UK: Construction, Property & Real Estate (Case Law Review, Issue 6, 2007)

Last Updated: 30 October 2007
Article by Keating Chambers

Nerys Jefford has been elected as Chairman of the Society of Construction Law

ADJUDICATION

See HG Construction v Ashwell Homes under Keating Chambers Reported Cases on the binding effect of an earlier adjudication on a dispute referred to a subsequent adjudication.

Injunctions

Equitable remedies in connection with adjudication: Injunctions by Peter Sheridan and Dominic Helps, Shadbolts, Construction Law Journal 2007 Vol. 23 No. 4 p. 292
The regular Construction Act Review concentrates on the use of injunctions in conjunction with adjudication in three main situations: enforcement of an adjudicator’s decision, freezing orders and restraint of continuation of an invalid adjudication. Particular attention is given to Workplace Technologies v E. Squared (Paul Darling QC). The authors doubt whether an injunction should be granted to restrain an invalid adjudication once a declaration of its invalidity has been granted, on the ground that there is no interest to be protected. The correct course would be rather to resist enforcement, they conclude.

Payment provisions in the Lords

Melville Dundas Ltd v George Wimpey UK Ltd [2002] CILL June 2469 House of Lords
Already reported in WLR. This is the first decision by the House of Lords on the payment provisions of the HGCR Act. By a majority of 3-2, the appeal of the defendant employer succeeded; the contractor had previously been successful in the Court of Session. The contractor had gone into receivership, entitling the employer to terminate the (JCT 1998) contract, but the contractor claimed interim payments due in the absence of a withholding notice. It had been conceded in the lower courts that interim payments were not contractually payable after determination and the House of Lords held that this was not inconsistent with the payment provisions of the Act. There was a requirement that the contractor should be entitled to payment by instalments, but this did not mean that that entitlement had to be maintained after the contractor had become insolvent, giving a benefit to the contractor’s creditors against the employer, which was never intended by the Act.

ARBITRATION AND DISPUTE RESOLUTION

Certainty and privilege in mediation

Brown v Rice CILL June 2007 2467 Ch. Div.
Following a failed property transaction, the parties and their representatives met for mediation. Offers were made by both sides, one rejected, the other, accepted. The court had to decide whether the whole matter was the subject of mediation privilege and so not open for decision by the court. The idea of special mediation privilege was rejected, at least on these facts. On the facts, the agreement reached was insufficiently certain to be binding and did not comply with Clause 1.4 of the mediation agreement, which required any settlement to be in writing and signed by both sides.

Stay of execution on overpayment refused

G. Middleton Ltd v Berry Creek Overseas Development Ltd (2007) TCLR 4 TCC
The defendant client sought a stay of execution on arbitration awards in favour of its contractor, arguing that the arbitrator’s basis of calculation had been incorrect and that it was entitled to a separate refund. The court, applying Wimbledon Construction v Vago (Simon Hughes) refused the stay, holding that the arbitrator’s methods could not be analysed on an application for a stay and that an alleged entitlement to a refund should not ground a stay of enforcement on the balance of convenience.

Exclusion of right to s.69 challenge

Essex County Council v Premier Recycling Ltd [2007] BLR 233 TCC
In the context of a contract for management of amenity and recycling centres, the use of the words ‘final and binding’ in an arbitration agreement was not sufficient to exclude the possibility of a challenge under s.69 Arbitration Act 1996. Clear words would be necessary to do so, indicating an intention by the parties to exclude a process of challenge in the courts; the words did not clearly show this intention, because of the context.

Arbitration under non-existent contract

Arbitration under a contract alleged not to exist by Alan Berg, Law Quarterly Review Vol. 123 July 2007 p. 352
The article, an extended case note, concerns the Court of Appeal’s decision in Fiona Trust & Holding Corp. v Privalov, in which the court had to consider whether, where contracts had been rescinded on discovery of bribery, disputes concerning the contracts and their rescission could be determined under the arbitration clause. The owners had sought injunctions in the Commercial Court restraining arbitration initiated by the charterers (a shipping case), arguing that the arbitration clause was not wide enough to cover rescission of the contract for bribery and that the arbitration clause had gone with the rescission. The Court of Appeal rejected both arguments and discharged the stay of the arbitration.

See also the report of the case in 2007 Construction Law Journal Vol. 23 No. 4 p. 307.

Global Arbitration Review Vol. 2 Issue 2 contains the following articles:

Power surge
by David Samuels
(on the increase in claims under the Energy Charter Treaty).

