UK: News in Brief: Construction, Property & Real Estate

Last Updated: 12 October 2005
Article by Keating Chambers

Keating Chambers are pleased to announce that Vivian Ramsey QC has been appointed a Justice of the High Court with effect from the 1st November 2005. Vivian will be assigned to the Queen’s Bench Division so we expect to see him sitting in the Technology and Construction Court (TCC) before too long. His appointment is yet another boost for the TCC as it continues its renaissance under the stewardship of Mr Justice Jackson. The Court recently published its user’s guide which has addressed the issues raised by court users in recent years. The guide was developed in conjunction with TecBar (the Bar users committee) which is currently Chaired by Mr Paul Darling QC and its Solicitors’ equivalent Committee, TeCSA.

On his appointment to the Bench, Vivian Ramsey follows Sir Patrick Garland, Sir Anthony May and His Honour Judge Peter Coulson QC.

John Marrin QC has been elected to take over the reins as Head of Chambers with effect from 27th October. John was called to the Bar in 1974 and took Silk in 1990. He has at different times served as Deputy Head of Chambers and as Treasurer. He is a Bencher of the Inner Temple.

ADJUDICATION

Continuing entitlement to refer
Connex South Eastern Ltd v MJ Building Services Group [2005] 100 Con LR 16 CA
Already reported in BLR, this is the CA’s decision on the appeal from the TCC judgment on agreements in writing. The appeal was on the question of whether a settlement between the two parties to a multi-party dispute would have the effect of releasing one from liability to another party. The case also deals with the important issue of duration of the right to refer a dispute to adjudication within the meaning of the words ‘at any time’ in s.108(2)(a) HGCR Act. The CA was disposed to give this very wide meaning, even well after the alleged acceptance of a repudiation.

Adjudicator’s use of legal advisor
Costain Ltd v Strathclyde Builders Ltd
[2005] 100 Con LR 41 Court of Session (Outer House)
Adjudicators in Scots law are said to be under similar rules of judicial control to arbiters (arbitrators). While strict timetable rules have to be taken into account, they do not do away with the requirements of the rules of natural justice. Here the adjudicator’s failure to reveal the subject matter of his consultation with his legal adviser and the content of the advice raised the possibility of prejudice.

CIC Model Procedure
Dean & Dyball Construction Ltd v Kenneth Grubb Associates
[2005] 100 Con LR 92 TCC
The contract in this dispute provided for reference to adjudication under CIC Model Procedure. The first point was that the dispute, about liability, had crystallised at the point of reference to adjudication; it would not cease to have crystallised because of a revision of the quantum. Allegations that the adjudicator was in breach of natural justice by conducting separate interviews with the parties and their respective experts were rejected, since the CIC Procedure permitted this.

Interest powers
Interesting times by Lawrence Davies, Pinsent Masons
Construction Law Vol. 16 Issue 7 Aug/Sept 2005 p.32
Principally a consideration of Carillion Construction v Devonport Royal Dockyard which upholds a freestanding right for an adjudicator to award interest in a Scheme adjudication, without the need to express it in the contract.

See Carillion Construction v Devonport Royal Dockyard under Keating Chambers Reported Cases on natural justice and the power to award interest in adjudication.

See Palmac Contracting v Park Lane Estates under Keating Chambers Reported Cases on service by e-mail and under natural justice.

See Wimbledon Construction Co Ltd v Vago under Keating Chambers Reported Cases on economic factors in resisting enforcement.

Expiry of adjudicator’s jurisdiction
Ritchie Brothers (PWC) Ltd v David Philp (Commercials) [2005] BLR 384 Court of Session Inner House
Already reported in CILL, this is the result of the appeal by defenders David Philp against an enforcement order made against them. By a 2-1 majority, the Second Division of the Inner House allowed the appeal, holding that the adjudicator’s jurisdiction expired after 28 days, unless extended in accordance with paragraph 19(1) of the Scheme (The Scottish Scheme is the same as that of England and Wales on this point).

Note that the BLR Editors, like the CILL Editors, have some concerns about this decision. They see a conflict between the first instance authorities of Simons Construction v Aardvark and Barnes & Elliott v Taylor Woodrow.

Incorporation and Unfairness
Bryen & Langley Ltd v Boston [2005] CILL 2261 CA
The CA allowed the appeal from the TCC decision, holding that the JCT standard form of contract had, on the facts, been incorporated into the parties’ contract and that the adjudication provisions in the contract would not be unenforceable as contrary to the Unfair Terms in Consumer Contracts Regulations 1999.

