provision for re-rating. Both parties accept that the aim of the court must be to ascertain their intentions as revealed by the Contract documents, yet it must be remembered that, if events have operated upon the Contract to produce a result which is disadvantageous (even severely disadvantageous) to one party upon a proper construction of the Contract, that does not necessarily mean that the Contract itself was unfair. If we assume for a moment that the construction contended for by the Employer is correct and that the Contractor knew it to be correct when invited to tender, there were two alternatives open for the avoidance of the risk to which Mr. Waller refers: either the Contractor could have refused to tender on the basis of a Contract which may well not be suitable to this kind of subterranean work or it could have quoted different rates for quantities in excess of those estimated in the Bill of Quantities. If, as Mr. Waller suggested, the latter alternative involved such massive calculations as to make it impracticable, a prudent contractor would have adopted the first alternative. The whole foundation of the Contractor's case was the inherent uncertainty which existed at the time the Contract was made as to the amounts of labour and materials which it would be called upon to provide: so in effect we are asked to approach the Contract with the thought that no Contractor in his right mind would have agreed what the Employer says this Contractor has agreed and, in the event, to say that the parties must have intended something different. I am well aware that authority can be found for an approach which amounts to this, that the court should ask itself what it would like to decide or, in other words, what it would itself have been prepared to agree if it had been in the shoes of each of the parties in turn, and then to construe the written terms accordingly, but that appears to me to be a dangerous and fundamentally wrong approach. One must start with the written terms and give to them their natural and ordinary meaning, if they have one. The assumed intention may be a guide, but it must never be the master. For the reasons I have just given I do not think that either construction argued before us makes such commercial nonsense that it cannot possibly be correct. 11. I do not think the argument has been assisted by references to a "lump-sum contract" and to a "contract for an unlined tunnel". As I understand it, a lump-sum contract is one in which a lump sum is agreed for the completion of the entire project, although provision may be made for an increase or decrease if the employer changes his mind during the course of the construction as to what he requires: see Duncan Wallace on "The I.C.E. Conditions of Contract 5th edition" at p. 306, where the author indicates that such contracts are used where "the Work is capable of more precise estimation". The Contractor has not suggested that this was a lump-sum contract but only that a lump sum was agreed for the work quantified in the Bill of Quantities, which quantification was never intended to be more than a basis for subsequent calculation. Again, it has never been suggested by the Contractor that this was a contract for an unlined tunnel: what Mr. Waller submits is that if the Engineer had failed to give information as to his requirement of permanent lining the Contractor could have gone ahead on the basis that no permanent lining was required, and, from this, he went on to argue that any direction to insert a section of permanent lining was a "variation order". (For reasons which I will give later I am not persuaded that the Contractor was ever entitled to assume that no permanent lining was required and to proceed accordingly: it was intended that the Engineer should not only indicate which lining was to be inserted where a lining was required but also indicate that no lining was to be inserted where he thought a lining was not required.) Yet again, I am unable to agree that the Contractor's argument would even turn the contract into a "cost-plus contract", for it is only when a quoted rate is thought by the Engineer to be unreasonable or inapplicable that another rate can be applied under cl 74(4). 12. The judge came to the conclusion that, if cll. 73 - 75 were construed without reference to cll. 13 and 14, they showed an intention not to cover those "increases" which consisted of the differences between the billed quantities and the executed quantities necessarily flowing from the giving by the Engineer of information as to which of the several alternative lining designs shown in the tender documents he had selected for each section of the works. There is e danger in the present case in referring to such increases as "automatic increases". That phrase was used in Grinaker Construction (Transvaal) (Propriety) Ltd. v Transvaal Provincial Administration 1982 1 S.A.L.R. 78 and 20 B.L.R. 30 to mean any increase of the quantities shown in the Bill of Quantities which was not due to a variation order. In that case there was no question of the engineer's choosing between alternative designs and therefore no issue whether the giving of information as to the choice of design was a "variation order". I shall refer to the type of increases with which we are concerned as "choice of design increases" and the works to which they relate as "choice of design additions". 13. Although the judge would have construed cll.73 - 75 in favour of the Employer had they stood in isolation, he thought that cl.13 changed the whole tenor of the Agreement and showed that choice of design additions were "additions" in respect of which "suitable rates" could be agreed under cl. 74(4). His initial approach to cll.73 - 75 followed that adopted by the Supreme Court of South Africa (Appellate Division) in Grinaker's Case, and I do not think Mr. Waller was disposed to challenge the correctness of that decision. There the project was the construction of a road and appurtenant works. Clause 49 of the Contract contained the substance of our cll.73 - 75 in five sub-clauses. As in the present case there was a bill of quantities containing estimates of each item of work that would be required. As in the present case there were terms in the agreement which left no doubt that the quantities stated in the bill of quantities were merely estimates and that the quoted rates were to be applied to the measured quantities necessary to complete the project in accordance with the drawings and specifications. The estimates turned out to be bad estimates and the contractor sought payment on the basis of other rates to be fixed in accordance with a provision comparable to our cl. 74(4). It was held that, as the increases in respect of which the contractor claimed were due not to orders varying the quality or quantity of the work to be done but to inaccurate estimation, no re-rating was possible under the terms of the contract. The court said that the basic flaw in the argument on behalf of the contractor was that it equated a variation of the quantity of the works as envisaged in the equivalent of our cl. 73(1) with an increase of the quantities shown in the schedule of quantities. I think, with respect, that most of the reasoning of the court was unassailable, although I question whether the words "for that purpose" in that sub-clause should (as was suggested) have read "if for that purpose": the paragraph was grammatically and sensible correct as it stood. Beyond pointing out (1) that under the contract in that case there was a limitation which prevented the engineer from ordering higher rates for work covered by a variation order unless that work constituted a specified proportion of the whole works and (2) that there could be a re-rating only if the contractor produced evidence of "loss or damage", I do not think it is necessary to detail the contractual terms, and I merely cite this passage from the judgment at 1982 1.S.A.L.R. 85:
