UK: Case Law Update – Issue 6 (2010)

Last Updated: 4 January 2011
Article by Keating Chambers

ADJUDICATION

Reservation of Position on Jurisdiction

Aedifice Partnership Ltd v Ashwin Shah [2010] CILL 2905 TCC

In a dispute over professional fees which the claimant surveyors referred to adjudication, the respondent client submitted that there was no adjudication agreement and that the adjudicator had no jurisdiction. The adjudicator indicated that he thought that he had jurisdiction and the respondent asked for his reasons. In enforcement proceedings by the claimant, the respondent successfully argued that he had reserved his position on jurisdiction and that his request for reasons did not constitute an agreement that the adjudicator had the power to decide his own jurisdiction.

Apparent Bias Allegation Fails

Fileturn Ltd v Royal Garden Hotel Ltd [2010 BLM August/September [2010] CILL 2912 and [2010] 131 Con LR 118.

The defendant failed to prevent enforcement of the adjudicator's decision on the grounds of bias by the adjudicator. The allegation was based on a pre-existing relationship between him and the claimant's claim consultants, of which the adjudicator had been a director between 2001 and 2004. The court found on the evidence that the reasonably fair-minded and informed observer would not conclude that an involvement more than 5 years previously would create an apparent bias.

Nature of Adjudicator's Decision

Rok Building Ltd v Celtic Composting Systems Ltd (No. 1) [2010] 130 Con LR 61 TCC

The defendant main contractor, Celtic, failed in its argument that the adjudicator's decision was merely declaratory of the position between the parties which could be reflected in future certification and payment procedures. The court in the words of the Con LR Editors "roundly dismissed this contention". The court held that the adjudicator's decision was by its nature directory, not declaratory, thus requiring the defendant to make a payment, even though there had been no stated obligation to pay within a specified time.

Natural Justice and Slip Rule

Rok Building Ltd v Celtic Composting Systems Ltd ((No 2) [2010] 130 Con LR 74 TCC

In a second adjudication in the above project, Celtic tried to resist enforcement proceedings on the ground that the adjudicator had failed to hold a meeting to test the parties' evidence, allowing Rok to misrepresent the financial position, comprising a breach of natural justice. The court held that it was not seriously arguable that it was a breach of natural justice not to hold a meeting. Neither was the adjudicator wrong in refusing to use the slip rule to correct alleged 'manifest errors'.

See Cleveland Bridge v Whessoe-Volker Stevin under Keating Chambers Reported Cases on the interpretation of the s.105(2)(c) exception to the HGCR Act adjudication provisions and refusal of enforcement of whole decision where exception partly applied.

Adjudicator's Finding on Jurisdiction Not Binding

Pilon Ltd v Breyer Group plc [2010] BLR 452 and [2010] 130 Con LR 90 TCC.

The adjudicator held that he had no jurisdiction to hear a set-off defence which derived from batches 1-25 of the project when the dispute referred to arbitration referred to batches 26-62. He therefore did not consider it. The judge, dismissing Pilon's application for summary judgment, held that the parties had not made an express or implied agreement to be bound by the adjudicator's ruling on his own jurisdiction. The adjudicator had breached the rules of natural justice by failing to consider a defence submitted and his decision would not be enforced.

See Yuanda (UK) v WW Gear under Keating Chambers Reported Cases on disapproval of Tolent clauses under s108 HGCR Act.

See William Hare v Shepherd Construction under Keating Chambers Reported Cases on the insolvency exception to the pay when paid provisions of the HGCR Act.

