UK: Construction, Property & Real Estate (Case Law Review – June 2006)

Last Updated: 27 June 2006


Construction Law Volume 17 Issue 4 May 2006

Courts say hands off adjudicators
by Steven Bate, Hammonds
On Carillion Construction v Devonport Royal Dockyard (Stephen Furst QC and Louise Randall) and AMEC v Secretary of State for Transport (Vivian Ramsey QC, Simon Hughes, John Marrin QC, Sarah Hannaford)

The ones that got away
by Stephen Carey, Campbell Hooper
On proposed changes to the HGCR Act.

Obviously unfair
by Lawrence Davies, Pinsent Masons on Carillion Construction v Devonport Royal Dockyard (Stephen Furst QC and Louise Randall) Quietfield v Vascroft (Matthew Holt and Abdul Jinadu) and Kier Regional v City & General (Adrian Williamson QC)

Award of costs: appeal allowed
John Roberts Architects Ltd v Parkcare Homes (No. 2) Ltd [2006] BLM Vol. 23 No. 5 May 2006 CA
Already reported in BLR. The CA reversed the TCC’s decision that an adjudicator had no power to award costs in the event of the adjudication being discontinued. The CA held that it would be very odd if the power to award costs only arose where there was a substantive contested decision. That would mean that either party, having behaved unmeritoriously in advancing claim or defence, could then avoid the consequences of the expense generated by throwing in their hand at the eleventh hour. Therefore under clause 9.2 of CE/99, which had been used to replace clause 29 in the CIC Model Adjudication Procedure 3rd edition used, the adjudicator could award costs "as part of what he had to decide".

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

See Captiva Estates v Rybarn under Keating Chambers Reported Cases on exclusion of development agreements from the HGCR Act’s adjudication Provisions.

See Kier Regional v City & General 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.


Arbitration under UAE law
Abu Dhabi Investment Co. v H Clarkson & Co Ltd [2006] All ER (D) 397
Where arbitration provisions in a shareholders’ agreement and a (shipping) joint venture agreement provided for reference to arbitration under UAE law proceedings were commenced by the claimants. Some of the defendants, who were not parties to the contract, brought Part 20 claims against other defendants. The Commercial Court, having heard evidence on UAE law, refused a stay to arbitration in Abu Dhabi. The arbitration agreement could not compel the parties to enter into arbitration in Abu Dhabi, under UAE law.

Requirements of Notice to Refer
Scrabster Harbour Trust v Mowlem plc
[2006] BLR 176 Court of Session Outer House
Mowlem was constructing a new breakwater quay for the client Trust as part of a new ferry terminal project. Mowlem commenced adjudication over deduction of liquidated damages and, having been largely unsuccessful, served a Notice of Arbitration on the Trust. The Trust challenged the validity of the Notice, but the court held that the Notice made it clear that Mowlem was dissatisfied with the adjudicator’s decision and wished to refer its subject matter to arbitration. There was no breach of the Scottish Arbitration Code 1999, which concerned the conduct of the arbitration, nor the Notice to Refer.

Arbitration: the Journal of the Chartered Institute of Arbitrators Vol.72 No.2 May 2006 contains the following articles

The prehistory of dispute resolution in England
by Derek Roebuck (University of London)

Arbitration and the English courts: progress and regress by Hew Dundas

Final and binding? Challenges under the Arbitration Act 1996, Section 69 by Camilla MacPherson and Chris Mainwaring-Taylor, Allen & Overy

The problem with legal privilege in international arbitration by George Burn and Zara Skelton, Denton Wilde Sapte

The Supreme Arbitrazh Court of the Russian Federation does not trust international arbitration by Boris Karabelniko

Stay of legal proceedings for arbitration, mediation and other ADR: Thames Valley Power v Total Gas & Power by Hew Dundas

Thunderbird v Mexico and the principle of legitimate expectations by Borzu Sabahi, Georgetown University