14. At this point I must say two things about the argument of the Contractor to the effect that cll. 13 and 14 alter the whole tenor of the Agreement in our case. First, the argument is based upon the interpretation of "variation" in cl. 73(1) and, as we have just seen, does not necessarily conflict with the decision in Grinaker's Case, because of the distinction between "automatic increases" and "change of design increases" which I have already drawn. An automatic increase is one for which no variation order is required and Mr. Waller's submission is that a giving of information as to a lining required is a variation order. Secondly, not only cll. 13 and 14 but also cll. 73 - 75 must be construed in the light of the entire Contract. If "variation order" had been expressly defined in cl. 2 as including in all contexts, and in particular in cl. 73(1), a notice giving information as to which of the specified linings was required, it could hardly be said that the result contended for by the Contractor was impossible. We shall, therefore, have to consider whether cll. 13 and 14 were intended to have the same effect as such a definition. 15. I now set out those clauses:
Since a Bill of Quantities was included in the Tender documents in the present case, it is cl. 13 which is directly applicable. The effect of it, the Contractor argues, is that the quantities estimated, in the Bill of Quantities became the Base for any variations or additions. The obscurity of the clause is not reduced by the obvious confusion between the work and the price to be paid for the work: the Contract Sum is a sum of money and neither the nature nor the quantity of work can be described in terms of money. Nevertheless Mr. Waller contends that whatever the clause was intended to mean it must have been more than a mere repetition of the definition of the Contract' Sum in words referable to the works rather than to the price: had that been the intention the draftsman need not have mentioned "the quality and quantity of the work", nor would it have been necessary to "deem" something which was a fact: he could merely have said
Although Mr. Graham was unwilling to agree that the clause could, if his construction were correct, equally well have been drafted in that form, he was unable to suggest why the draftsman should have used the words which cast doubt upon that construction. I do not, of course, overlook the fact that a business contract is not to be construed with the strictness of a statute, but a contract which reflects an attempt to attain precision may fairly be construed more strictly than one that does not. The Employer's argument, it seems to me, does fail to give any meaning whatever to substantial parts of cl.13. The Contractor's argument, on the other hand, gives some meaning to the whole sub-clause, even though the suggested intention could have been more clearly expressed. 16. That suggested intention can be summarised as follows. The distinction between cll. 13 and 14 is that, in the one, Bills of Quantities are included in the Tender documents and, in the other, they are not: where they are included, they regulate the quality and quantity of the work covered by the Contract Sum and, where they are not included, the quality and quantity of the work covered by the Contract Sum are regulated by the drawings and specifications. What difference does it make which document regulates the quality and quantity of the work covered by the Contract Sum? Or, to put the question in another way, What is the relevance of the quality and quantity of work covered by the Contract Sum? Mr. Graham's argument does not satisfactorily answer these questions. As we have seen, he suggests that cll. 13 and 14 do no more than repeat what is self evident from the definition of Contract Sum and, to use his own words, that cl. 13 "means that the Contract Sum is the grossed-up total of the priced items in the Bill of Quantities". He goes on to explain why the Bill of Quantities contains estimated quantities and cites from Duncan Wallace on "The I.C.E. Conditions of Contract Fifth Edition" at p. 307 to show what are "the three quite separate contractual functions" of a Bill of Quantities in the modern English contract of which quantities form part,
The author continues:
It is true that in the present case separate prices were quoted for each of the linings and it obviously could not be determined beforehand how much of each would be required, but the case contemplated by Mr. Duncan Wallace was not one where a unilateral decision lay with the Engineer: the applicability of a particular rate quoted depended on a simple issue of fact - rock or no rock? Here the applicability of the quoted rates depended upon the opinion of the Engineer and it was an opinion which he was expressly allowed to change while the excavation was in progress. Mr. Waller does not, I think, challenge the assertion that there are three quite separate contractual functions of the Bill of Quantities: he confines himself to saying that cl. 13 would not be necessary if it were not in order to establish what is a variation for the purpose of function (a). The Contract Sum is defined in cl. 2 and no further provision is required to show how that is to be arrived at: the estimated quantities are admittedly necessary for that purpose and cl. 13 was not necessary to make them so. He submits that the only possible intention of cll. 13 and 14 is to establish the Base for the determination of variations and additions. A comparable provision was not required in the contract in Grinaker's Case because there could be no doubt what was the Base for the determination of variations and additions or, therefore, what constituted a variation or addition. In cases of the kind we have here the draftsman needed to make it clear whether a change of design addition was or was not a variation and cll. 13 and 14 were inserted for that purpose. 17. I think we must assume that cll. 13 and 14 were not inserted merely to be repetitive and to state the obvious, unless any possible alternative construction raises insoluable conflict with other parts of the contract. Mr. Graham contends that there is such conflict. First, he submits that the Contractor's construction conflicts with the clear intention that the quantities indicated in the Bills of Quantities were to be treated as estimates only. Indeed, it is beyond doubt that the Contractor must have been fully alive to the fact that there might be differences between the estimated quantities and the quantities measured for remuneration purposes. The "Contract Sum" here was $82,816,657 and one thing is certain: no one expected that that was the precise sum which would be paid: it was, to use Rhind, J.'s words, a figure "which was arrived at by a totting up exercise after multiplying the quantities shown in the Bills of Quantities by the unit rates quoted by the Contractor". (I shall refer to those rates as "the quoted rates".) Equally, no one has suggested that, if the Contractor had stopped work as soon as it had put in all the quantities shown in the Bills of Quantities, it would have fulfilled all its obligations. That the quantities shown in the Bills of Quantities were intended to be nothing more than a rough estimate was made abundantly clear in several places. We can start with the preamble to the Bill of Quantities itself, para. 3 of which reads:
That is echoed by clauses 91 and 92(1) of the General Conditions:
18. Next Mr. Graham says, the Contractor's construction conflicts with the provisions which "fixed the Contractor with knowledge of the nature of the sub-soil: if the Tender was submitted on the basis of an assumption of knowledge of the ground through which the tunnel would pass it could not have been intended to treat a choice of lining as variation." Here he points to section 1.13 of the Particular Specification, to cl. 15 and to the recital in the Form of Tender to the effect that the Contractor has "inspected the site". 19. Thirdly, the Contractor's construction is said to conflict with the natural construction of cll. 73 - 75 as a comprehensive scheme for dealing with what may be described as "Specification Variations" all the linings having been included in the specification and drawings. 20. I must deal with each of these alleged conflicts in turn. For my part I do not see any difficulty arising from the fact that this was a re-measurement contract. The "additions" referred to in the definition of Final Contract Sum include, first, increases of quantities due to under-estimation in the Bills of Quantities. By virtue of cl. 92 the Engineer was responsible for measuring the work actually done. If that work were no more than had been "contemplated by the Contract", the work would be paid for strictly in accordance with the rates set out in the Bills of Quantities but based on the actual measurements instead of on the estimates in the Bills of Quantities. Thus the estimated quantities have, prima facie, no relevance to the calculation of the Final Contract Sum. The "additions" could also include works ordered by the Engineer but not contemplated by the parties at the time of the Contract - "Additional Works" and "Extra Works". The Contractor does not suggest that, if the Engineer does not consider the tender rates "unreasonable or inapplicable", they are otherwise than the rates which ought to be paid. All that is sought is a declaration that the Engineer has power to apply other rates if he is of opinion that the tender rates are unreasonable or inapplicable. The appropriate rate, whatever it may be, is admittedly to be applied to the quantities as measured and to regard Mr. Waller's argument as implying that this was a lump-sum contract is to mis-understand it. There is no conflict here. I recognise that any re-rating would apply to the billed quantities as well as to the excess over the billed quantities, but that is a matter which the Engineer would doubtless bear in mind when fixing a "suitable rate". 21. The second alleged conflict, which amounts to an argument of imputed knowledge, is allied to the submission referred to at the beginning of this judgment to the effect that a claim for additional payment was expressly forbidden by cl. 15 and by cl. 65(4). I set out cl. 15 in that connection and now need only add section 1.13 of the Particular Specification:
The Employer cannot have it both ways: either this is essentially a re-measurement contract or it is not. If it is and if, as is admitted, both sides were well aware of the impossibility of ascertaining in advance what conditions would be met with in the course of tunnelling, it would need very clear language to show an intention on the part of the Contractor to contract on the basis of assumed knowledge. I am not persuaded that cl. 15 was intended to relate to the ground along the site of the tunnel at all: it concerned an examination of "the site and its surroundings" and imputed to the Contractor only such knowledge as such an examination by a competent contractor would reveal. Section 1.13 merely provided that the geological information supplied by the Employer was not a representation upon which the Contractor was entitled to rely: he was to satisfy himself as to the extent to which that information represented the conditions to be encountered. That was a very different thing from deeming the Contractor to know what conditions would be encountered - knowledge which, as is to be inferred from the terms of the Contract itself, no one could ascertain until each section was reached. Moreover, even precise knowledge of "the conditions to be encountered" would not enable the Contractor to say with certainty which particular lining the Engineer would consider appropriate to those conditions. Mr. Graham then relies on section 2.6.18 of the Particular Specification, the first two paragraphs of which are in these terms:
This might at first sight appear to support the Employer's contention, but two things need to be noticed. First, the Contractor is not to be deemed to have ascertained what could obviously not be ascertained but only "the general nature of the ground through which the tunnels will be constructed". Secondly, what has to be allowed for is "the probability" of meeting difficulties and for any contingency "which may be expected". In my view that falls far short of making allowance for any possibile difficulty which could be met and for any contingency whether expected or unexpected: it is common case that the problems experienced were neither probable nor expected. The rates quoted did make allowance for the probable and expected conditions and I am not persuaded that the intention of the parties was "very clear indeed" that all risks arising from bad ground were to be borne by the Contractor. The second paragraph of that very section shows that the parties were contracting an the basis that the extent of the bad ground was uncertain and would be defined as the excavation proceeded. 22. Two other provisions must be referred to in relation to this argument of imputed knowledge. First cl. 16 reads:
This,again, is said to show that the Contractor has assumed all the risks arising from the ground conditions. I do not think it does so. The words "except in so far as it is otherwise provided in the Contract" indicate that the quoted rates do not necessarily cover all the Contractor's obligations under the contract. Moreover, the tender was not for "the Works" as defined in cl. l but for "the Works" as understood in the Articles of Agreement. It begs the question we have to decide to say that those works included the works made necessary by choices of lining. The Contractor does not deny that it must be deemed to have satisfied itself as to the correctness and sufficiency of its tender for the quantities of works specified in the Bill of Quantities. 23. Section 1.15 of the Particular Specification is also relied upon. It reads:
I am not clear what is the significance of the word "for" after "include" but I cannot see that the paragraph could possibly assist the Employer's argument. The Drawings do not indicate the lengths required of each of the lining designs. In so far as the lengths do not grossly exceed the quantity estimated in the Bill of Quantities it is not disputed that the quoted rates "include everything necessary to provide complete and finished work to the full intent of the Drawings". The paragraph is not inconsistent with the contention that the Engineer has power to apply different rates if the measured lengths are such that the quoted rates are rendered unreasonable and inapplicable. 24. The third alleged conflict requires us to consider in detail cll. 73-75. It is with "Variations" that cl. 73 is concerned. Information as to which of the specified linings was required was without doubt necessary for the completion of the works and it would be unreasonable to view the Contract in the light of a supposition that the Contractor could complete the works in the absence of any such information. It is true that section 2.6.30 of the Particular Specification does not expressly say that the Contractor will be informed if no permanent lining is required. The section is in these terms:
It seems to me that this shows an intention not only that the Contractor would be informed of the type of permanent lining required where the Engineer thought that permanent lining was required but that it would be informed if the Engineer thought no permanent lining was required. The parties appear to have been of that opinion, since we find (for example in Site. Instructions No. 65 and No. 79) directions to excavate for unlined sections. Mr. Graham contends that to regard the making of a choice of a specified lining as a "Variation" was prima facie to stretch the ordinary meaning of that word: he would have us hold that such a choice was not a variation because, whatever the choice made, the resulting work was no more than was contemplated by the parties at the time of the Agreement. 25. The only indication I have been able to find as to what is normally understood by architects and civil engineers as a "variation" is to be found in Hudson's Building and Engineering Contracts (10th Edition) at p. 506:
Mr. Graham says that the linings were expressly or impliedly included in the original Contract "and therefore ... included in the contract price", but Mr. Waller says that, although it may be that they were expressly or impliedly included in the original Contract, they were not included in the Contract Sum save to the extent of the quantities stated in the Bill of Quantities and he equates "Contract Sum" to Hudson's "contract price". On balance I incline to the view that choice of design increases would not normally be regarded as variations any more than would the automatic increases in Grinaker's Case. I think it would be difficult to regard the giving of information as to the choice of lining required to be a Variation Order where the result was an excess over the quantity specified in the Bill of Quantities for a particular lining and not a Variation Order where it was not. It is also to be noted that choices of lining were in practice notified in the form of "Site Instructions under section 2.6.30 of the Particular Specification and not in the form of "Variation Orders", a fact which, although not conclusive, is some indication that both parties looked upon choices of lining in a different light from that in which they viewed other "variations". One must therefore remember that, when the Contractor argues that "as the tunnel was being constructed the Engineer ordered much greater lengths of permanent lining than had been foreseen", this begged the question whether "by reason of clause 13, the site instructions were to be regarded as variation orders". 26. To this extent, therefore, Mr. Graham is right, that he says the Contractor's construction places a strain on the plain language of cl. 73(1). However, if the choice lies between giving a strained construction to cl. 73(1) and giving no effect whatever to some of the words in cl. 13, I would think that the former alternative is to be preferred. What we have to decide is whether that strained construction is forced upon us by cl. 13. Obviously the answer must be "No" if the result is to make cl. 73 and its associated clauses unworkable, and for the moment I will assume that a choice of design addition is a variation. Clause 73(1) requires the Engineer to make necessary variations and confers on him power to give specified consequential orders to the Contractor. Paragraph (a) allows him to order the Contractor to "increase or decrease the quantity of any work included in the Contract" and para. (e) to "execute Additional Works and Extra Works". The latter paragraph seems to me to be clear enough: it is para, (a) which is difficult. It would be impossible to increase the work included in the Contract as defined in cl. 1. What does "work included in the Contract" mean in this context? Mr. Waller says in effect that it means "work as quantified in the Bill of Quantities and forming the basis for the calculation of the Contract Sum". Mr. Graham says that para. (a) was only intended to show that an automatic increase (in which he would include a choice of design increase) is not a variation at all. With respect, para, (a) seems to me a strange way of trying to achieve such an object. Mr. Graham reasonably says that all "the Works" were contemplated other than "Additional Works and Extra Works", but why then include para. (a) at all, since para, (e) covers Additional Works and Extra works? 27. Whatever para. (a) was intended to mean, the clause does seem to contemplate that any "variation" to which it relates shall be the subject of an order. As a general rule that order must also be in writing: cl. 73(2). That sub-clause draws a distinction between increases which are "the result of an order given under this clause" and those which are "the result of the quantities exceeding or being less than those stated in the Bills of Quantities". Sub-clause (2) can only apply where there is a variation under sub-cl.(1) and it follows that the proviso can only apply where sub-cl.(2) would prima facie be applicable. Given its natural meaning sub-cl.(2) clearly requires an order in writing for any variation within sub-cl.(1) unless such variation is an automatic increase or decrease; but such an automatic increase or decrease would not, on Mr. Graham's construction, be a variation within sub-cl.(1) anyway. The difficulty is that, if such an automatic increase or decrease was not a variation in the first place, it was unnecessary to insert proviso (a) at all. It is thus not the Contractor's construction but the Employer's construction which produces difficulty here. Mr. Graham seeks to get round the difficulty by suggesting that proviso (a) "is explanatory and declaratory" and "enables the Contractor to be paid for an increase in quantities for work within the scope of the Contract without it being disputed on the basis that there was no order in writing". However, the Contractor could be so paid for both automatic increases and choice of design increases without the proviso. 28. We then come to cl. 74. Sub-clause (1) relates to the valuation of Additional Works and Extra Works done by the Engineer's order. Mr; Waller submits that choice of design additions are Additional Works and he seeks to refute the argument that they cannot be Additional Works because they are not "similar to" but are "the same as" "those contemplated by the Contract" by saying that only the specified quantities of linings were "contemplated by the Contract". I cannot accept that. It seems to me clear that the Contract contemplated all the linings required for the 3,227 metres of tunnel. To the extent that the tunnel was extended in length by variation orders there were Additional Works, but to the extent that the total length of all the various design finishes did not exceed 3,227 metres nothing was done which was not "contemplated by the Contract". Mr. Waller argued that "the question is not What was contemplated by the Contract? but Was this within the Contract Sum?" The answer to neither of those questions gives the complete answer to our problem, because we still have to decide whether works can be an "addition" for the purpose of cl.74(4) without being Additional Works. On a strict construction they can, especially as it would have been more logical to place sub-cl.(4) immediately after sub-cl.(2)if "addition" was intended to be synonymous with Additional Works. Even so, can "additions" include choice of design additions? There seems to me to be no possible reason for excluding them other than the argument that, despite the natural meaning of cl.74(4), the whole of cll.73 - 75 appear to provide a comprehensive scheme for dealing with "variations" as that word is normally understood. The word "additions" in cl.74(4) clearly cannot include Extra Works, the rates for which ere, by sub-cl.