Gateways to the Energy Charter Treaty
by Stephen Jagusch and Anthony Sinclair, Allen & Overy.

Calculating damages under the ECT: the early awards
by Kaj Hobér, Mannheimer Swartling.

Strategic choices under the ECT
by David Herlihy and Bruce Macaulay, Skadden Arps Slate Meagher & Flom.

Comparing ICSID and ad hoc treaty arbitration
by Barry Appleton, Appleton & Associates.

Anti-suit relief – an imperfect world
by Paul Mitchard, Skadden Arps Slate Meagher & Flom.

Arbitration International Vol. 23 No. 2 2007 contains the following articles:

Transcript of the 16th Annual Workshop of the Institute for Transnational Arbitration
containing sessions on:

  • Constitution of the tribunal
  • The preliminary hearing
  • Applications for interim measures
  • The hearing on the merits

Reflections of an international arbitrator
by Gerald Aksen

New Rules of the Arbitration Institute of the Stockholm Chamber of Commerce
by Kaj Hobér and William McKechnie, Mannheimer Swartling, Stockholm

‘The claim is time barred’: the proper limitation regime for international sales contracts in international commercial arbitration
by Ingeborg Schwenzer and Simon Manner, University of Basle

Articles 16 and 18 of the PRC Arbitration Law: the Great Wall of China for foreign arbitration institutions
by Jingzhou Tao and Clarisse von Wunschheim, DLA Piper, Beijing

Transparency, third party participation and access to documents in international investment arbitration
by Christina Knahr, University of Vienna

Arbitration International Vol. 24 No. 3 2007 contains the following articles:

Factors affecting the choice of dispute resolution methods in Japan (with an emphasis on arbitration)
by I-Ching Tseng, Nagoya University

The Compétence-Compétence principle revisited
by Francisco Gonzalez de Cossio, Universidad Ibefoamericana, Mexico City

Enforcement of foreign arbitral awards in the Republic of Moldova
by Alexander Svetlicinii, Free International University of Moldova

International Investment law and the host state’s power to handle economic crises
by Stephan Schill

Two nebulous ICSID features: the notion of investment and the scope of annulment control
by Walid ben Hamida, University of Evry Val-d’Essonne and Sciences, Po, Paris

Final offer arbitration from a civil law perspective
by Christian Borris, Freshfields Bruckhaus Deringer, Cologne

Commencement of arbitral proceedings and unsigned requests for arbitration
by Stephan Wilkse and Christien Gack, Gleiss Lutz, Stuttgart

Limits to party autonomy in arbitral procedure
by Michael Pryles, Clayton Utz

Arbitrator’s own expertise

JD Wetherspoon plc v Jay Mar Estates [2007] All ER (D) 86 TCC
The claimant tenants sought to challenge an award on a rent review, claiming that the arbitrator was in error in disregarding submissions and relying on his own methods of assessment without giving the parties opportunities for further comment on them. The court held that the arbitrator was entitled to trust his own professional expertise and that nothing in his approach could be said to constitute serious irregularity within s.68 of the Arbitration Act 1996.

CONSTRUCTION AND ENGINEERING CONTRACT LAW

Legal effect of negotiations

Pre-contractual negotiations: recent trends in the interpretation of contracts
by Shy Jackson, Construction Law Journal (2007) Vol. 3 No. 4 p. 268
The article concentrates on case law on the interpretation of contracts in the light of the factual context in which they were framed, specifically the pre-contractual negotiations between the parties. The main cases reviewed are Investors Compensation Scheme v West Bromwich Building Society and Chartbrook v Persimmon Homes. Conclusions are offered relating to particular meanings ascribed to words, unusual combinations of words and defined terms.

See Multiplex Constructions v Honeywell Control Systems under Keating Chambers Reported Cases on the prevention principle and notices as conditions precedent to grant of extension of time.

Effect of breach of contract on insurance

Board of Trustees of the Tate Gallery v Duffy Construction Ltd [2007] BLR 216 TCC
Following flood damage caused by Duffy’s sub-contractor to the works and to the Gallery’s building, the court held that this was a specified peril within the meaning of the insurance policy. Duffy could not claim indemnity from insurers, because it was itself in breach of the contract and the insurance policy. It was not a co-insured with respect to the escape of the water.