The enforcement of adjudicators awards under the Housing Grants Construction and Regeneration Act 1996 by Kenneth Salmon, Mace & Jones, Manchester

Chartered Institute of Arbitrators Guideline on Multi-Party Awards
The new Austrian Arbitration Law
by Gerold Zeiler, Schönherr Rechtsanwälte, Austria

Arbitration Law Monthly Vol.6 No.6 June/July 2006 contains the following articles:

Removal of an arbitrator on ASM Shipping of India v TTMI of England (alleged and actual bias and parties to the arbitration)

Error of law on Covington Marine Corp Xiamen Shipbuilding (meaning of question of law and applications for permission to appeal)

Service of arbitral proceedings on Bernuth Lines v High Seas Shipping (service by e-mail)

Control of foreign arbitrations on Weissfisch v Julius (restraining an arbitrator in a foreign jurisdiction)


Foot and Mouth clean-up
Ruttle Plant Hire Ltd v Secretary of State for the Environment Food and Rural Affairs [2006] 104 Con LR 110 TCC
This is factually very similar to JDM Accord v SOS, being concerned with payments under a government contract for cleaning-up farms during the foot and mouth epidemic. In Ruttle the signature of timesheets was also critical; they were held to create a presumption of entitlement to payment which could only be rebutted by clear evidence of non-entitlement provided by government. Ruttle also decided that the contract was a construction contract under the HGCR Act and that the payment provisions were authorised by ss.109 and 110 of HGCR Act.

More on refusal to mediate
Hickman v Blake Lapthorn [2006] All ER (D) 67 NLJ 3 March QBD
The claimant succeeded in a negligence action against his solicitors (one third of liability) and counsel (two thirds of liability). The solicitors had wished to compromise the action in response to mediation proposals by the claimant and sought to pass the majority of the defence costs (which were much greater than the claim) to counsel, who had refused to compromise and refused to mediate. The court held that the barrister had legitimately and reasonably refused to mediate and gave guidance on when such refusal will be allowed, including interesting observations on the cost and prospects of success of mediation and the party’s view of its chances of success in the litigation in assessing unreasonableness.

See Alfred McAlpine v Tilebox under Keating Chambers Reported Cases on liquidated damages/penalties.

Subject to contract and incorporation
Skanska Rasleigh Weatherfoil v Somerfield Store [2006] All ER (D) 269 TCC
Skanska claimed for work done during negotiation for a maintenance/minor works contract with Somerfield, under a letter expressed to be ‘subject to contract’. Somerfield argued that Skanska’s claim was out of time under the draft contract but the court held that this was not incorporated into the agreement for services, since it was the draft which was under negotiation and ‘subject to contract’.

Cash-flow and insolvency
Melville Dundas Ltd v George Wimpey Ltd [2006] BLR 164 Court of Session and [2006] BLM Vol. 23 No. 5 Inner House
The editors of the BLR suggest that, as a result of this decision, possibly being appealed to the House of Lords, substantial amendments may be necessary, not only to the Scottish Building Contract but to JCT and ICE as well. While the employer will almost always suffer a net loss in the event of determination for insolvency, it appears that interim payments becoming due prior to determination must be made without deduction unless an appropriate withholding notice has been given. The Inner House construed s.111 HGCR Act as concerned with cash-flow, but this can include cash-flow to the contractor’s bankers and sub-contractors and not merely to the contractor itself.

See SafewayStores v Interserve under Keating Chambers Reported Cases on restriction of liability under a sub-contract warranty.

Construction Law Vol. 17 Issue 4 May 2006 contains the following articles:

No substitute for professional advice
by Michael Phipps, Thurston Consultants on JCT Minor Works payment provisions.

The JCT 2005 range of sub-contract
by Neil Jones, Pinsent Masons

The new Fire Safety Order
by Michael Conroy Harris, Laytons

Damage to adjoining property
by John Wright, JD Risk Associates

Rolled up holiday pay ruled unlawful
by Rebecca Kettell, Shadbolt & Co.

