Construction litigation and arbitration very much boils down to one essential question: Who foots the bill? And in this article, we deal with the question in the context of inaccurate soil reports which would translate to much difficulty in construction as well as substantial costs for additional foundational works, etc.
In Bacal Construction v Northampton Development Corporation, the contractors successfully argued that foundation designs were prepared on the assumption that the soil report was accurate, therefore the accuracy of the soil report was an implied term or warranty of the employer. Hence, the additional costs arising from such inaccuracy, being a breach of implied term or warranty, entitled the contractor to compensation by way of damages.
However, a contrary outcome was seen in the case of Co-operative Insurance Society v Henry Boot. In this case, the employer commissioned a third party to undertake a subsoil survey. During excavation work by the contractor, water and soil flooded into the sub-basement excavations. The contractor alleged that the problem stemmed from the inaccuracy of the ground water levels shown in the subsoil survey. The subsoil survey was issued to the contractor as part of the tender documents, and the contractor’s drawings expressly stated that it was based upon the survey report.
However, the court considered the survey report did not form part of the contract documents. Instead, the court looked at the express words in the contract itself which states that the contractor is deemed to have inspected and examined the site and satisfied himself as to the nature of the site including the ground and subsoil before submitting the tender. On the strength of this clause, the contractor was liable for all damages arising from the inaccurate survey report commissioned by the employer!
Hence, whenever employers disclaim the accuracy of reports included in the tender documents, it would seem that the buck stops with the contractor. In Malaysia, we do not have any equivalent to the Unfair Contract Terms Act that would prevent such a practice, as it seems patently unfair for the contractor to be held responsible for inaccuracies in reports commissioned and supplied by the employer itself.
Of course, the contractor arguably could maintain a case in negligence against the party who prepared the inaccurate report.
Kheng Hoe Advocates
Construction Litigation and Arbitration Lawyers
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