The inclusive price principle

The inclusive price principle – a tribute to IN Duncan Wallace by HH Judge Thornton QC
Construction Law Journal 2007 Vol. 23 No. 4 p. 276
This article, based on Judge Thornton’s February 2007 paper to SCL in London, comprises a biographical account of Ian Duncan Wallace and his work, notably Hudson, and a special focus on the inclusive price principle, which the author attributes to INDW. The principle covers the scope of the work which the contractor is obliged to undertake within the agreed contractual price. Judge Thornton summarises the four main propositions of law which he derives from Hudson on the subject.

Certification

The discretion of the certifier: a drafting tool best left in the tool shed?

by Anders Axelson, Nielsen-Wurster, Melbourne,
Construction Law Journal 2007 Vol. 23 No. 4 p. 253
This article is based on an essay in the 2006 Hudson Prize competition which received a Commendation. The author seeks to identify and define how much discretion is conferred on the certifier by construction contracts and how it is exercised. It also considers related issues such as the prevention principle and the superintendent’s role in triggering its operation.

Breach and repair cost

Tomlinson v Wilson [2007] All ER (D) 17 TCC
Following the deterioration of the relationship between the claimant client and the defendant contractor, the claimant forbade the defendant to enter the property, pending production of a schedule of remedial works to be undertaken. The client insisted that no further payment would be made until the contractor had completed the remedial work and sued for breach of contract. The contractor counter-claimed for breach. While the case was part-heard, the claimant demolished the building (a residential extension) and claimed the cost of rebuilding it as damages.

The court held that the claimant’s refusal to allow the defendant onto the site and refusal to continue stage payments constituted breach of contract by the claimant. It had been a high-risk strategy by the claimant to demolish the building, since this proved to be unnecessarily more expensive than repair. In those circumstances, it would only be able to recover the cost of repair at best.

Construction Law Vol.18 Issue 5 June 2007 contains the following articles:

Terms get curiouser and curiouser
by Michael Phipps, Thurston Consultants (on JCT 2005).

Services disputes in PFI contracts
by Simon Lewis, Dickinson Dees.

Costs of tendering
by Steven Carey, Campbell Hooper.

Disallowing costs under the NEC form of contract
by Laura Waterhouse, Pinsent Masons.

Liability insurance – cover for costs
by John Wright, JD Risk Associates.

See Reinwood v L Brown & Sons under Keating Chambers Reported Cases on deduction of liquidated damages after cancellation of certificate of non-completion.

See Zurich Insurance v Gearcross under Keating Chambers Reported Cases on the requirements for a building defects insurer to claim for remedial work against a developer responsible for defective construction.

See John F Hunt Demolition & Asme Engineering under Keating Chambers Unreported Cases on the JCT 98 insurance provisions and settlements under Biggins v Permanite.

GENERAL AND PROFESSIONAL NEGLIGENCE

Negligent advice on value

Earl of Malmesbury v Strutt & Parker [2007] 20 EG 296
The claimant landowner brought an action for professional negligence against the defendant surveyor, alleging that the defendant had negotiated leases of the claimant’s land for airport car parking at an undervalue. The court held that the claimant was entitled to damages on the basis of the price the surveyor would have been likely to have obtained had the negotiations been undertaken as they should have been. The claimant’s loss had been of a lost chance of the rent which should have been obtained based on the estimated turnover of the land if used as a car park.

PRACTICE AND PROCEDURE

Claiming management time

Bridge UK.Com Ltd v Abbey Pynford Plc CILL June 2007 2465 TCC
Following the Court of Appeal’s decision in Aerospace Publishing v Thames Water Utilities, this is another confirmation that in principle lost management time should be recoverable as damages, where a member of staff has been diverted from productive work to deal with the consequences of the defendant’s breaches of duty. Specifically, Abbey had delayed in constructing adequate foundations for Bridge’s printing press. The assessment of the wasted staff time, although not based on records, but estimate, was allowable, subject to a 20% discount for the inherent uncertainty of the process.

Security for costs

Newman v Wenden Properties Ltd CILL June 2007 2474 TCC
The claimant’s small claim for unpaid fees against the defendant property company was met with a £690,000 counter-claim for professional negligence. The claimant’s application for security of costs was met by the company with the argument that there was no prospect of it obtaining funds. The court rejected this defence; it was only without funds because that was how the owners had set it up. It should be assumed that they would provide the security for costs which could accordingly be ordered.