ARBITRATION AND DISPUTE RESOLUTION

Global Arbitration Review 2010 Vol. 5 Issue 4
contains the articles:

South Africa – is it time?
by Alison Ross

Russia – you have an award, but now what?
by Victor Dumler, Egorov Puginsky Afanasiev, St. Petersburg

Journal of International Arbitration August 2010 Vol. 27 No. 4
contains the articles:

Pre-arbitral Urgent Relief: the new SCC Emergency Arbitrator Rules
by Patricia Shaughnessy

Too many forums for investment disputes?
ICSID illustrations of parallel proceedings and analysis

by Jamie Shookman

Is this a Great Leap Forward? A Comparative Review of the Investor-State Arbitration Clause in the ASEAN-China Investment Treaty: from BIT jurisprudential and practical perspectives
by Wei Shin, City University of Hong Kong

Challenge to arbitrators: where a counsel and an arbitrator share the same office – the Italian perspective
by Pietro Ferrario

Learned lawyers attest: it is advantageous to be right in (an Austrian) court?
by Barbara Helene Steindl, Brauneis Klauser Prändl, Vienna

Arbitration Law Monthly Vol. 10 No. 8 September 2010
contains the following:

Anti-suit injunctions: Conditions for grant
on Midgulf International v Groupe Chimique

Contractual time limits: extension of time
on SOS Corporacion Alimentaria v Inerco Trade

Serious irregularity: failure to deal with all issues
on Buyuk Camlica v Progress Bulk Carriers

The Commercial Litigation Journal No. 33 September/October 2010
contains the articles:

Settlement: what's in an offer?
by Matt McCahearty, MacFarlanes
(on Part 36 offers)

Product liability: the end of the decade
by Hugh Preston, Bedford Row

Jurisdiction: the litigation offside rule
by Andrew Horrocks and Rowena Lewis, Barlow Lyde & Gilbert
(on Brussels Convention and Lugano Convention)

Privilege: circumstantial evidence
by Caroline Hadfield and Edward Coulson, Davies Arnold Cooper

Arbitration: recession proof or another casualty of the global credit crunch?
by Sarah Walker, Boey Swee Siang and Luke Ryan, Bird & Bird
(on insolvency during arbitration)

Limitation: trust me
by Shantanu Majumdar, Radcliffe Chambers
(on limitation in relation to fiduciary duties)

Block exemption: competition law issues in commercial contracts
by Simon Dodd, Lawrence Graham

International Construction Law Review Vol. 27 Part 4 October 2010
contains the articles:

The availability of treaty arbitration in construction
by John Uff QC, Keating Chambers and Alexander Uff

An annotated commentary on the 2010 Revised IBA Rules of Evidence for International Arbitration
by Nathan O'Malley, Conway & Partners, Rotterdam

Arbitration Law Monthly Vol. 10 No. 10 November 2010
contains the articles:

Stay of judicial proceedings
on Billa v Nazir (refusal of stay of proceedings for arbitration).

Enforcement of arbitration awards
on HJ Heinz v EFL Inc. (failure to overturn Hungarian award for fraud).

Enforcement of arbitral awards: challenge to the award
on Continental Transfert Technique v Nigeria

Arbitrators: qualifications
on Jivraj v Hashwani (Court of Appeal reversal on specified religious background).

Arbitrability: insolvency provisions
on Petroprod v Larsen Oil and Gas in the Singapore High Court (dispute not arbitrable as raising public interest issues).

Arbitration: the Chartered Institute of Arbitrators Journal Vol 76 No 4 November 2010
contains the following articles in a special Ireland issue.

The (Irish) Arbitration Act 2010
by Nael Bunni

An arbitration in Dublin: some practical issues
by Arran Dowling-Hussey, Irish Bar.

The courts and Alternative Dispute Resolution
by Roderick Murphy, Irish High Court.

A view from the Bar: Arbitration in Ireland 2010
by Ercus Stewart, Irish Bar

Statutory adjudication for Ireland
by Anthony Hussey.

The role of Engineers Ireland in dispute resolution
by Ciaran Fahy

Arbitration or the Commercial Court? End-Game resolution of intellectual property disputes in Ireland
by James Bridgeman, Irish Bar.

Dispute resolution provisions in the Irish Public Works Contract
by Roy Sherlock

Is Alternative Dispute Resolution suitable for procurement disputes?
by Edward Quigg, Quigg Golden, Dublin.

Keeping sports out of the courts: the use of Alternative Dispute Resolution in the Irish courts
by Jack Anderson, Queen's University, Belfast.

Incorporation of arbitration clauses revisited
by Andrew Tweeddale, Corbett & Co. and Keren Tweeddale, South Bank University.