ARBITRATION AND DISPUTE RESOLUTION

Construction Law Vol. 16 Issue 7 Aug/Sept 2005
contains the following articles:
ADR in construction disputes
by Tracey Wood and Claudine Smith, Hammonds
Drafting the disputes clauses
by Paul Newman, Hugh James
(both on Burchell v Bullard)
See X Ltd v Y Ltd under Keating Chambers Reported Cases on an attempted action by a substituted party.

International Arbitration Law Review Vol 8 Issue 4
August 2005
Contains the following articles:
Res judicata: recent developments in arbitration
by Mark Beeley and Hakeem Seriki, Vinson & Elkins

Towards a higher degree of party autonomy and transparency: the CIETAC introduces its 2005 new rules
by Wang Seng Chang and Lijun Cao, CIETAC
Insolvency and arbitration in English Law
By George Burn and Elizabeth Grubb, Denton Wilde Sapte
Most favoured nation treatment and dispute resolution under Bilateral Investment Treaties: a turning point?
By Stephen Fietta, Latham & Watkins, London
A tribunal by any other name: US discovery in aid of non-US arbitration
By Jane Wessel, Crowell & Moring, London

Arbitration Law Monthly Vol. 5 No. 8 September 2005
Contains the following articles:
The supportive power of the courts
(on urgent relief under Section 44 of the Arbitration Act 1996)
Anti-suit injunctions in arbitration cases
(on the effect of EC Regulation 44/2001)
Serious irregularity
(Reliance on matters not put to the arbitrators)

Refusal to Mediate
Burchell v Ballard [2005] BLR 330 CA
The Court of Appeal here considers the body of case law supporting the proposition that the courts will deploy their costs powers as a sanction against a party who has unreasonably refused to participate in an ADR process when offered the opportunity. Following a small residential building dispute, the claimant contractor’s offer to mediate was refused by the defendant clients. The contractor was the net winner after the defendant’s counter-claim was deducted. The CA allowed the contractor’s appeal against the Recorder’s costs order, holding that a proportion of costs on both claim and counter-claim could be awarded. Although the CA was very supportive of mediation, it did not propose to penalise the defendants further in costs for refusal to mediate, holding that the legal position had been less settled when this occurred and so refusal to mediate had not been unreasonable at the time.

Challenge to award
Lesotho Highlands Development Authority v Impregilo [2005] BLR 351 HL
Already noted in KC In Brief June 2005, this is a major decision of the House of Lords on judicial challenges to arbitral awards, reversing an unanimous Court of Appeal. Lord Steyn, giving the principal speech, referred to the far-reaching changes made by the Arbitration Act 1996 so the prospects of challenge and to the powers of arbitrators. In this case, being an ICC arbitration, challenge on a point of law was excluded. The allegation was that the arbitrators had exceeded their powers in the currency of the award and in the award of interest. The majority (Lord Phillips dissenting) held that there was no excess of jurisdiction by the arbitrators:

"the erroneous exercise of an available power cannot by itself amount to an excess of power. A mere error of law will not amount to an excess of power under section 68(2)(b)."

Challenge to Award
Claire and Co Ltd v Thames Water Utilities Ltd [2005] BLR 366 TCC
The claimant estate agency sought to challenge an arbitrator’s award in a dispute on compensation payable to it for damage to business under the Water Industry Act 1991, alleging serious irregularity. The claimant argued that the arbitrator’s refusal to accept an admission made by the defendant’s expert under cross-examination constituted a serious irregularity. The court held that the witness had not agreed to the proposition, but in any event an arbitrator will not be bound to accept admitted or even agreed evidence. The weight to be attached to each piece of evidence should be a matter for the arbitrator.

CONSTRUCTION AND ENGINEERING CONTRACT LAW

Fairness in Procurement
Pratt Contractors Ltd v Transit New Zealand
[2005] 100 Con LR 29 Privy Council
Already reported in BLR, this is an important Privy Council decision on the obligations of a Tender Evaluation Team in assessing tenders on behalf of the (state) client. The evaluation had taken account of the claimant contractor’s record and reputation for aggressive claimsmanship. The Privy Council upheld the New Zealand CA decision that the duty on the client to act fairly only meant that all tenderers had to be treated equally, not that they had to be given the same marks if their attributes were different.

Construction Law Vol. 16 Issue 7 Aug/Sept 2005
contains the following articles:
JCT rings in the new
by Michael Phipps, Thurston Consultants
and
JCT modernises its suite
by Neil Jones, Pinsent Masons
(both on the new versions of the JCT contracts)

See Bath and North East Somerset DC v Mowlem under Keating Chambers Reported Cases on liquidated damages and injunctions under a construction contract.