Third party costs order refused

Jackson v Thakrar (No. 4) [2004] BLR 241 TCC
A claimant (the trustee in bankruptcy) of Thakrar, (a defendant) sought costs against a non-party. Thakrar’s wife, on the grounds that she had funded Thakrar’s part in an action for a declaration that litigation had been compromised. The court refused the order, holding that such an exercise of its discretion was exceptional. The application for the declaration had been reactive and was not of certain benefit to the wife. The costs incurred by the claimant would have been incurred anyway, since all the defendants joined in making it.

Damages cap and UCTA

Regus (UK) Ltd v Epcot Solutions Ltd [2007] All ER (D) 93 London Mercantile Court
The claimant, who supplied serviced office accommodation, sued the defendant; a client using its services, for sums owed and was met with a counterclaim in relation to defective air-conditioning. The court considered it reasonable within the meaning of UCTA for the claimant to restrict damages for loss of profits and consequential losses. However, if the clause of the contract deprived the defendant/counter-claimant of any remedy for malfunctioning air-conditioning, that would be too wide an exclusion. Here the effect of the failures was significant but not crucial, so an appropriate measure of damages would be reduction of fees due, unless the claimant could prove additional specific loss.

Methodology for product testing

Mulheim Pipe Coating GmbH v Chemefall plc [2007] All ER (D) 418 QBD
In a dispute over whether a chromate-based product was of satisfactory quality under the Sale of Goods Act, the claimant purchaser changed its case from alleging that the product specification was inadequate to arguing that it had received a defective ‘rogue batch’. The defendant criticised the claimants’ expert evidence for failing to include the instructions, an audit proving sample integrity and details of testing methodology. The court held that scientific test results were of little value unless the methodology used was made explicit and could be examined. Here the change in case made this need especially acute and without some comfort as to the methodology used for testing the alleged ‘rogue batch’, little weight could be given to the test results and the claim was dismissed.

Evidence of required repairs needed

Carmel Southend Ltd v Strachan & Henshaw [2007] All ER (D) 424 TCC
The claimant, the landlord, claimed the cost of roof repair of premises let to the defendant tenant under s.18(1) Landlord and Tenant Act 1927. A dispute arose because the incoming tenant had insisted on a more expensive scheme, for which the claimant sought to recover from the defendant. The court held that a detailed critique of the works and risks allegedly created would be necessary to sustain the case that repairs were impracticable on health and safety grounds. The incoming tenant’s request could be taken into account, but was not decisive and the mere fact of the landlord undertaking a more expensive scheme did not automatically trigger the defendant’s liability. However, on these facts, the tenant could not reduce its liability further by asserting that the otherwise reasonable repairs had been superseded by the improved scheme.

Construction Law Vol.18 Issue 5 June 2007 contains the following articles:

Rights to light – injunction or damages?
by Sinead Geaney, Lawrence Graham.

On and off the record
by Paul Newman, 3 Paper Buildings
(on the meaning of ‘without prejudice’).

Court settlement process
by Michael Draper, Shadbolt & Co.

See Multiplex Construction v Honeywell Control Systems under Keating Chambers Reported Cases on the TCC’s jurisdiction to hear an application for leave to appeal against its refusal to order disclosure of documents.

See McGlinn v Waltham Contractors on whether costs should be ordered where there had been a split trial.

Security for costs on counterclaim

Hart Investments Ltd v Larchpark Ltd [2007] BLR 160 TCC
This is part of the litigation arising from the collapse of a property; another part has been reported as Hart v Fidler. The issue here was whether separate security of costs should be given in respect of a counterclaim or whether, as Larchpark contended, the counterclaim was sufficiently bound up with Hart’s claim to render any separate security of costs order inappropriate. The judge held that the counterclaims were substantially separate and so a separate order for security for costs should be made. The court was not satisfied that Larchpark was being put in difficulties by Hart’s application.

Third party costs order

Alan Phillips Ltd v Dowling [2007] BLR CA
The claimant architect used both his firm’s name and that of a limited company in dealings with his client. When he sued for fees, he was met with a claim for negligence, which he chose not to mention to his insurers. When the fees action failed and the negligence claim succeeded, the CA upheld the judge’s finding that a third party costs order could be made personally against the architect. Factors to be taken into account were the close interchangeability of identity used by the architect and his failure to notify his insurers of the claim.

See Multiplex Constructions v Cleveland Bridge (No. 2) under Keating Chambers Reported Cases on an order for costs on account against an unsuccessful party which has made a Part 36 offer.

