UK: 2012 Construction Case Law Summary (January – June)

Last Updated: 2 August 2012
Article by Suzanne Reeves

Following on from our case law summary of 2011, the first half of 2012 has also seen a number of important decisions made in the Courts which may affect our clients and contacts in the property and construction sectors. A selection of these cases is set out below:

Claims consultants and legal professional privilege:

Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 649

This case is a reminder of the scope of legal professional privilege. The claimant in this case was a building contractor who had been engaged to construct a house for one of the defendants. The defendant had engaged a claims consultant (Knowles) for "contractual and adjudication advice". The defendant claimed that the majority of the Knowles documentation was privileged and did not disclose it. The contractor applied for an order requiring disclosure of these documents and the Court agreed holding that legal professional privilege did not apply. The Judge gave weight to the fact that Knowles was not retained to provide legal advice and had not held itself out as a firm of solicitors or barristers. It was immaterial that the people providing the advice had trained at the Bar and that the defendant honestly believed that it was engaging Knowles to provide legal advice. It is therefore very important that parties are clear as to the services they are providing to avoid any surprises as to what documentation could subsequently be subject to disclosure.

Quantity Surveyor's duty to obtain a bond:

Sweett (UK) Ltd v Michael Wight Homes Ltd [2012] EW Misc 3 (CC)

The QS was obliged by its appointment to "prepare contract documentation and arrange for such documents to be executed by the parties thereto". The contractor became insolvent before providing the performance bond in favour of the employer. The court rejected the employer's argument that the QS was under an absolute obligation to procure the bond from the contractor. The QS was subject to the implied test of reasonable skill and care and had satisfied its duty in these circumstances (as he had chased the contractor for this and advised the employer of the importance of the bond). If you wish to imply an absolute obligation on another party to procure something, very clear wording should be used.

Professionals' duty to review previous work:

Shepherd Construction Ltd v Pinsent Masons LLP [2012] EWHC 43

Shepherd argued in this case that their solicitors were under an ongoing duty to review the suitability of clauses in standard sub-contracts that had been drafted by the solicitors some time ago, but which were now ineffective due to a change in the law and left Shepherd facing claims from third parties. The Court did not agree, finding that on the facts there was no general retainer to review and revise previous work stating "there is something commercially and professionally worrying if professional people are to be held responsible for reviewing all previous advice or indeed services provided". Without a specific retainer such a duty to review previous work will not exist which will be good news to insurers and professionals alike.

Fire damage and insurance:

United Marine Aggregates Ltd v G.M.Welding & Engineering Ltd & Anor [2012] EWHC 779

The claimant (UMA) had engaged the defendant (GM) to carry out works at its plant which included welding. A fire occurred as a result of these hot works. Court found that GM was not liable to UMA for this fire as on the facts GM had acted with reasonable skill and care when carrying out the works. However, it was held that had GM been liable, their claim for an indemnity from their insurers would have failed as they had breached one of the conditions of their insurance in respect of hot works, reminding of the importance of complying with insurers' requirements.

Settlement agreements:

Point West London Ltd v Mivan Ltd [2012] EWHC 1223

The case concerned an agreement the contractor and developer had made in respect of sums to be paid to the contractor. The Court had to decide whether the agreement had also released the contractor from liability for defects to a penthouse which were still not resolved. On the facts the Court held the contractor was released from liability. It is important to be certain of, and clear in the terms of any agreement, what the effect of any settlement will be.

Good faith in commercial contracts:

Compass Group UK and Ireland Ltd (trading as Medirest) v Mid Essex Hospital Services NHS Trust [2012] EWHC 781

The contract obliged the parties to a long term facilities agreement to "co-operate with each other in good faith". The Trust in this case had the right to terminate Medirest's engagement because Medirest had exceeded the number of permitted "service failure points", but the key question was whether Medirest also had the right to terminate owing to a breach of the obligation to act in good faith. The Court held that it was; the Trust had breached a material obligation to act in good faith (having prepared "patently absurd", "cavalier", "indefensible" calculations of service credits under the contract).

E-Disclosure practices:

West Africa Gas Pipeline Co Ltd v Willbros Global Holdings Inc [2012] EWHC 396

Willbros had provided a guarantee in relation to a contract between West Africa and its contractors. West Africa terminated the contract and completed the project using different contractors, seeking payment from Willbros for additional costs incurred. During e-disclosure a number of problems occurred including duplication of documents, inconsistent redaction, inadequate collection and preservation of documents, and errors by outsourced reviewers. Willbros was awarded damages to compensate them for increased work of its solicitors and litigation support providers. The Court ordered that the damages awarded to Willbros applied in any event, regardless of the outcome of the case. It is important to ensure that during litigation e-disclosure systems and any outsourcing used are used appropriately as the courts will not be sympathetic to errors caused by inadequate practices.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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