See Safeway Stores v Interserve Project Services under Keating Chambers Reported Cases on restriction of liability under a sub-contract warranty.

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

See ERDC Group v Brunel University under Keating Chambers Reported Cases on a contractor’s entitlement to quantum meruit for work done under and after letters of appointment.

See P4 Ltd v Unite Integrated Solutions under Keating Chambers Reported Cases on delivery and disposition of goods in a conversion action and on summary judgment criteria.

Limitation of liability

Decoma UK Ltd v Haden Drysys International Ltd [2006] All ER (D) 55 CA

The claimant’s appeal against the enforcement by the TCC of a contractual liability cap was dismissed. The defendant was not relying on its own breach of contract to obtain a benefit, as the appellants contended, but on a binding contractual limitation of liability.

Note that Marcus Taverner QC appeared in this case in the TCC. The defendants did not appear and were not represented in the appeal.


Disability Discrimination
Roads v Central Trains Ltd [2006] 104 Con LR 62 CA
Already reported in Con LJ, this is an important first appeal decision on disability discrimination in the rail industry. The CA allowed an appeal by a wheelchair user against the first instance decision that it was not reasonable to require Central Trains to provide a taxi to take him from one platform to another at Thetford station in the absence of a viable route. The case was brought under ss.19 and 21 Disability Discrimination Act requiring service providers to take reasonable steps to remove or alter physical features or provide alternatives.

Dual vicarious liability
Viasystems (Tyneside) Ltd v (1) Thermal Transfer (Northern) Ltd (2) S&P Darwell Ltd (3) T Hall & C Day (T/A Cat Metalwork Services) [2005] EWCA Civ. 1151
D2 was a ducting subcontractor who employed D3 to provide fitters. The fitters supplied work under the supervision of a fitter contracted to D2. D3’s fitters negligently caused a flood. The question arose as to who was vicariously liable for this act. It was held that vicarious liability is determined by asking who was entitled to exercise control over the relevant act or operation of the fitter. The inquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it – who was entitled and obliged to give orders as to how the work should or should not be done. Entire and absolute control was not a necessary precondition of vicarious liability. Dual vicarious liability was legally possible and on the facts both D2 and D3 were vicariously liable for the fitter’s negligence.

Proportionate liability revisited by the Lords
Barker & Corus (UK) Plc [2006] 2 WLR 1027 House of Lords
This is a preliminary note of an important House of Lords decision which will receive further comment when the report has been considered fully. It can be regarded as a qualification of the approach to multiple causation in asbestos-related disease cases established in Fairchild v Glenhaven to the effect that material increase of risk of contracting disease was sufficient to establish the causal link. Corus allowed apportionment of liability between the defendants with the result that those surviving and solvent would not have to pick up liability for all the defendants.

See CFW Architects v Cowlin Construction under Keating Chambers Reported Cases on architects’ obligation to deliver designs on time and repudiation.


Limitation in contribution
AER Lingus plc v Gildacroft Ltd [2006] 2 All ER 290
The judgment or award referred to in the Limitation Act 1980 s.10(3) as setting the relevant date for the running of time against a tortfeasor who sought contribution under the Civil Liability (Contribution) Act 1978 was a judgment or award that ascertained the quantum, not merely the existence, of the tortfeasor’s liability. The point had in fact been left open by authority, George Wimpey & Co Ltd v British Overseas Airways Corporation (1955) AC 651 considered.

Knowledge for purpose of limitation
John Hedley Haward v Fawcetts (A Firm) [2006] UKHL 9
The requisite knowledge for the purposes of the Limitation Act 1980 s.14A(8)(a) was knowledge of the facts constituting the essence of the complaint of negligence. In the circumstances, the relevant date was not when the claimant first knew that he might have a claim for damages but the earlier date when he first knew enough to justify setting about investigating the possibility that the defendant’s advice was defective.

See Yorkshire Water Services v Taylor Woodrow under Keating Chambers Reported Cases on the possibility of appeal to the Court of Appeal from the TCC on alleged errors of fact and law.

