UK: Case Law Update - October 2011

ADJUDICATION

Costs of adjudication in Scotland

Profile Projects Ltd v Elmwood (Glasgow) Ltd [2011] BLM Vol. 28 No. 6 (Court of Session Outer House)

The Scottish courts have taken a different approach from the English decision of Yuanda v WW Gear (Gideon Scott Holland) in holding that a Tolent-style clause would have to do more than act as a 'discouragement' or 'disincentive' to adjudication by pre-allocating costs to the referring party, in order to be non-compliant with the HGCR Act. It would actually have to 'disable' a party from reference. Lord Menzies also took the view that non-compliance did not bring in the entire Scheme for Construction Contracts, just the provisions necessary to put right the non-compliance.

See now s.141 of Local Democracy Economic Development and Construction Act 2009 which inserts new provisions (s.108A) into the legislation regarding pre-allocation of costs.

Construction Newsletter July/August 2011
contains the following article:

Change is coming
by Chris Hoar, Foot Anstey (on the LDEDC Act).

See Lanes Group v Galliford Try under Keating Chambers Reported Cases on ability of party to discontinue reference and re-commence with a different adjudicator.

Waiver of jurisdiction and writing

Durham County Council v Jeremy Kendall [2011] BLR 425 TCC
The result of the case turned on the finding that there was a single binding contract evidenced in writing for the purposes of s.107 HGCR Act, rather than three separate agreements as the defendant argued.

See now, applying to contracts after 1 October, s.139 LDEDC Act 2009. which repeals s.107 on the requirements for writing.

There is also obiter discussion of waiver of jurisdictional objections, focusing on the distinction between 'specific' and 'general' reservations and particularly CPS Marine v Ringway. (Samuel Townend and Justin Mort).

ARBITRATION AND DISPUTE RESOLUTION

Global Arbitration Review 2011
Vol. 6 Issue 3
contains the following articles:

The 'chilling effect' of Jivraj
by Alison Ross and David Elward.

The rebirth of arbitration in central and eastern Europe
by Matthew Hodgson, Allen & Overy.

ICCA at 50
by Alison Ross (on the International Committee for Commercial Arbitration).

Dallah v Pakistan: vive la difference
by Patrick Heneghan and Jonathan Egerton-Peters
Skadden Arps Slate Meagher & Flom.

Arbitration, Sharia and the modern Middle East
by Paul Turner and Robert Karrar-Lewsley,
Al Tamimi & Co, Dubai.

Journal of International Arbitration Vol. 28 No. 4 August 2011
contains the following articles:

Language truth and arbitral accuracy
by Nicolas Ulmer, Budin et Associés, Geneva.

Who is afraid of Nottebohm? – reconciling the ICSID nationality requirement for natural persons with Nottebohm's 'Effective Nationality' test?
by Cornel Marian, Stockholm Arbitration and Litigation Centre.

Using an event study methodology to compute damages in international arbitration cases
by Rosa Abrantes-Metz, AFE Consulting, and Santiago Dellepiane, Compass Lexecon, New York.

Prospects of foreign arbitration institutions administering arbitration in China
by Fan Kun, Chinese University of Hong Kong.

Confidentially speaking: commercial arbitration in Canada's Open Courts
by Nicholas Pengelley.

The new French Law on International Arbitration
by Beatrice Tastellane, Paris Bar.

Clues to construing the new French Arbitration Law – an ICC perspective on procedural efficiency, good faith and independence
by Nadia Darwazeh, ICC, and Baptiste Rigaudeau.

Witness preparation: memory and story telling
by Jennifer Kirby, Paris.

Dallah: conflicting judgments from the UK Supreme Court and the Paris Court d'Appel
by Jacob Grierson, Jones Day, Paris and Mireille Taok, Reed Smith, Paris.

The International Construction Law Review Vol. 28 Part 4 October 2011
contains the following articles:

Enforcement of DAB decisions under the 1999 FIDIC Conditions of Contract: CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK
by Frederic Gillion, Fenwick Elliott.

Dispute adjudication in civil law countries – phantom or effective dispute resolution method?
by Götz-Sebastian Hök, Hök Stieglmeier & Kollegen, Berlin.