(3), to be valued at rates agreed upon between the Engineer and the Contractor. Why then should the draftsman not have said "Additional Works" if that is what he meant? He had done so in sub-cll.(1) and (2). It is then said that cl.75 operates against such a construction, because it appears to contemplate that an order under cl.73 will normally have to be made before there can be a variation of rate under cl.74(4). Although cl.75 refers to "increase of the Contract Sum" that is one of the many examples of bad drafting in the contract documents and clearly means "amounts added to ... the Contract Sum" under the other terms of the Contract: "the Contract Sum" is as unchangeable as was the law of the Modes and Persians. Clause 75 cannot have been intended to require two notices in the case of Additional Works and Extra Works and it seems to me that the word "and" at the beginning of the third line in the printed version must of necessity be read as "or". (With all respect I differ as to this from the judges in Grinaker's Case.) Clause 75 therefore requires that before there can be a variation of rate under clause 74(4) in respect of an "addition" which is not Additional Works there shall have been notice given "ass soon as is practicable after the date when the order was given under clause 73". It follows that an order is necessary before there can be a re-rating under cl.74(4). Once again one comes back to the questions whether choice of design additions are such that a variation order is required and whether site instructions can properly be regarded as variation orders. 29. The judge finds strong support for the Contractor's contention in J. Crosby & Sons Ltd. v Portland Urban District Council 1967 5 B.L.R. 121. With respect I think he mis-understood that case at least in one respect, although it must be said that some of the reasoning in the judgment is difficult to understand. There were two points which were material to the present case. The first related to the materials to be used in performance of the contract. The contract gave the contractor a choice between using pipes manufactured by one company and pipes manufactured by another. The engineer insisted that the contractor use the pipes of the second company. Rhind, J. found it
The answer is that, although both pipes were within the contemplation of the contract, the engineer not only was not obliged to make a choice between them: he had no right to make it: it was the right of the contractor. By forcing the contractor to use the pipes of one particular manufacturer he deprived the contractor of his right of choice and thereby varied the terms of the contract. It was therefore just that the contractor should be compensated. In the present case the decision as to which (if any) lining was to be used in a particular section of tunnel was not the choice of the Contractor, as we have seen from section 2.6.30 of the Particular Specification. Accordingly, by specifying the type of lining the Engineer was exercising a right conferred upon him and was not depriving the Contractor of a right which belonged to it. Thus there was no variation as normally understood. 30. The only other point in J. Crosby & Sons Ltd. v Portland U.D.C. is more obscure. The arbitrator found that the work done (including laying, jointing and moulding the pipes) was "an increase in the quantity of work as stated in the Bills of Quantities". Item 1 of the Bill of Quantities No. 2 allowed for excavation not exceeding 5 feet deep and averaging 4 feet 6 inches deep. There were provisional items to cover "additional excavation supplementary to item 1 to be taken cut of trench bottoms only over 5 feet deep but net over 10 feet deep" and for "ditto only over 10 feet deep but not over 20 feet deep". There was no provisional item for laying, jointing and moulding the pipes at a depth below 5 feet. Donaldson, J. said at p.130:
The second sentence in clause 51(2) was:
That the excavation item was in excess of the quantity stated in the Bills of Quantities would appear to have been a finding of the arbitrator rather than a decision of the judge. The judge held that it followed from that finding that no written variation order was required. That is understandable. However, the judge went on:
With respect to him this is not entirely clear. By "the contract rate" he appears to mean the rate specified in the bills of quantities for laying, jointing and moulding the pipes. Clause 52(2) allowed for revision of that rate "if the nature or amount of [the] . .. addition relative to the nature or amount of the whole of the contract work made the rate unreasonable". Presumably he regarded the laying of the pipes at depths or more than 5 feet as having produced an addition to the quantities stipulated in the bills of quantities in the same way as the excavation to such greater depths led to one decrease and two additions to the various excavation items, but was that correct? It was, if the item for laying, jointing and moulding pipes was so expressed as to relate only to work at not more than 5 feet depths, but not otherwise. If the item had been expressly for laying, jointing and moulding pipes throughout "at any depths" it could not possibly have been said that that item was exceeded. The report does not indicate the terms of this item and I can only assume that the judge thought that it, at least implicitly, covered only work at not more than 5 foot depths. In that event there was, on the one hand, a decrease of the quantity under that item and, on the other, a quantity which was not covered by any item and therefore could not strictly be described as an "excess" or an "addition". It is the words "he was entitled to vary that rate" which produces the difficulty. What the judge appears to have done in fact was not to vary a contract rate for laying, jointing and moulding pipes at up to 5 foot depths but to supply the omitted rates for depths in excess of 5 feet. Yet he disclaims having done that: he implicitly rejected the alternative argument for the claimant that, there being an omission in the Bills of Quantities, "the Engineer (and thus the arbitrator) [was] entitled to fix a price or rate for laying and jointing at depths in excess of the standard depth" and accepted the contention "that the Engineer was bound or at least entitled to vary the Bill of Quantity rate in the exercise of the power contained in clause 52(2) of the Contract". Whatever the real basis of his decision, I cannot accept the case as good authority for the proposition that wherever a quantity stated in a bill of quantities is exceeded the Engineer has power under cl.52(2) of the I.C.E. Conditions to increase the "contract rate". 31. In the result I find nothing in the Contract which makes the strained interpretation of "variation" in cl.73(1) completely untenable. On the other hand I must decline to give to cl.13 a meaning which net merely deprives it of all sensible purpose but introduces concepts of quantity and quality which are wholly irrelevant to the suggested purpose. With the judge I think that that clause was intended to provide that choice of design increases were to be deemed to be variations. 