Construction, Property & Real Estate (Case Law Review – April 2006)

ADJUDICATION

The authors, in their regular Construction Act Review slot, consider the (five) reported cases in which late delivery of decisions by adjudicators has been considered. The distinction between making a late decision and communicating it late is observed: the authors blame the lack of clarity in the decisions on lack of clarity in the Act.

Proper responding parties to adjudication
Michael John Construction Ltd v Golledge [2006] BLM Vol.23 No.3 p.5

This concerns a construction contract concluded between a contractor and an unincorporated club. The contract was signed by trustees of the club. The contractor referred payment problems to adjudication and obtained awards in its favour. The defendant trustees resisted enforcement on the ground that the adjudicator had no jurisdiction to bind the trustees, since, under the club’s constitution, the proper responding parties were each and every club member and that the second reference comprised two disputes. The court rejected the defendant’s arguments: the club’s constitution was irrelevant as between the contracting parties and it would be contrary to the purpose of adjudication if simple disputes were required to be separated into individual components.

The court emphasised that, generally, courts should be slow to characterise adjudicators’ procedures as contrary to the rules of natural justice. However, here, exceptionally, there was evidence of breach of natural justice by the adjudicator in failing to give one party the opportunity to deal with their opponents’ expansion of their case from that pleaded, so that the adjudicator was basing his decision on matters on which there had been no argument.

See Midland Expressway v Carillion (No. 2) under Keating Chambers Reported Cases on pay when paid clauses in PFI contracts.

See Devonport Royal Dockyard v Carillion Construction under Keating Chambers Reported Cases on the adjudicators’ power to award interest and the duty to give reasons.

See Kier Regional v City & General (Holborn) under Keating Chambers Reported Cases on the effect of disregard of expert evidence by adjudicator.

See Capital Structures v Time & Tide Construction under Keating Chambers Reported Cases on the refusal of enforcement of an adjudication decision under a contract allegedly void for duress.

In a maintenance contract between the Cameroon State airline and South African Airways, a dispute about alleged bribery inducing the formation of the contracts was referred to arbitration in London. The majority of the tribunal had adopted a particular view of quantification for the purposes of calculating repayment. The Employer applied to set aside the award on the grounds of serious irregularity under s.68 Arbitration Act 1996. The court set aside the award; it was not necessary to show that the outcome of remitting the award would even probably be different, but it is necessary to show that the applicant has been unfairly deprived of the opportunity to present its case. The majority of the tribunal had departed without warning from the way the case on quantification was presented and this created a real risk of substantial injustice to the employer who had not been given a chance to address the way the majority were thinking.

International Arbitration Law Review Vol 9 Issue 1 Feb 2006
contains the following articles:

China Arbitration Law v UNCITRAL Model Law
by Weng Sheng Chang, CIETAC and Sarah Hilmer, ACICA.

Human Rights: a speed bump for arbitral procedures? An exploration of safeguards in the acceleration of justice.
by Thomas Schultz, University of Cambridge

Substantive or procedural: an arbitration perspective
by Hakeem Seriki, Vinson & Elkins, London.

Arbitration Law Monthly Vol. 6 No 3 March 2006
contains the following articles:

Judicial support for arbitral proceedings
on Tajik Aluminium Plant v Hydro Aluminium (witness summonses)

Serious irregularity
on Sinclair v Woods of Winchester (procedural and substantive aspects of section 68

Stay of judicial proceedings
on Ahad and Ahmed v Uddin (loss of the right to seek a stay)

Jurisdiction
on Bakwin and Erie International Trading Co v Sothebys (determining the jurisdiction of arbitrators)

Error of Law
on Surefire Systems v Guardian ECL, (Adam Constable) (the grant of permission to appeal)

Mediation
on Burchell v Ballard, Wethered Estate v Davis and Thames Valley Power v Total Gas and Power (judicial support for mediation).

See Surefire Systems Ltd v Guardian ECL under Keating Chambers Reported Cases on whether alleged errors by the arbitrator involved a question of law for the purposes of s.69 Arbitration Act.

Asian Dispute Review January 2006
contains the following articles:

Latest developments in arbitration in Malaysia and Brunei
by Colin Ong, Brunei

Arbitration under the ICC and the JCAA – a comparison between the ICC Rules and the JCAA Rules
by Melanie Ries, Bosch Corp, Tokyo

The 2002 Thai Arbitration Act may not change much
by Thavisak Na Ta Kuathung & Craig Arndt, Kanung & Partners, Bangkok

Interim measures of protection in international arbitration proceedings: towards a new paradigm?
by David Howell, Fulbright & Jaworski, London

Practical issues to consider in relation to enforcing and resisting enforcement of international arbitration awards
by Julian Cohen, Masons, Hong Kong

Managing cultural differences in on-line dispute resolution
by Sharanya Rao, Singapore

Mediation in Australia: history, policy and application
by Peter Megens, Mallesons Stephen Jaques, Melbourne

Judicial review of tunnel toll arbitration
by Andrew Aglionby and Catherine Mun, Baker & McKenzie, Hong Kong

The court has to consider whether the effect of a letter of intent was to incorporate the JCT form of contract and specifically its arbitration agreement, for the purposes of deciding whether declarations should be granted to the claimant employer that the arbitration proceedings were a nullity under s.72 Arbitration Act 1996 or to the contractor that the claimant was debarred from participating in the arbitration.