Arbitration in Ghana – the Alternative Dispute Resolution Act 2010
by Kwadwo Sarkodie, Mayer Brown, London.

Mealey's International Arbitration Report
contains the following articles:

International commercial arbitration in Brazil
by Richard Paciaroni, K&L Gates, Pittsburgh.

Jivraj v Hashwani: when will courts use their blue pencil?
by Sarah West and Ed Poulton, Baker & McKenzie.

Definition of investments protected by international treaties: an on-going hot debate
by Jean-Pierre Harb, Baker & McKenzie, Paris.

The impact of the Yukos case on the enforcement of arbitral awards: a race to the top?
by Thomas Yates and Richard Allen, Baker & McKenzie, London.

Arbitration Law Monthly Vol. 11 No. 8 September 2011
contains the following articles:

Arbitration in Hong Kong
on the new Hong Kong Arbitration Ordinance.

Mediation: Cross-border mediation
on the Cross-Border Mediation (EU Directive) Regulations 2011.

Interim Relief: contracting out of the court's powers
on B v S, concerning Scott v Avery clauses.

CONSTRUCTION AND ENGINEERING

CONTRACT DISPUTES LAW

Construction Law Vol. 22 Issue 8 October 2011
contains the following article:

Construction disputes on the rise
by Mike Allen, EC Harris.

See Adyard Abu Dhabi v SD Marine Services under Keating Chambers Reported Cases on the prevention principle and causation issues.

CONTRACT AND PROCUREMENT LAW

Terms as to fitness for purpose and quality not implied

Southwark London Borough Council v IBM UK Ltd [2011] 135 Con LR 136 TCC

In a contract for the supply of software and IT services, the court refused to imply terms as to fitness for purpose and satisfactory quality. This was because such terms would be contrary to express terms in the contract. This was not a sale of goods contract and therefore the Sale of Goods Act 1979 did not apply. Had it done so, exclusion of these implied terms would not have been unlawful under the Unfair Contract Terms Act, because such an exclusion would be reasonable in the circumstances.

Formation of contract and written document

Immingham Storage Co Ltd v Clear Plc [2011] 135 Con LR 224 Court of Appeal

The CA dismissed the defendants' appeal against the trial judge's decision that a contract existed, even though the defendants had never returned a signed document. The court made the point that clear language would be necessary to preserve conditional nature of communications. Here the reference to 'further confirmation' suggested that the document would only reinforce a legal position already in existence. The court also had regard to the fact that both parties had acted as if there were a contract, in giving effect to their apparent common intention.

Construction Law Vol. 22 Issue 8 October 2011
contains the following articles:

JCT on track with changes (on JCT 2011 changes)
by Michael Phipps, Thurston Consultants.

The trouble with weather
by David Bordoli, Driver
(on NEC 3 provisions for weather compensation events).

Insuring the professional risks of surveyors
By John D Wright, JD Risk Associates.

Europe keen on ADR
by Alexander Whyatt, Clyde & Co.

The International Construction Law Review Vol. 28 Part 4 October 2011
contains the following article:

EIC Contractors Guide to the MDB Harmonised Edition (June 2010) of the FIDIC Conditions of Contract for Construction April 2011

End of restraint of award

The Halo Trust v Secretary of State for International Development [2011] BLR 229 TCC

Halo sought to challenge the award of a contract for landmine clearance by the UK government, alleging breach of the Public Contracts Regulations 2006. The government sought to have the mandatory restraint of the award pending challenge lifted. Halo's challenge to the government's change in policy was held to be a matter for application for judicial review, not challenge to a contract award. It was also unsuccessful in claiming that marking was different as between framework agreement and specific contract award, since these were different exercises. A criticism of the winning tender also failed, as did criticisms of inconsistency in tender documentation. The government succeeded in getting the restraint of the award lifted on an application of the American Cyanamid injunction tests. Having failed the 'serious issue to be tried' test on the above grounds, the court held that it would also fail on the public policy element of the balance of convenience test and because damages would be an adequate remedy.

GENERAL AND PROFESSIONAL NEGLIGENCE

See Rust Consulting v PB Ltd under Keating Chambers Reported Cases on the interpretation of indemnities in an asset purchase agreement in favour of an insolvent geotechnical engineer.