32. At the very least, it seems to me, the intention is uncertain. I came, therefore, to the "contra proferentem" rule. Mr. Waller expressly said that he did not rely heavily upon this, although I suspect his stance was largely dictated by his contention that the intention of the parties was clear, a contention which would be inconsistent with the existence of the necessary foundation for the application of the rule. Nevertheless, the rule was described by Lord Selbourne in Neill v Duke of Devonshire (1882) 8 A.C. 135, 149 as "well settled". It will only be applied in the last resort, when all other rules of construction have failed to produce a satisfactory answer. Mr. Graham does not suggest either that the rule is unsound or that it does not operate against the Crown: he, too, argues that the intention is clear. In my view, if anything is clear after nearly a week of argument, it is that this contract is an appalling conglomeration of obscure provisions, some of which have been taken (not necessarily in precisely the same form) from sets of institute clauses having a different conceptual basis and which cannot conceivably have been intended to mean what they plainly purport to say. We have been referred at length to comparable sets of institute clauses and to decisions upon them. For my part I have obtained no assistance from this. Chameleon-like, words can change their colour in a different context, and in the final analysis it is the contract signed by these parties that we have to construe. Such sign-posts as this contract contains are contradictory and any one who confidently asserts that he is on the right road is as likely to find himself in Baghdadas in Rome. It is in just such a case that the contra proferentem rule can be applied - and deservedly so. It cannot fairly be said that the construction contended for by the Contractor would work a wrong to the Employer: rather could it be said that the construction contended for by the Employer would work a wrong to the Contractor because the Contractor may have been misled by the failure to state clearly what the Employer contends was intended. 33. In the event I would uphold the decision of the judge and of the arbitrator on issue C. 34. On issue B the Employer contends that, even if "site instructions" could properly be regarded as "variation orders", the relevant site instructions here were ineffective as such. The argument is that a variation order has to be signed by the Engineer and that, although cl.2(3) of the General Conditions empowered him to delegate in writing any of his functions, the only written delegation did not include a reference to cl.73: the site instructions not being signed by him, they could not be variation orders. Mr. Waller acknowledges the force of this argument but seeks to avoid its impact by saying first that power was delegated under "all clauses of the Particular Specifications", and the letter of delegation therefore empowered the Senior Engineer/Construction to give orders under section 2.6.30, even if they were variation orders for the purpose of clause 23(I) of the General Conditions. Secondly, he says that the Engineer ratified the orders of the Senior Engineer/Construction and that in any event the Contractor treated the site instructions as valid variation orders and that the Employer paid for the work at, the quoted rates, so that the Employer cannot now be heard to contend that the orders were invalid. The judge took the view that variation orders under section 2.6.30 were different in nature from variation orders under cl. 73(l) and that a separate delegation under the clause was essential before the site instructions could be relied upon. Mr. Waller says that that is to fail to distinguish between the power to order and the "ministerial act" of signing the order. That is, I think, too artificial a distinction. However, the judge did not deal with the argument based on ratification and this seems to me to have greater force: if the site instructions are properly to be regarded as variation orders it would lie ill in the mouth of the Employer, having accepted their validity for the purpose of measurement, to deny their validity for the purpose of considering increased rates. The judge, who disagreed with the arbitrator on this issue, referred to "the fallacy of supposing that just because there is an order it is necessarily a variation order". That would, indeed, be a fallacy, but it is not necessarily a fallacy to suppose that a site instruction which is in truth a variation order is invalid as such because it is not signed personally by the Engineer. On issue B I would restore the decision of the arbitrator. 35. I have already expressed my view at the beginning of this judgment that issue A was framed upon a misapprehension of the real basis of the Contractor's claim. The issue does not arise and I would say no more about it. 36. I would dismiss the appeal and allow the cross-appeal. However, as the other two members of the court have reached a different conclusion, the appeal is allowed, and Issues B and C will be answered "No". The cross-appeal is dismissed. There will be an order nisi under 0.42 r.5A that the Respondent pay the costs here and below, application to vary that order to be made within 14 days. Cons, J.A. : 37. I have had the advantage of reading in draft the judgment which my Lord has just delivered. The major question with which we are faced permits, as my Lord has amply illustrated, of no confident answer. On balance however I regret that I have come to a different conclusion. 38. My main difficulty is that to the extent that they constitute "variations" or not, I find myself unable to draw any distinction between what were termed "automatic increases" in Grinnaker and what my Lord has termed "choice of design increases" in the present instance. I would therefore be forced to accept, as Mr. Waller indeed argued, that any deviation, however small, from the figures contained in the Bill of Quantities is a "variation" within the contract. The size of the variation would be relevant only if it were such as would warrant an adjustment of the rate originally quoted. 39. It is suggested by Mr. Graham that as far as automatic increases are concerned Grinnaker has already provided the answer. Mr. Waller seeks to distinguish that decision on the grounds that it dealt with increases which could have been discovered from the actual drawings in the very first instance and that the contract there contained no equivalent of our Clause 13. 40. The full provisions of that contract do not appear in the report so that it is difficult to estimate the strength of these distinctions. However, quite apart from that authority, I would not be satisfied that automatic increases amount to "variations" under the present contract. Paragraph 3 of the preamble to the Bill of Quantities states -
41. These provisions show that the contractor was required to complete the work specified in the contract documents as a whole regardless of the actual figures inserted in the Bill of Quantities. That was his obligation under the contract. It is to my mind inconsistent to suggest that by faithfully fulfilling that obligation he was at the same time making a variation of it. 42. When it comes to choice of design increases the position is strengthened by paragraph 2.6.30 of the Particular Specification -
43. The details of the various types of lining are to be found in drawings 59 to 62. 44. Mr. Waller contended that the contract documents did not require the contractor "to supply an open ended rate for any number of combinations of lining which might have taken 50 years to complete". But with respect it seems to me that, so far as providing the actual linings was concerned, paragraph 2.6.30 did just that. It may have been, as my Lord has already observed, that neither the employer nor the contractor expected that so much of the most difficult type of lining would be required, but the obligation to provide it if necessary was there within the contract. All that the engineer subsequently did was to require the contractor to make good that obligation, not to vary it in any way. 45. A consideration of Clauses 73 to 75 leads me to no other conclusion. Clause 73(1) authorises the engineer to order what would, upon any view, be variations -