KEATING CHAMBERS REPORTED CASES

McGlinn v Waltham Contractors [2007] BLR 188 TCC
This is a part of major long running litigation relating to the construction of a luxury residence in Jersey. This hearing concerned the entitlement to costs of the defendant quantity surveyors, who had been successful on all issues of liability and quantum.
Adrian Williamson QC
Jonathan Selby

Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] BLR 167 TCC

This was an application to the TCC for leave to appeal against the court’s refusal to order disclosure of certain documents relating to an agreement between Multiplex and the client, WNSL. The court’s decision on the "prevention principle" point has already been reported. Here the TCC held that the court had jurisdiction to entertain the application for leave to appeal. However, on the facts, permission would be refused because there was no real prospect of success.
Philip Boulding QC
Marc Rowlands

HG Construction v Ashwell Homes Ltd [2007] BLR 175 TCC
Already reported in CILL. An adjudicator held that LAD provisions under JCT 98 with Contractor’s Design were enforceable, but on reference of a dispute over delay to a different adjudicator, the claimant obtained a finding that they were not and that LADs paid were repayable. The claimant brought proceedings to enforce the latter award, but the court held that the second adjudicator should have regarded the existing decision as already binding. The court considered Quietfield v Vascroft (Matthew Holt and Abdul Jinadu)

Finola O’Farrell QC
Matthew Holt

Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (No. 2) [2007] Vol. 23 No. 4 p. 299 TCC

Following the finding that Cleveland Bridge had repudiated their sub-contract on Wembley Stadium and Multiplex’s success on 10 points of claim, Cleveland Bridge succeeded in its argument on the 11th point, on the effect of an entire agreement on the inclusion of works under the contract for payment purposes. This is the report on the costs hearing. The court held that, while the normal rule would be that costs would be reserved where an unsuccessful party had made a Part 36 offer or payment in, in an exceptional case an immediate costs order could be made despite this. This was such a case because the 11th point had been a new claim by Multiplex and it was without legal basis.

Paul Buckingham, Adrian Williamson QC,
Lucy Garrett

Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] BLR 195 TCC
This is an important decision on the prevention principle; directions causing delay could still constitute acts of prevention, even though legitimate exercises of the contractor’s powers (the case concerns a Wembley Stadium IT and communications sub-contract). It is also important regarding notices as conditions precedent and the so-called Gaymark principle, which Jackson J. doubted, despite some support from Keating 8th edition. A settlement agreement made by Multiplex

with the client had not had the effect of setting time at large under the sub-contract.
David Thomas QC, Marc Rowlands

Reinwood Ltd v L Brown & Sons Ltd [2007] All ER (D) 228 CA
This is the Court of Appeal decision on the appeal from the TCC decision reported in CILL. The first instance decision was reported on formalities necessary for an extension of time and particularly on the criteria for unreasonable determination by contractors. The appeal was conducted on the issue of whether the cancellation of the certificate of non-completion under Clause 24 (of JCT 98) by the grant of an extension of time had the effect that the employer could no longer justify a LAD deduction. In the result, the employer’s appeal was allowed; the employer’s right to deduct LADs was not lost by the grant of the extension of time even if its effect was to cancel the certificate of non-completion.
Stephen Furst QC

Zurich Insurance Co v Gearcross Ltd [2007] All ER (D) 216 TCC
This case concerns the requirements necessary for the defendant developer to be liable to the claimant, who operated a building guarantee scheme in respect of the cost of remedial works carried out to defective work in a house built by the defendant. The remedial work was carried out by another contractor. The requirements were: that the defendant’s work was defective, that a notice had been served by the claimant, that the defendant had not carried out remedial work timeously, that this had resulted in instruction of another contractor and that the sum claimed was caused by this. The claimant got summary judgment for £36,000 invoiced but the defendant got leave to defend the balance of the claim for further remedial works.
William Webb

KEATING CHAMBERS UNREPORTED CASES

This is an occasional additional section for cases in which Members of Chambers have appeared which not yet been reported.

John F Hunt Demolition Ltd v Asme Engineering Ltd [2007] EWHC 1507 TCC
The case concerns the preliminary hearing of two unrelated issues, namely the relationship between the insurance provisions in the JCT contract (1998 edition) and the existence of common law duties of care and the extent to which a settlement was reasonable under the Biggin v Permanite principle.
Jonathan Selby

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.

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.

For further information on how our members can assist you, please contact the Senior Clerks, John Munton and Nick Child , in the first instance, on +44(0)20 7544 2600. They and their teams of Clerks will be pleased to advise you on the member of Keating Chambers appropriate to your requirements.

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Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.