See Mouchel v Van Oord under Keating Chambers Reported Cases on contribution between design and construction sub-contractors as joint tortfeasors.

Construction Newsletter July/August 2011
has the following article:

Industry talk
by Richard Pike, Stephenson Harwood, on Jones v Ruth
(nuisance and trespass in neighbouring construction dispute).

Construction Law Vol. 22 Issue 8 October 2011
contains the following articles:

Professional liability update
by Shona Frame, MacRoberts.

Duty of care uncertainty persists
by Simon Henderson and Laura Crowley, 4 Pump Court.

Honesty is the best policy
by Alison Groat, Pinsent Masons (on misrepresentation).

Limitation defence succeeds

Eagle v Redlime Ltd [2011] 136 Con LR 137 [2011] BLR 373 [2011] BLM Vol. 28 No. 6 (TCC)
Where the claimant had known of subsidence and cracking of the concrete base of a structure built by the defendants, this was sufficient to start time running for the purposes of the Limitation Act. The test was the 'knowledge required for bringing an action for damages in respect of the relevant damage'. The fact that the claimant later had better knowledge of more extensive damage was irrelevant. The Con LR commentary makes the point that the tortious claim might not have been allowable anyway, following the Court of Appeal's decision in Robinson v PE Jones, as an alternative to a barred contract claim.

PRACTICE AND PROCEDURE

Effect of co-defendant's inability to defend

Crown Aluminium Ltd v Northern & Western Insurance Co. Ltd [2011] BLR 355 TCC
As a result of failing to comply with an 'unless' order, one of two co-defendants of claims made under trade credit supply agreements became debarred from defending the claim. The other co-defendant applied for summary judgment against the claimant, arguing that because the claimant was bound to succeed against a defendant debarred from defending, the alternative claim failed. The court held that, while there might be cases where such a conclusion would be automatic, this was not one of them. It was necessary to consider the two claims together to avoid any risk of inconsistency of finding. The claim should therefore be heard at trial and the application to strike out failed.

The Commercial Litigation Journal No. 38 July/August 2011
contains the following articles:

Update: hot off the press
by Anna Pertoldi and Maura McIntosh, Herbert Smith
(on privilege, expert witnesses and Part 36 offers).

Procedure: the Jackson juggernaut – all aboard?
by Richard Marshall and Clare Arthurs, Manches.

Costs: cutting your cloth
by Rani Mina, Mayer Brown
(on costs budgets under the new Practice Direction).

Litigation: playing with fire-meeting suspicious claims head-on
by David Sawtell, 4 King's Bench Walk.

Contract: never trust a lawyer
by Sam Coulthard and Bryony Pawsey SNR Denton
(on negligent legal advice).

CPR: coming in from the cold
by Michael Ward and Nicola Bridge, S J Berwin
(on freezing orders).

Funding: take a chance:
by Paul Jonson, Pannone
(on submissions to the Jackson review).

Civil Procedure Rules Update

The 57m CPR Update introduces changes in a number of areas coming into force on (or before in some cases) 1st October 2011. Most are not relevant to commercial/construction practice, but they including the following:

  • clarification of meaning of 'more advantageous' and 'at least as advantageous' for purposes of Part 36 offers to settle and payments into court.
  • A cost management pilot has been introduced into the TCC by Practice Direction 51G, for monitoring and assessing effectiveness of costs budgeting.

Draft Judgments

The use, abuse and implications of the draft judgment procedure by Kirsty Hughes, Clare College, Cambridge, Law Quarterly Review Vol. 127 October 2011 p.565
The author notes that the historical justifications for providing counsel with draft judgments are to allow for corrections of typographical or factual errors under the slip rule and to prepare applications on costs. However, more recently, the procedure has been used for different purposes, such as requesting the removal of sensitive material from the judgment. The article considers the procedure, and the expansion of its usage. The conclusion is that restriction of the use of the procedure is desirable, as its expansion is contrary to its original purpose, undermines finality and equal treatment of the parties, may undermine judicial process, specifically appeals, and principles of open justice and fairness.

