A recent Court of Session decision has rejected a contractor's claim for damages against a third party, where that third party had affected progress of the works. The court found that the contractor had no entitlement to claim damages, as in the circumstances it did not have rights in the land which were necessary for an entitlement to sue the third party.
Cruden Building & Renewables Limited was contracted by Glasgow Housing Association to carry out building works at a site in Toryglen, Glasgow. Scottish Water owned a sewer on a nearby site. During the course of the works, foul water escaped from the sewer onto the site. The escape of foul water continued for a period of up to 15 weeks and once this ceased, no activity could take place on site for a further period of four weeks, to allow the bacteria to die off. This caused a considerable delay to the works and substantial cost to Cruden Building.
In order to recover the costs incurred, Cruden Building raised an action for damages against Scottish Water. The matter before the court was then whether Cruden Building was entitled to sue Scottish Water to recover the losses it had suffered. The case did not discuss whether Cruden Building could have recovered from GHA.
Scottish Water argued that for Cruden Building to have entitlement to sue, they must either own the land, or have possession of it similar to that of an owner. Cruden Building's building contract confirmed that it had no right of occupation; no title or interest in the site; and had to allow GHA access to the site while it was carrying out the works. Scottish Water argued that in light of such provisions, Cruden Building's rights were not sufficient to provide it with an entitlement to sue.
Cruden Building argued that it did not require ownership or possessory rights, as it did not seek to recover loss as a result of damage to the site. Its claim was for loss as a consequence of the disturbance to the works. The disturbance caused by the escape of foul water was enough to provide an entitlement to sue.
The court did not agree with the distinction that Cruden Building sought to make. The court emphasised that underpinning the claim was damage to the site and all Cruden Building had was a contractual right to carry out construction works on the site. That was not enough, even though it meant that Cruden Building would be left with no remedy.
This case highlights that because of the contractual framework a party may ultimately be found to carry the risk for unexpected events which occur. For both contractors and employers, it is a useful reminder to carry out due diligence to understand the risks which may occur; consider any necessary insurance cover and ensure that the building contract includes provisions which appropriately manages and allocates that risk.