46. The clause is perhaps not too carefully worded, but in my view we cannot expect even from standard form contracts the meticulous drafting appropriate to a statute Moreover we understand that the basic form of contracts such as these has become traditional. I take then head (a) to refer simply to an actual piece or kind of work specifically set out in the contract, eg. a contract to build a house might include provision for an outside patio at the back, the patio to be of a certain size. That would seem to me to be aptly described as a "work included in the contract". If ground conditions subsequently compelled the patio to be increased or decreased in size the appropriate order could be given under head (a). On the other hand, if it were subsequently decided to have a patio in the front as well, that would be a "additional work" under head (e). It was not included in the contract but is of a character similar to work that was. I do not read any significance into the use of the slightly different wording in the definition section, i.e. "contemplated by the contract"... There will, of course, be instances where it is not easy to say under which head that particular variation would fall, e.g. the extension of a central heating-system to more rooms in the house than was originally planned, but in practice it would not really matter. 47. This view of Clause 73(1) seems consistent with Clause 74. Sub-clauses (2) and (3) of the latter deal with Additional and Extra Works, i.e. head (e). The remaining heads fall within Sub-clause (4). The purist might argue for the inclusion of the word "changes" together with "omissions or additions", but taken in a broad sense those words are sufficient to cover any kind of order that the engineer is there authorized to make. 48. Clause 75(2)(a) presents difficulties, for at first glance its presence seems to imply that automatic increases are variations, otherwise it would not be necessary to exclude them from the need of a written order. It is suggested by Mr. Graham, quoting from Mr. Duncan Wallace, "The International Civil Fngineering Contract" at page 98 -
49. I have eventually come to the conclusion that that must be so. It is perhaps after all not surprising. I would think that those responsible for standard form contracts such as these would have in mind to reduce the need of those using them to seek particular legal advice and to that extent the standard terms may well be explanatory as well as contractual. 50. It is against the same background that I approach Clause 13 –
51. The effect of these, said the judge below, is that "the billed quantities become the measure of the work included in the Contract Sum, so that any excesses over the billed quantities .......... can amount to variation". 52. With every respect to the learned judge I do not think Clause 13 goes that far. It is part of a process which enables the parties to arrive eventually at the final price to be paid, and explains how that is to be done when a Bill of Quantities has been included in the tender documents. Clause 14 explains how that is to be done when there is no bill. It could again perhaps have been better worded - in particular there seems no reason for the use of the words "quality and quantity" - yet I am not persuaded that the actual words chosen are in themselves alone sufficient to change the whole nature of the contract, which to my mind is clearly apparent from other parts of the documents. 53. For these reasons I would, for my part, allow the appeal with respect to question (C). I agree with my Lord that question (A) does not arise. I also agree with his conclusion on what appears to be the real issue raised by question (B), but if the question be taken literally an affirmative answer would accept that the choice of design increases were in fact variations. I would therefore dismiss the cross-appeal on that issue. Fuad, J.A.: 54. I have had the advantage of reading in draft the judgments just delivered, and the Vice-President's review of the facts, contractual documents, issues and submissions makesit possible to make my own observations quite brief. 55. The proper construction of building contractsis a notoriously fruitful source of litigation and the task of a court where, as in the present case, the competitive arguments are so nicely balanced, bristles with difficulties. These difficulties are not reduced by the fact that the parties have apparently adopted, as they are fully entitled to do, contractual arrangements drawn from different standard forms which do not necessarily have a common conceptual foundation. 56. Central to the controversy which still divides the parties is the question whether upon a true interpretation of the contractual documents read as a whole, in the light of the agreed facts, the Contractor who has received full payment for all the work done and materials supplied at the rates provided for in the Bill of Quantities is entitled to insist upon the exercise by the Engineer of the duty imposed upon him by clause 74(4) of the General Conditions to determine whether or not in his opinion the rate for any particular item has been rendered inapplicable so that a suitable rate should be agreed or determined As I understood the position at the conclusion of the able and helpful arguments addressed to us, it was conceded on behalf of the Contractor that no such claim could succeed unless he could bring himself within the ambit of clause 74. 57. In my view the intention of the parties, expressed by the words they used, that the items in the Bills of Quantities were to be regarded as mere estimates is made plain by certain express provisions in the agreement. There is para. 3 of the Preamble to the Bills of Quantities itself which states that the "quantities of works and materials in the Bill of quantities are approximate only and shall not be considered as limiting or extending the work to be done and the materials to be supplied...". Then we have clause 91 of the General Conditions which provides that "the quantities set out in the Bill of quantities are the estimated quantities of the Works but they are not to be taken as the actual and correct quantities of the Works to be executed ...". As regards payment, para. 3 of the Preamble to the Bills of Quantities stipulates that "All the work done and materials supplied ... will be measured and paid for at the rates quoted in the Bills of Quantities" and clause 92(1) of the General Conditions requires, the Engineer to "ascertain and determine by measurement the value in accordance with the contract of work done in accordance with the contract." I would remark in passing, that if an obligation to pay for the work done and materials supplied beyond that stated in the Bills of Quantities is not to be inferred from clause 91(1), the matter is put beyond argument by the sentence with which para. 3 of the Preamble concludes. 58. What then is the effect of Clause 13 of the General Conditions in the context of the whole agreement? The learned Judge thought that this was "the Achilles' heel of the government's case", and Mr. Waller urged upon us the construction accepted by the Judge that its effect is to define the works for the purpose of clarifying whether any departure from the quantities in the Bills shall be regarded as a variation. 