The article concentrates on the way the JCT Major Project Form 2003 deals with time and with loss and expense. There is fairly detailed treatment of clause 9 (commencement and completion), Clause 11 (taking over parts of the project), Clause 12 (extensions of time), Clause 13 (acceleration), Clause 14 (bonus) and Clause 21 (loss and/or expense). The author finds the extension of time provisions "conservative" and the absence of programming requirements notable. There is a table comparing events entitling the contractor to an extension of time under the JCT With Contractor’s Design, Design and Build and Major Project Form respectively.

This is an updated version of the paper which won the 2003 SCL Hudson Prize, dealing with changes in unfair contract terms law in the context of construction. He tracks the now well-known adjudication cases Picardi v Cuniberti, (Simon Hughes and Richard Harding), Lovell Projects v Legg, (Piers Stansfield), Westminster Building Co v Beckingham, (Simon Hughes and Gaynor Chambers) and Bryen & Langley v Boston. The author includes tables comparing the factual backgrounds of the four cases and also comparing UCTA as amended and the Unfair Terms in Consumer Contracts Regulations. He notes the arrival of the Unfair Contract Terms Bill 2005.

CILL has chosen to report this South Australian decision because it usefully reviews the position where contracts provide for notices and other procedural steps in the bringing of delay and disruption claims. It was argued that the contract in question contained a clause providing an exclusive remedy, but the court held that it did not exclude the sub-contractor’s entitlement to claim for general damages for breach of contract. The requirement of notice could operate as a condition precedent to the bringing of a claim.

See Scheldebouw v St James Homes under Keating Chambers Reported Cases on a Construction Manager’s duty of fairness in contract administration.

See Shawton Engineering v DGP International under Keating Chambers Reported Cases on grounds for termination for delay in performance.

The Court of Appeal allowed the Trust’s appeal against a finding of liability under the Occupiers’ Liability Act 1984 towards a child trespasser who had suffered brain injuries in a fall on a Trust building and subsequently committed offences allegedly due to a personality change. The Court of Appeal held that the fire escape from which the child had fallen was not itself dangerous, within the meaning of s.1(1) of the Act.

The Commercial Litigation Journal No 5 Jan/Feb 2006
contains the following articles:

Electronic disclosure: a practical guide
by Philippa Bennett, Piper Rudnick Gray Cary

Arbitration costs: who pays what?
by Michael Reynolds, Davies Lavery

Mediation: getting the right result
by Hilton Meruis, SJ Berwin

Misrepresentation: signed, sealed … but misrepresented
by Paul Friedman and Shakir Anverally, Clyde & Co.

Fraud: heads in the sand
by Andrew Howell and Dorothy Herman, Barlow Lyde & Gilbert

Insolvency: circumventing the liquidator
by Alexander Stewart, Hogarth Chambers

Experimental litigation training: the hands-on approach
by Fiona Cunningham, Nottingham Law School.

The TCC dismissed Northumbrian Water’s application for pre-action disclosure of documents relating to tunnelling work by BT, who were suing Northumbrian Water for damage to BT service tunnels allegedly caused by their excavations. The TCC Protocol only deals with disclosure, not pre-action disclosure, so the tests were the four in CPR 31.16(3):

1. respondent likely to be party in subsequent proceedings
2. applicant likely to be party to those proceedings
3. standard disclosure would apply to the documents if proceedings had already started
4. pre-action disclosure was desirable to dispose of the matter without proceedings, fairly or economically.

The BLR commentary notes that this judgment of HH J Coulson follows the decision of the same judge on a similar issue in Briggs & Forrester Electrical v Governors of Southfield School for Girls (Simon Hargreaves)

This concerns the criteria for indemnity costs for unreasonable conduct. Contractor Wates joined its architect HGP, following a roof collapse at a Waitrose retail outlet built by Wates under a design and build contract. Wates settled with Waitrose but its insurer insisted on proceeding against HGP under subrogation rights. At trial, Wates opened by withdrawing the claim and offering to pay costs. HGP attacked the conduct of the litigation against it, when the claim was obviously doomed, especially on the basis of the experts’ joint statement. In the circumstances, the court awarded indemnity costs. HGP had earlier threatened to claim on an indemnity basis if the proceedings were discontinued.

Conduct must be unreasonable to justify an award of indemnity costs, although it need not involve morally blameworthy conduct. Exceptionally, refusal to mediate might justify indemnity costs, although not in this case. The decision to defend had been wrong and misguided but no worse; it was arguable and not lacking in good faith. The application for indemnity costs was refused.