See Bella Casa v Vinestone under Keating Chambers Reported Cases on the measure of damages for deprivation of use of a residential property.

Service by e-mail
Bernuth Lines Ltd v High Seas Shipping Ltd [2006] CILL 2343 Commercial Court
Service by e-mail was held to constitute good service in arbitration proceedings. Contrast this with litigation, where, under the CPR service by e-mail is only allowed under strictly controlled circumstances. The rationale is that arbitration is usually between commercial interests, where e-mail communication is common.

Internal staff costs

R & V Versicherung AG v Risk Insurance and Reinsurance [2006] CILL 2343 Commercial Court
In an insurance (tort) case, the court had to consider the extent to which costs could be claimed where internal staff of the claimants were diverted from normal work to investigation of the degree of damage. To be able to recover it has to be shown that there has been a significant disruption to business and that the staff had been deliberately diverted from their usual activities.

Registration of notice for lien
Donnelly (Philip) v Weybridge Construction [2006] BLR 158 TCC
The claimants had agreed to purchase apartments on long leases and paid deposits but refused to complete, because of complaints about standards of workmanship and forfeited their deposits, commencing proceedings alleging breach of contract. Before trial, the claimants registered notices of alleged liens over their deposits. The defendants were thus prevented from proceeding with a sale to other purchasers and applied to vacate the notices. The court applied a similar test to that for the discharge of an injunction; the balance of convenience overwhelmingly favoured the discharge of the notices, which had merely been registered to put pressure on the defendants as the trial of the claimants’ action approached. Delay to the trial date caused by unresponsiveness of the claimants was also a factor in exercising the discretion of the court.

Draft judgments
Gurney Consulting Engineers v Gleeds Heath & Safety Ltd [2006] Times Law Reports 24 April TCC
This concerns the publication of judgments. Where an action is compromised before a draft judgment has been issued, a court of first instance has no discretion to publish the draft. If it had, any discretion would have to be exercised against publication if either party objected to it. In addition, where judgment is reserved, the parties and their professional advisers have a duty to inform the court immediately of any development which may make it necessary for judgment to be delivered.

See Alfred McAlpine Capital Projects v SIAC Construction on whether a stay should be granted on joinder of a new party to allow pre-action protocol procedures.


CFW Architects v Cowlin Construction Ltd [2006] CILL 2335 TCC
Contractors Cowlin engaged architects CFW for design work under design and build contract for Defence Housing Executive to build houses for service personnel. A contract was agreed, although not signed, and held to incorporate SFA/99 and a payment schedule. CFW delivered drawings late and, when Cowlin did not pay argued that Cowlin had repudiated the agreement. The court held that a term should be implied obliging CFW to supply drawings in accordance with the payment schedule. Cowlin had not repudiated the agreement, but CFW had and Cowlin was entitled to damages.
Ian Pennicott QC

Yorkshire Water Services Ltd v Taylor Woodrow Construction Northern Ltd [2006] 104 Con LR 76 CA
Following earlier reported litigation on the significance of contractual performance tests on an allegedly defective sewage treatment works, the appellants sought to argue that the first instance judge’s decision was substantially wrong on fact and law. The Court of Appeal held that the appeal was simply not viable unless the claimant/appellant was allowed to re-open large parts of the judge’s findings. The burden on an appellant to obtain leave to appeal against a TCC judge (specifically) on findings of fact would be heavy, and heavier in complex cases. The application was refused.
Timothy Elliott QC
Gideon Scott Holland

Safeway Stores Ltd v Interserve Project Services Ltd [2006] CILL 2339 TCC
A design and build supermarket project for Safeways included a waterproofing sub-contract for Interserve. Under their warranty, they were not to have any greater liability to the contractor than the contractor would have to the client. The TCC (Ramsey J’s first reported TCC decision) held that this would prevent the client claiming for defective work under the warranty: the defendant’s liability to the client and its liability to the contractor was limited by rights of equitable set-off.
Philip Boulding QC
David Thomas QC

Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2006] 104 Con LR 1 CA
This is part of extensive litigation arising from the dockyard project, being an appeal on a number of matters, including the adjudicator’s duty to give reasons and his power to award interest. The CA dismissed the client’s appeal against the TCC decision. There is no free-standing power to award interest under clause 20(c) of the Scheme. However, in the circumstances, the client had not disputed the adjudicator’s power to award interest on moneys outstanding. The parties had therefore agreed that interest should come within the scope of the adjudication, conferring on the adjudicator a jurisdiction he would not otherwise have had.
Stephen Furst QC
Louise Randall

Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2006] 104 Con LR 39 TCC
The issue was whether the claimant contractor was entitled to a declaration that the liquidated damages provision under an amended JCT 1998 WCD contract was invalid as a penalty. In the result, it was held that the £45,000 per week was valid as a reasonable pre-estimate of likely loss. The case contains discussion of the principal penalty authorities.
Paul Darling QC

Bella Casa Ltd v Vinestone Ltd [2006] CILL 2344 TCC
The TCC had to consider the measure of damages in respect of deprivation of use of a residential building following allegedly defective design and construction work. The court held that such matters as service charges and utility bills might be recoverable in principle, but that general damages calculated by reference to interest on the balance of the purchase price could not be recovered as contrary to principle.
Finola O’Farrell QC
Justin Mort

Captiva Estates Ltd v Rybarn Ltd [2006] CILL 2333 TCC
An option agreement on a residential development site was held to be a development agreement within the meaning of the Construction Contracts Exclusion Order 1998 and thus excluded from the operation of the adjudication provisions of the HGCR Act. It therefore followed that the adjudicator had no jurisdiction and the adjudication was invalid.
Justin Mort

Kier Regional Ltd v City & General (Holborn) [2006] CILL 2353 TCC
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 that 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

P4 Ltd v Unite Integrated Solutions plc [2006] BLR 150 TCC
Supplier P4 sought damages against contractor Unite for alleged conversion of goods, a computer addressable emergency lighting system in university accommodation, supplied to Unite’s sub-contractor, which had become insolvent before P4 was paid. Unite sought summary judgment against P4 on the ground that the conversion claim had no real prospect of succeeding, but the court refused the application, principally because the factual and contractual issues were unsuitable for summary determination. The case is notable for discussion of delivery and disposition of goods under the Sale of Goods Act 1979 and Factors Act 1889.
Lucy Garrett

Alfred McAlpine Capital Projects Ltd v SIAC Construction [2006] BLR 139 TCC
The court had to consider the operation of the pre-action protocol in circumstances where the defendant sought to join a Part 20 defendant and the claimant sought to join that party as a defendant in the main proceedings. The question was whether a stay should be granted of both main and Part 20 proceedings to allow compliance with the pre-action protocol in relation to the new defendant. The court, rejecting the application for the stay, set out the relevant considerations for courts in exercising discretion in such cases.
Paul Darling QC
Simon Hargreaves

Capital Structures plc v Time & Tide Construction Ltd [2006] CILL 2345 TCC
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

ERDC Group Ltd v Brunel University [2006] CILL 2348 TCC
Formal execution of the contract documents being deferred until after planting permission was obtained, work proceeded under a series of letters of appointment and then continued after their expiry. The claimant’s contractor claimed entitlement on the basis of a quantum meruit for work done. The defendant denied that this should be assessed on a cost-plus basis and argued that defective work should be taken into account. The court rejected the defendant’s right to set off sums owing, but accepted that the quantum meruit should reflect any sub-standard work and an allowance for delay. The basis for the quantum meruit would be primarily reference to the rates and prices in the earlier work.
Simon Hargreaves

Shawton Engineering Ltd v DGP International Ltd [2006] BLM Vol 23 No 5 May 2006 CA
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

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. MCI.Arb MRICS Barrister) Visiting Professor of Law, Oxford Brookes University.

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