See Enertrag (UK) v Sea and Land Power and Energy under Keating Chambers Reported Cases on the scope of a turnkey contractor’s design responsibility.

GENERAL AND PROFESSIONAL NEGLIGENCE

Effect of negligence on fees
McLaren Murdoch & Hamilton Ltd
v Abercromby Motor Group
[2005] 100 Con LR 63 Court of Session Outer House

Previously reported in CILL in 2003, this decides what fees architects should receive, based upon a reasonable interpretation of the parties’ negotiation and the general commercial background, in circumstances where the architects were responsible for the negligent design of an underfloor heating system. The court had to deal with a potential ‘legal black hole’, in that it was argued that the loss from the negligence actually sustained was by another company in the same group as the defenders.

Construction Law Vol.16 Issue 7 Aug/Sept 2005
contains the following articles:
Assessing the developer’s true loss
by Ishaq Kayani, Gateley Wareing

(on damages for loss of use of capital)
Interpreting design wordings
by John D Wright, JD Risk Associates

Corporate culpability in the dock – again!
by Matthew Hardwick, Shadbolt & Co.

Lower duty to business client
Accident Assistance Ltd v Hammonds Suddards Edge [2005] PNLR 29 Ch.Div
The claimants (AA) operated a credit hire business affected by a number of court decisions on enforceability of credit hire agreements. Their action against the defendant solicitors failed. They had alleged that the solicitors failed to explain adequately counsel’s opinion. However, the court found it relevant that the claimants’ representative was ‘an experienced businessman and sophisticated client’ who knew the business well. This made it harder to show that there had been a failure to understand the legal position set out in counsel’s advice.

Contracts (Rights of Third Parties) Act
Laemthong International Lines v Artis [2005] 2 All ER (Comm) 167 CA
This is another shipping case applying the Contracts (Rights of Third Parties) Act 1999 on whether a stranger to a contract could enforce a term under it. The first such case was Nisshia Shipping v Cleaves which is cited. In the result, the owners were held to be able to enforce the receivers’ letter of indemnity as agents of the charterers under s.1 of the Act.

Rylands v Fletcher
The distinctiveness of Rylands v Fletcher by Donal Nolan, Worcester College, Oxford, Law Quarterly Review Vol 121 July 2005 421
The article examines the theory, originating in Cambridge Water v Eastern Countries Leather, that Rylands v Fletcher is just an offshoot of the tort of private nuisance. The author refutes this and also attacks the High Court of Australia’s assimilation of Rylands v Fletcher into ordinary principles of negligence. He argues that, following Transco v Stockport MBC in the House of Lords it still has to be treated separately, but that ultimately it is likely to have to be abolished, since the nuisance or negligence explanations constitute a fudge.

Negligent valuation
Preferred Mortgages Ltd v Countrywide Surveyors [2005] 31 EG 81 Ch. Div
The claimant mortgagees failed in their action for professional negligence against the defendant valuers. The claimants’ expert had devalued from a later valuation to obtain a ‘correct figure’ but this approach was rejected by the court as a ‘misuse of hindsight’. The defendants’ valuation fell within the 15% margin of error justified by the unusual nature of the property and the lack of comparable evidence.

Negligence and Nuisance
Mistry v Thakor [2005] CILL 2266 CA
Following injury to the claimant when cladding fell off a neighbouring building as he walked along a public highway, he sued the owners of the building, who issued Part 20 proceedings against the property managers and a previous tenant. The Court of Appeal upheld the judge’s findings on the liability of the owners on the basis of their imputed knowledge of the defects and upheld the 80% contribution against the property manager.

PRACTICE AND PROCEDURE

Choice of forum clause
British Sugar plc v Fratelli Babbini di Lionello Babbini
[2005] 100 Con LR 122 TCC
British Sugar purchased a pulp press from Babbini, who purchased the gearbox for it from another Italian company, BF. The gearbox failed and British Sugar’s action against both companies was settled by a consent order in the English courts. BF took the point that, because the contract between them and Babbini contained a choice of forum clause giving the court of Forli exclusive jurisdiction, the English court had no jurisdiction. Applying EU Regulation 44/2001 enacting the Brussels Convention, the TCC held that the Italian court had exclusive jurisdiction, and BF succeeded in taking the contribution claim out of the English courts.

The Commercial Litigation Journal No. 2 July/Aug 2005
Contains the following articles:
ADR: a useful tool for litigators
by Michael Lind, ADR Group.
New beginnings
by Gordon Wignall, No. 5 Chambers (on maintenance, champerty and litigation funding).
The end of ‘vituperative epithets’
by Neil Aitken and Eleanor Akenhead, CMS Cameron McKenna
(on development of the concept of gross negligence).