The proper law of an arbitration agreement
by Matthew Parish, Akin Gump, Strauss Hauer & Feld, Geneva.

The financial crisis: arbitration as a viable option for European financial institutions
by Susan Kratzsch, Thűmmel Schűitze, Stuggart.

Do Dispute Review Boards trump Dispute Adjudication Boards in creating more successful construction projects?
by Derek Griffiths

The 'reasonable man' in international arbitration
by James Hope, Advokatfirman Vinge, Stockholm.

CONSTRUCTION AND ENGINEERING CONTRACT DISPUTES LAW

Utmost Good Faith and Reasonable Endeavours

CPC Group v Qatari Diar Real Estate Investment Co. [2010] CILL 2908 Ch. Div
The Sale and Purchase Agreement on the Chelsea Barracks site contained obligations on Qatari Diar, as joint venture partners of CPC, to use "reasonable endeavours". The court was required to consider the meaning of the expression, when modified by "commercially prudent endeavours". A party need not subordinate its own financial interests to obtaining an objective in order to achieve that. The court thought it difficult to see how there could be a breach of the duty of good faith without showing bad faith.

Concurrent Liability and Collateral Warranty

How Engineering Services Ltd v Southern Insulation (Medway) Ltd [2010] BLM August/ September 2010
How had sub-sub-contracted pipework to Southern and brought a negligence claim against it for breach of duty in the way it was insulated, alleging a concurrent duty of care in tort. Southern sought to strike out the claim as having no reasonable prospect of showing a concurrent duty of care to protect How from economic loss. However, it was known that collateral warranties were routinely provided, even if it was not specifically known that How had provided them to a particular party. How could thus recover from Southern losses paid out under its liability and Southern's strike-out attempt failed.

Construction Law Vol. 21 Issue 8 October 2010
contains the following articles:

Equitable set-off without the headache
by David Friedman QC, 4 Pump Court

City Inn revisited
by Lindy Patterson, Dundas & Wilson

Experts' immunity from suit under threat
by Paul Scott, HJB Gateley Wareing

Insurers raise the bar
by John D. Wright, JD Risk Associates
(on limitation and the Latent Damage Act).

Keep it simple
by Edward Freeman, Clyde & Co
(on "without prejudice" negotiations).

Implication of Terms Refused

Chantry Estates (Southeast) Ltd v Anderson [2010] 130 Con LR 11 CA

The appellant vendors failed in their contention that a term should be implied into an option for the purchase of a development site preventing the respondent purchasers from extending the option by delaying the process of obtaining planning permission. The CA held that it was not necessary to imply such a term, even though it was arguably a bad deal.

Causation and Lost Profit

Aldgate Construction Co. Ltd v Unibar Plumbing and Heating Ltd [2010] 130 Con LR 190

This case concerns the amount of damages claim made by the developer against a contractor whose admitted breach of contract caused a fire at a house which was being renovated. The developer, Aldgate, succeeded in claiming lost profits in respect of developments which it would have carried out during the period when it was prevented from operating because of the fire. The Con LR editors note the judge's "robust treatment" of Unibar's attempt to argue a break in the chain of causation as a result of Aldgate's changed development strategy.

Common sense wins out
by Lindy Patterson, Dundas & Wilson (on City Inn v Shepherd Construction).
Note: now Lindy Patterson QC

Part 36 offers: some recent issues
by James Pratt, Pinsent Masons.

Unwritten rules
by David Owens, Clyde & Co.
(on contracts in writing).

CONTRACT AND PROCUREMENT LAW

Battle of Forms

GHSP Inc. v AB Electronics Ltd [2010] BLM August/September and CILL [2010] 2915 TCC
The case concerned a contract for motor vehicle parts, which had been found to be defective. The parties had exchanged their standard terms of contract but neither had been executed. The defendant wished to rely on an exclusion clause in its own standard terms purporting to exclude liability for consequential loss. The court held that neither set of standard terms had been incorporated and that the terms would be implied, specifically from the Sale of Goods Act.