59. With due respect to the arguments advanced before us, in my opinion, it is not helpful to attempt to categorise the agreement here as a "lump sum contract" or a "measurement and value contract", or to seek to attach to it any of the other labels used by the text-book writers to describe the different types of standard building contracts encountered. We have, of course, to examine and construe the actual words used and all that can safely be said as to the nature of the contract before us, is that as regards the issues that fall for determination, it contains certain features of, for example, the I.C.E. Conditions of Contract and of the R.I.B.A. Form. 60. Clause 13 of the General Conditions states that "When Bills of Quantities are included in the Tender documents the quality and quantity of the work included in the Contract Sum shall be deemed to be that which is set out in the Bills of Quantities". Clause 12(1) of the R.I.B.A. Form contains a parallel provision, but unlike, our contract, goes on to provide in sub-clause (2) Any error in description or in quantity in or omission of items from the Contract Bills ... shall be corrected and deemed to be a variation required by the Architect. ". 61. The I.C.E. Conditions omit any provision of the kind just mentioned and contain clauses similar to our clauses 91 (quantities are estimated quantities) and 92(l) (the Engineer is to measure the value of the work) - I.C.E. clauses, respectively, 55 and 56. 62. Whatever might be the effect of provisions drawn on the lines of Clauses 55 and 56 of the I.C.E. Conditions, or of Clause 12(1) and (2) of the R.I.B.A. Form, cannot be the same as the effect of a contractual arrangement which includes the salient features of both sets of provisions. Put quite simply, it seems clear to me that the duty of the court is to give effect, if it is at all possible, in the light of all the other relevant terms, to Clause 13 and to Clauses 91 and 92 of the General Conditions. It is, of course, not necessary to resort to Clause 6 (that the General Conditions prevail over other documents) or to the contra proferentem rule unless these provisions cannot be reconciled. 63. The learned Judge considered that "the effect of treating the quantity of the work included in the Contract Sum as being the same as that set out in the Bills of Quantities in my view is that the billed quantities become the measure of the work included in the Contract Sum, so that excesses over billed quantities, provided they are sufficiently substantial to make the existing rates unreasonable, can amount to a variation. " And later he says "Clause 13, on the view I take, makes the quantities in the Bills the measure of the work included in the Contract Sum; so there is no reason why an increase or decrease in the quantities of the Bills should not amount to a variation of the quantity of the works. " 64. With the utmost respect to the learned Judge, I consider that this was to read into clause 13 more than it says. Where the R.I.B.A. Form is used, the problem does not of course, arise due to the-existence of clause 12(2). But here we have-clause 13 without the equivalent of R.I.B.A. clause 12(2), and we also have para 3 of the Preamble to the Bill of Quantities, as well as clause 91 and 92(1). In my judgment, clause 13 means no more than that the work described in the Bills is the precise measure of the work included in the Contract Sum and in its effect infers that all other work not embraced by the Contract Sum must be paid for, an inference confirmed, in this particular contract, by para. 3 to the Preamble to the Bills and Clause 92 of the Conditions. The clause may indeed add little to the other contractual arrangements but this is not to say that it is meaningless. It is not, after all, unknown for a draftsman to include a provision in a contract that another reader might regard as otiose. 65. In my view the Contractor cannot rely on clause 13 as indicating that any excess over the billed quantities amounts to a variation for the purposes of clauses 73-75. 66. As regards the interpretation of clauses 73-75 of the General Conditions I will add little to what has been said by my Lords. Despite the differences in wording between the provisions before us and those considered by the Appellate Division of the Supreme Court of South Africa in Grinaker Construction (Tvl.)(Pty.) Ltd. v. Transraal Provincial Administration, [1982] 1 S.A.L.R. 78,I respectfully agree with and would follow that decision, preferring the reasoning to that adopted by Donaldson, J. (as he then was)"in Crosby v. Portland U.D.C., 5 B.L.R. 121. 67. Speaking in broad terms, what I might call "variation provisions" commonly feature in building contracts for no right to order variations can be implied. Where there is no express power to order them a contractor, of course, is not obliged to carry them out. And so, it seems to me that, where a contractor is obliged to do certain work, even though alternative methods of carrying out the work are prescribed by the express terms of the contract by which he has bound himself (whether upon the instruction of the engineer or not) the work actually done cannot by any fair use of language be said to be a variation, unless the contract otherwise provides. It would be wrong, I think, to equate obligations which arise only as the result of an order with the obligations undertaken by the contractor when the contract was entered into. 68. The matter might perhaps be tested in this way. Several provisions of the contractual arrangements are relevant to this point, but more specifically para. 2.6.,30 of the Particular Specification - which states that "whilst tunnel driving is in progress the Engineer will order the type of permanent lining to be subsequently installed ... The Contractor will be informed of the type of permanent lining required for a length of tunnel ... and separate items are provided in the Bills of Quantities for additional costs arising from this decision being changed after the length of tunnel has been excavated...". In the light of this provision, if clauses 73 - 75 had been omitted, could it have been successfully maintained that the Contractor's obligations were limited to the work and the supply of materials contained in the Bills of Quantities? I think not. For in such circumstances, to read clause 13 in the way urged upon us on behalf of the Contractor would, it seems to me, to give it the effect of stipulating that for the contract sum, the Contractor had undertaken only to complete certain precisely stated quantities of work. This is to fly in the face of para. 3 to the Preamble to the Bills of Quantities itself and clause 91 of the General Conditions. I think it would be quite unrealistic to suggest that at the time agreement was reached either party thought for one moment that as work progressed it might possibly turn out that the quantity of work undertaken had indeed been precisely estimated In the circumstances, an increase or decrease in quantities visa inevitable. 69. I have reached the conclusion that with the background of the agreed facts and upon a proper construction of the contractual documents, clauses 73-75 of the General Conditions have no application. The Contractor has not bought himself within the contemplation of the scheme for ordering and valuing variations envisaged by those clauses and cannot therefore rely on clause 74(4). I would here note that in the "measurement" provisions contained in the General Conditions we are required to interpret (clauses 91-93) there is nothing equivalent to clause 56 (2) of the I.C.E. Conditions, which expressly allows an increase or decrease of the rate to be considered by the Engineer when he is measuring the value of the work done. 70. For these reasons, in my judgment, each of the three questions raised by the preliminary points of law we have to decide should be answered in the negative, and the appeal should be allowed on issues A and C and the cross-appeal dismissed on issue B. 19th January 1984 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||