Rejection of offer to settle and mediate

Rolf v De Guerin [2011] BLR 221 CA
The Court of Appeal allowed an appeal by the client claimant, who had offered to accept £14,000 in settlement of her claim against her contractor and mediation to agree a settlement. He subsequently offered £14,000 but by then she had re-amended the claim to £21,000. In the trial, she received £2500 in damages, and an adverse costs order. The CA held that the discretion on costs should be exercised afresh, because the judge had erred in his appreciation of the significance of the Part 36 offer and the offer of mediation which was refused. The CA held that the judge had in effect penalised the party making the offer. The correct order was that there should be no order as to costs.

Allegation of judicial bias

Woodlands Oak Ltd v Conwell [2011] BLR 365 CA
The contractor, Woodlands, succeeded in part in its appeal against the judgment of a Southampton County Court Recorder. The defendants did not succeed in their allegation of bias against the judge on the ground that he had made preliminary observations expressing "firm views irrespective of any other evidence that is forthcoming". The CA regarded these as preliminary conclusions, because stated to be so, which the BLR editors regard as the main importance of the case. Woodlands succeeded in their appeal against a reduction of the 'cost plus 5%' to 'cost plus 1%' by the judge, since the CA said the contractual agreement should apply. Their other grounds of appeal on costs and interest failed.

KEATING CHAMBERS REPORTED CASES

Rust Consulting Ltd v PB Ltd [2011] 135 Con LR 32 43 TCC
The case concerned the interpretation of an asset purchase agreement by which PB took over Rust, a geotechnical engineering consultancy. Eagle, one of Rust's clients, took action against Rust in respect of alleged breach of its professional obligations and obtained a consent judgment. Eagle pressed the liquidators of Rust to enforce indemnities under the asset purchase agreement by which PB had assumed responsibility for Rust's liabilities. The court held that 'proceedings, claims and demands' meant actual liability of Rust; an indemnity against liability would not always be the same as an indemnity against judgments. To establish that PB was liable on the indemnity, it would be necessary to show that Rust was liable to Eagle and for how much.
David Thomas QC
Justin Mort

Mouchel Ltd v Van Oord (UK) Ltd [2011] 1353 Con LR 183 TCC
The case concerned contribution between joint tortfeasors who were both sub-contractors to the main contractor on a combined cycle power station. Mouchel's liability arose from its inadequate design of a protective system and Van Oord's from failure to install one. Mouchel's liability was assessed at 65% on the facts and Van Oord's at 35%. The decision applied the Civil Liability (Contribution) Act 1978 and the test in Royal Brompton Hospital v Hammond (No. 3). (Marcus Taverner QC)
Jonathan Selby

Lanes Group plc v Galliford Try [2011] BLM Vol. 28 No. 6 TCC [2011] BLR 438
The issue for the court was what happens legally when a party who institutes a reference to adjudication does not want, for good or bad reason, to go ahead with the nominated adjudicator. If it abandons that reference, can it go ahead with another reference for the same dispute or not? The main contractors, GTI, had served a Notice of Adjudication on sub-contractors Lanes and the ICE recommended an appointee, to whom Lanes objected. The ICE made a subsequent appointment, to whom GTI objected. The ICE then appointed a third adjudicator, although the second refused to resign. Lanes sought an injunction to prevent GTI continuing with its new reference, but were not successful, although the judge did not rule out the possibility of an injunction to prevent repeated refusals to proceed and recommencements, if they were an abuse of process. However, in this case, the claimants had abandoned the first reference and started another lawfully.
Piers Stansfield

Adyard Abu Dhabi v SD Marine Services [2011] BLR 384 Commercial Court
SDMS, the client, was held to be entitled to rescind its contract with the claimant, the Abu Dhabi shipyard, Adyard, for the construction of two vessels and to reclaim sums paid. Adyard's claim was based upon SDMS's alleged prevention of completion of the work, which would deny them the right to rescind under the contract. The court held that only an application of the prevention principle could enable Adyard to succeed. Perfectly legitimate actions could constitute prevention, but the principle would not apply if the contract provided for extensions of time for those actions. In any event, Adyard's case on causation was unsound on principle.
Adam Constable QC
Lucy Garrett

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.

This material is prepared for Chambers by our Director of Research and Professional Development, Professor Anthony Lavers (LL.B. M.Phil Ph.D. D.Litt MCI.Arb FRICS Barrister) Visiting Professor of Law, Oxford Brookes University.

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