Construction Newsletter September/ October 2010
contains the articles:

New EU Directive on the energy performance of buildings
by Noel Butcher, Stephenson Harwood

New developments in liquidated damages
by Chris Hoar, Foot Anstey

Construction Law Vol. 21 Issue 8 October 2010
contains the articles:

New way of showing changes needed
by Michael Phipps, Thurston Consultants (on JCT 2005 Revisions 1 and 2)

New procurement routes of little benefit
by Prof. Peter Hibberd, Joint Contracts Tribunal

Sub-contracting – risks and opportunities
by Zac Spyrou, Pinsent Masons

International Construction Law Review Vol. 27 Part 4 October 2010
contains the articles:

PPPs in Egypt
by Said Hanafi Khaled El Dardiry, Orascom

Termination for convenience clauses – a shield or a sword in times of economic downturn?
by Martin Hirst

Is it the correct time for an ASEAN Standard Form of Building and Construction Contract?
by Philip Chan and Asanga Gunawansa, National University of Singapore

On Demand Guarantees

Rainy Sky SA v Kookmin Bank [2010] 130 Con LR 19 CA

The Commercial Court decision was reversed by a majority of the Court of Appeal in this shipbuilding contract case. The defendant bank was held to be obliged to pay the claimants under the terms of an advance payment bond "on first written demand" and the first instance judge held that the bank could not defend the claim by reference to absence of breach of the underlying contract. However, the CA focussed on the wording "All such sums due to you under the Contract". The contractor had become subject to a 'debt work out procedure' but this did not offer the owner a remedy and so was not something for which the bank was liable under the bond. The Con LR Editors welcome this as a return to "a black letter legal approach to construction" while noting that it may not find favour with the Supreme Court, if Chartbrook v Persimmon was an indication.

Construction Law Vol 21 No 9 November 2010

contains the following articles:

Read properly and live happily ever after
by Michael Phipps, Thurston Consultants, (on the JCT Minor Works Contract)

Tolent clauses fetter removed
by Gurbinder Grewal, HBJ Gateley Wareing
(on Yuanda v WW Gear: Gideon Scott Holland).

A fresh breeze or choppy waters
by Vijay Bange, Trowers & Hamlins
(on replacement of British Standards by Eurocodes).

NEC 3: judicial scrutiny lies ahead
by Mike Barlow, MacRoberts.

The joint names jungle
by John D. Wright, TD Risk Associates
(on joint names insurance clauses).

GENERAL AND PROFESSIONAL NEGLIGENCE

Consequential Loss

Network Rail Infrastructure Ltd v Conarken Group Ltd [2010] BLM August September TCC
Following rail incidents caused by the defendants' lorry drivers, the claimant rail track company sued in negligence, trespass and nuisance. The court held that demonstrably consequential losses suffered by the claimant could include compensation, including loss of profit, payable to train operating companies by the claimants under contract, provided it was closely associated with the physical damage suffered and the repair work.

Economic Loss in Tort of Negligence

Linklaters Business Services v Sir Robert McAlpine Ltd [2010] 130 Con LR 111 TCC

The case concerns the possible liability of a subcontractor directly to the employer in respect of economic loss caused by negligence. Damage had occurred allegedly because of defective insulation of chilled water pipes. The Con LR editors note that there are 3 categories of situation where a duty of care might be alleged by an owner: i) where subcontractor's own subcontract work fails; ii) where subcontractor's work damages something outside the works and iii) where subcontractor's work damages another subcontractor's work in another part of the building. The third category, where there is little case law, is the basis of the argument in this case and explains its importance. In the result, the court decided that there was far too much uncertainty to allow summary judgment or a strike out application. It was apparent from that the 'complex structure' theory still has potential relevance in such cases.

PRACTICE AND PROCEDURE

In-House Lawyers Not Privileged

Akzo Nobel Chemicals v European Commission C-550/07 14 September 2010
The court followed the opinion of the Advocate General that legal advice from an in-house lawyer in competition law proceedings would not attract legal professional privilege nor any related protection.