Where a series of adjudications between claimant sub-contractor and defendant contractor were initiated, the defendant tried to resist enforcement of the decision of the second adjudication by maintaining that it could be set off against the third award, which had been issued during the enforcement proceedings. The TCC rejected this argument: under ss.108(3) and 111of the HGCR Act and the CIC Model Adjudication Procedure adopted, defendant was under an obligation to pay the amount of the second award and summary judgment was entered.

This concerns the interpretation of a contract for a paint-spraying system. The issue was whether the party in breach of contract in failing to complete on time and to specification could rely on a contract clause capping its liability. The claimant sought to argue that the defendant contractor would be profiting from its own wrong if it was allowed to do so. The court rejected this argument; it had been clearly agreed that the defendant’s liability would be limited to 5% of contract price and the nature and extent of the breaches of contract were irrelevant.
Marcus Taverner QC

This is the costs hearing of the substantive trial noted in this section, concerning an attempt to avoid the operation of a contractual liability cap. The defendant had agreed to the claimant accepting out of time a payment into court of £350,000, but did not agree with the claimant’s proposals as to costs. The claimant argued that it should receive all of its costs on preliminary issues, claiming that it was the successful party until it had failed to beat the payment in. The court did not accept this contention; it would not ignore the clear result of the only substantive hearing, which was victory for the defendant.
Marcus Taverner QC

Both architects and mechanical and electrical engineers were held liable to the claimant owners in respect of design defects to the doors of a leisure/ retail centre which permitted serious cold draughts to enter the units. The defendant engineers settled without admitting liability and pursued a Part 20 claim against the architects. The TCC, interpreting s.2 of the Civil Liability (Contribution) Act 1978, held that ‘responsibility’ meant more than causal responsibility and includes ‘blameworthiness’. Acts of omission which are not causative of loss, may nevertheless be taken into account in assessing contribution under the Act, although they should be given less weight. This finding was upheld by the Court of Appeal. The architects, who had believed the engineers to be entirely responsible for internal environment, were allocated a 40% liability contribution.
Justin Mort

This case arose from a design sub-sub-contract relating to a process plant at Sellafield for handling nuclear waste. The issue arose as to the circumstances in which a contracting party could lawfully terminate a contract for delay in performance where the obligation was to complete within a reasonable time. The appellant sub-contractor was unsuccessful in the appeal.
David Thomas QC
Adam Constable

This is part of extensive litigation arising from the dockyard redevelopment project, being an appeal on the adjudicator’s powers to award interest. The Court of Appeal dismissed the client’s appeal against the TCC decision. There is no free-standing power to award interest under cl.20(c) of the Scheme. However, in the circumstances, the client had not disputed the power of the adjudicator to award interest on moneys outstanding. The parties had therefore agreed that interest should come within the scope of the adjudication, conferring on him a jurisdiction he would not otherwise have had.
Stephen Furst QC
Louise Randall

The TCC held that the client could not itself replace its construction manager in the administration of trade contracts for cladding on the Grosvenor Waterside development. The court considered that this would be inconsistent with a decision maker’s obligation of impartiality, fairness and honesty and could only be achieved by express contractual provision.

Note that Jackson J was here obliged to consider issues, albeit on different facts, left over from Costain v Bechtel (David Thomas QC), in which he also presided.
Simon Hughes

This was an attempt to obtain leave to challenge an award under s.69 of the Arbitration Act. Surefire was a trade contractor for the design and installation of a fire and voice alarm system in the County Hall building in London and Guardian a cable installation sub-contractor who claimed loss and expense. Surefire attempted to challenge the award sums where the contractual payment mechanism had not been used. The court held that neither of these issues involved a question of law for the purposes of s.69.
Adam Constable

This is the so called Tiger Tails case, deriving its nickname from white lines on the Birmingham Northern Relief Road (the M6 Toll Road). The court held (amongst a number of other points) that provisions in a building contract for payment on entitlement, were contrary to s.113 HGCR Act as being pay-when-paid clauses. Since this is a provision commonly used in PFI projects, back to back with the concession agreement (which is excluded from the HGCR Act by the Construction Contracts (England and Wales) Exclusion Order 1998), the implications for the industry are considerable.
Nerys Jefford

The adjudicator’s decision to disregard expert evidence submitted on behalf of the defendant as irrelevant could not render the adjudication award unenforceable. There was no breach of the rules of natural justice and no failure to consider relevant material. If the adjudicator had been wrong in deciding the evidence was irrelevant, this was the kind of error inherently possible under the adjudication system, not a ground for refusal of enforcement by summary judgment.
Adrian Williamson QC

The adjudication provisions in a contract would be lost if, as alleged here, the contract itself, a settlement agreement, was void for economic duress. If the effect was that there was no valid contract, the adjudication provision had become void, so the adjudicator would have no jurisdiction to hear disputes, including the question as to whether there had been economic duress. Accordingly, it would not be appropriate to grant summary judgment for enforcement of the decision.
Simon Hargreaves