I’m not paying for that!
by David Stockill, No. 5 Chambers, Birmingham (on work undertaken where the contract fails).
Bribery or facilitation payment?
by Matthew Saunders, DLA Piper Rudnick Gray Cary
Take your pick
by Brian Raincock, Litigation Protection Ltd.
(on litigation funding).

Part 36 Offer
Trustees of Stokes Pension v Western Power Distribution CILL 2269 CA
Landowners claimed £780,000 for trespass from a utility company who offered £35,000 ‘without prejudice save as to costs’ but only paid £20,000 into court. The judge took no account of the offer in making his costs order, since the award of £25,600 had beaten the payment in. However, the CA upheld the defendant utility company’s appeal against the costs order. The judge should have taken the offer into account but had been correct in reducing costs because of the claimants’ exaggeration of their claim.

See McGlinn v Waltham Construction under Keating Chambers Reported Cases on recovery of costs at pre-action protocol stage of proceedings.

KEATING CHAMBERS REPORTED CASES

Enertrag (UK) Ltd v Sea and Land Power and Energy Ltd
[2005] 100 Con LR 146 TCC
The case concerned the obligations of a turnkey contractor engaged to fabricate and install a meteorological mast as part of a programme to develop off-shore wind-farms in the North Sea. Although weather had been a factor in difficulty of installation, the dominant cause of the failure to install the mast had been the contractor’s inadequate advice on sea-bed soil conditions.
Finola O’Farrell QC

Carillion Construction Ltd v Devonport Royal Dockyard
[2005] BLR 310 TCC
This case arose out of proceedings by the contractors to enforce an adjudication award in their favour, which were joined with the client’s application for a declaration that the decision was unenforceable. The adjudicator’s refusal to consider evidence he regarded as irrelevant was neither a breach of natural justice nor an excess of jurisdiction. Only in exceptional circumstances would a decision be regarded as unenforceable due to inadequacy of reasons. The Scheme provides (Clause 20(c)) for the award of interest, although it would not override an express contractual term dealing with interest. This is part of wider litigation first reported in BLR 2003.
Stephen Furst QC
Louise Randall

Palmac Contracting Ltd v Park Lane Estates Ltd
[2005] BLR 301 TCC
This will probably become a much-quoted case on the question of service by e-mail. An attempt was made to argue that there was no dispute because an application for payment under the contract had been sent by e-mail. The judge did not accept that this had any relevance to jurisdiction, although the dispute was not appropriate for enforcement by summary judgment in any event. There was no breach of the rules of natural justice.
Robert Evans

X Ltd v Y Ltd [2005] BLR 341 TCC
Already reported in TCLR, this considers whether a third party substituted as employer under a contract could bring a contribution claim against a contractor in respect of its breach of a separate contract related to the same work. The arbitral tribunal’s decision that it had no jurisdiction to hear the case was upheld when challenged under s.67 Arbitration Act.
Timothy Elliott QC

Bath and North East Somerset District Council v Mowlem plc [2005] 100 Con LR 1 CA
Already noted in KC in Brief March 2004, this is a consideration of whether a contractual provision for liquidated damages would prevent a client from relying on probable higher losses actually to be suffered, in making an application for an interlocutory injunction to restrain the contractor from refusing entrance to the site to replacement contractors. The project was the Heritage Spa Roman baths in Bath.
Timothy Elliott QC
Adam Constable

McGlinn v Waltham Contractors Ltd [2005] CILL 2264
This case concerns recoverability of costs. A defendant sought costs in respect of elements of a claim discontinued through the pre-action protocol process. Pre-action protocol costs were held to be, in principle, ‘incidental to’ subsequent proceedings for s.51 Supreme Court Act. However, unless the circumstances were exceptional and involved unreasonable conduct, such costs would not be recoverable where the issues were subsequently dropped.
Lucy Garrett

Note: see article by Timothy Elliott QC on this case in Building 12 August 2005 p.41.

Wimbledon Construction Co Ltd v Vago [2005] BLR 374 TCC
Already reported in CILL, this is a case on adjudication enforcement. Even if evidence of a successful party’s financial position indicated that it was probable that it would be unable to pay sums awarded at a substantive trial, that would not normally be sufficient to stay the execution of a summary judgment enforcing an adjudicator’s decision. Such evidence might, in principle, constitute special circumstances justifying a stay, but the purpose of adjudication, namely summary enforcement of an interim result, would normally prevail.
Simon Hughes

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

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.

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