Order for Sale

Packman Lucas Ltd v Mentmore Towers Ltd [2010] BLR 465 TCC

Although the court was not persuaded that a sale of a large and expensive property should never be ordered to pay a comparatively modest judgment debt, it deferred making an order for sale because a sale was said to be imminent. It warned that the order might be made if the sale fell through.

Equitable Set-Off

Geldof Metaal Constructie v Simon Carves Ltd [2010] BLR 401 and [2010] 130 Con LR 37 CA

The Court of Appeal allowed the appeal by Simon Carves, the main contractor, against the TCC's decision in favour of Geldof, the sub-contract supplier. Simon Carves had been held not to be entitled to set-off against sums owed to Geldof under the supply contract an unliquidated but provisionally quantified sum for damages for repudiation of the installation contract. The CA provided useful clarification of the test to be applied in such cases. The Con LR editors describe the 2 elements of the test as "the requirement for a close connection between the claim and cross claim" and "the functional requirement that the court should be satisfied that it would be unjust to enforce the claim without taking into account the cross-claim". Geldof had themselves linked the two contracts by insisting that the supply contract invoices be paid before they would return to the installation work, so it would be unjust to enforce payment without taking into account the cross-claim.

KEATING CHAMBERS REPORTED CASES

William Hare Ltd v Shepherd Construction Ltd [2010] Con LR 1 CA

The Court of Appeal dismissed the appeal from the TCC in deciding that a pay when paid clause could not be brought within the insolvency exception, because the contract had not been updated to reflect the change in the statutory definition of insolvency. The Con LR editors note that the CA held that it was "not open to Shepherd to argue that there was a lack of clarity in a provision that it had drafted which relieved it from liability". The onus is upon the party seeking to rely on its own clause to get it right.
Stephen Furst QC
Alexander Nissen QC
Krista Lee

Yuanda (UK) Co. Ltd v WW Gear Construction Ltd [2010] BLR 435 and [2010] 130 Con LR 133 TCC

The adjudication provisions under a trade contract on a luxury London hotel project were an amended version of the TecSA Rules, making Yuanda liable for all costs in the adjudication, whatever the outcome. This was held to be not unreasonable for UCTA purposes nor void for uncertainty, but it did fail to comply with the requirements of s.108 HGCR Act and so would be replaced by the Scheme. Bridgeway v Tolent clauses were disapproved. On the Late Payment of Commercial Debts (Interest) Act, 0.5% above base would be replaced by 8% above the reference rate.
Gideon Scott Holland

Cleveland Bridge (UK) Ltd v Whessoe-Volker Stevin JV [2010] BLR 415 TCC

Cleveland Bridge was engaged as contractor by the Joint Venture for works on a LNG terminal at Milford Haven. Cleveland Bridge, the claimant, issued an adjudication notice when their invoice was not paid. The claimant sought to enforce the adjudicator's decision in its favour, but the JV resisted summary judgment. The JV's case was that a significant part of the work came under the exception in section 105(2(c)(ii) of the HGCR Act, namely "assembly, installation or demolition" of plant on a site where "the primary activity is ... the production, transmission, processing or bulk storage .,.. of ...gas". Following the approach in North Midlands v Lenjes (Stephen Furst QC), the court construed the provision narrowly, meaning that part of the works was excluded, although part included. The adjudicator's decision had covered disputes over both included and excluded works. The judge therefore refused to enforce the whole decision, since it could not be dissected.
Adrian Williamson QC
Lucy Garrett

For further information on how our members can assist you, please contact:

Paul Cooklin
Director of Clerking
pcooklin@keatingchambers.com

or

Nick M Child
Senior Clerk
nchild@keatingchambers.com

Tel: +44 (0)20 7544 2600
DDI: +44 (0)20 7544 2619
Fax: +44 (0)20 7544 2700

The articles and papers published by Keating Chambers are for the purpose of raising general awareness of issues and stimulating discussion. The contents must not be relied upon or applied in any given situation. There is no substitute for taking appropriate professional advice.

For further information on how our members can assist you, please contact the Senior Clerks, John Munton and Nick Child, in the first instance, on +44 (0) 20 7544 2600. They and their teams of Clerks will be pleased to advise you on the member of Keating Chambers appropriate to your requirements.

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