UK: Projects & Construction Law Update - July 2017

Last Updated: 11 September 2017
Article by Robert Meakin

Most Read Contributor in UK, October 2017

Cases

"Me first... No me first!" – Applications to challenge public procurement decisions

Alstom Transport UK Ltd v (1) London Underground Limited (2) Transport for London [2017] EWHC 1406 (TCC)

Debates around the proper interplay of applications to lift suspension of a contract and applications for specific disclosure regularly recur in public procurement work.  Which one should come first? Is there a standing principle that applies in all cases? The recent case of Alstom Transport UK Ltd v (1) London Underground Limited (2) Transport for London [2017] EWHC 1406 (TCC) answers these questions, clearly setting out the relevant principles and considerations involved. 

Challenges to public procurement processes are not uncommon in the UK.  When such proceedings are commenced, the award of the contract in question is automatically suspended.  This can often lead to a 'battle of the applications' where the authority seeks an urgent application to lift the suspension and the unsuccessful tenderer seeks specific disclosure of documents to show a serious question to be tried and resist the application.  The question is who comes first?

Briefly, Alstom sought to challenge the outcome of a tender process in which it was unsuccessful.  As a result, London Underground Limited ('LUL') could not award the contract to the successful tenderer.  LUL sought an urgent application to lift the suspension under Regulation 47H of the Public Contracts Regulations 2006.  Alstom subsequently applied for specific disclosure of documents relating to the tender, which LUL had continually refused to provide.  The principal issue before the court was whether it should hear the application for specific disclosure before the application to lift the suspension.

LUL argued that the "usual case" was for specific disclosure applications to be heard after those to lift the suspension of the contract.  However, Coulson J rejected this argument, stating that he did not agree there was any established principle to this effect: "These cases always turn on their own facts and it would be dangerous to set out any overarching principle or general rule".

Coulson J confirmed that the standard American Cyanamid test for interim injunctions applies when a court is considering any application to lift an automatic suspension and, accordingly, a critical element for an unsuccessful tenderer to successfully resist such an application is to show there is a serious question to be tried.  If its ability to show this turns on the disclosure of the specific documents sought, such that justice cannot be done without sight of the relevant documents, then the suspension hearing would have to be adjourned.

He acknowledged the need to balance this against policy considerations which emphasise that hearings to lift should be heard as soon as possible.  However, he also observed that the courts must be astute to prevent a defendant from obtaining an unfair advantage by refusing to disclose the documents sought, and then pointing to the absence of such documents to show there is not a serious issue to be tried: "the safest course will sometimes be to fix the specific disclosure application first in any event".

The court found in favour of Alstom and re-ordered the hearing dates so its application for specific disclosure came first.  The specific circumstances of each case are paramount and there is no overarching rule that can be applied across the board, as to which application should come first.  However, if a party can show that disclosure of certain documents will go to the substance of a serious question to be tried, it is likely to be successful in having its application heard first.

http://www.bailii.org/ew/cases/EWHC/TCC/2017/1406.html

"It does what it says on the tin" – A more lenient approach to exemption clauses

(1) Persimmon Homes Ltd (2) Taylor Wimpey UK Ltd (3) BDW Trading Ltd v (1) OVE Arup & Partners Ltd (2) OVE Arup & Partners International Ltd [2017] EWCA Civ 373

This case dealt with an exemption clause in a professional appointment (and related warranties) which limited the consultant's aggregate liability and which also contained a specific exclusion for liability relating to asbestos.  After commencement of the works, a large amount of asbestos was found on the site and the claimants sought to hold the defendants negligent for having failed to identify it – arguing that the exemption clause did not apply in the circumstances. However, the court followed the increasing trend in recent years to afford greater leniency in regard to exemption clauses, acknowledging the growing recognition that commercial parties should be free to allocate risks as they see fit.

In this case, the defendant engineers failed to report the presence of a large quantity of asbestos on the site and, when discovered, the claimant development consortium sought to hold them negligent.  However, the professional appointment included an exemption clause which read as follows:

"The Consultant's aggregate liability under this Agreement whether in contract, tort (including negligence), for breach of statutory duty or otherwise (other than for death or personal injury caused by the Consultant's negligence) shall be limited to £12,000,000 (twelve million pounds) with the liability for pollution and contamination limited to £5,000,000 (five million pounds) in the aggregate. Liability for any claim in relation to asbestos is excluded." (Emphasis added).

The related warranties contained a similar exemption clause, the only difference being that the aggregate liability was limited to £5 million pounds (instead of £12 million pounds). 

The consortium argued that the exemption clause did not apply in the circumstances for the following reasons:

  1. The clause only excluded the defendants' liability if they had 'spread' the asbestos as opposed to simply failing to alert the consortium to its existence. In this regard, the consortium put forward an alternative construction that the words should read 'liability for causing any claim in relation to asbestos'.
  2. If the first ground failed, they argued that the second sentence did not exclude liability for negligence and the contra proferentum rule applied such that the clause should be construed strictly against the defendants.

The court rejected the consortium's first argument, not least for grammatical reasons (as the reading of the clause would be unworkable) but also because it did not reflect business common sense.  Jackson LJ made clear that if the clause was to be interpreted as alleged it would mean that the consultant would be liable for failing to report the asbestos, but not for moving it to a different location within the site.  This would create a wholly bizarre situation.

In relation to the second argument, Jackson LJ held that the contra proferentum rule did not apply because the clause was clear and unambiguous.  The language was wide enough to exclude negligence.  The court acknowledged that the Canada Steamship approach, which states that if there is doubt as to whether an exclusion clause covers negligence then the clause must be interpreted against the party seeking to rely on it, is now more relevant to indemnity clauses and, in this regard, the courts have softened their approach.  Ultimately, "In major construction contracts the parties commonly agree how they will allocate the risks between themselves and who will insure against what. Exemption clauses are part of the contractual apparatus for distributing risk. There is no need to approach such clauses with horror or with a mindset determined to cut them down." 

As a result, the court rejected the claimants appeal on every ground, allowing any liability for the defendant's failure to report asbestos to be excluded.

This case emphasises the more lenient approach the courts are now taking in regard to such clauses – particularly where sophisticated commercial parties of equal bargaining power are involved.  In situations like this, where the clause is clear in what it excludes, the natural meaning should be preserved.  The contra proferentum rule will only apply where there is genuine ambiguity and the clause is capable of two competing meanings. The court will not allow parties to create their own ambiguities by relying on convoluted interpretations.

http://www.bailii.org/ew/cases/EWCA/Civ/2017/373.html#para31  

"Dot your 'I's and cross your 'T's" – Always consider the consequences of your amendments

GB Building Solutions Ltd v SFS Fire Services Ltd (t/a Central Fire Protection) [2017] EWHC 1289 (TCC)

It's easy, when negotiating a contract, to find yourself in a situation where you are required to agree a compromise position, accept wording that could be phrased in more precise terms or 'rush through' those final amendments to get the deal done.  However, if the consequences of amendments aren't properly thought through, you could find yourself fighting a losing battle down the line.  This case is a reminder of the importance of giving due consideration to the consequences of deviations from standard terms and the current position taken by the courts with respect to principles of contractual interpretation.

Matters of contractual interpretation regularly feature as preliminary issues in construction disputes.  The law in relation to contractual interpretation has been considered by a great many cases and continues to develop.

The position as it currently stands requires the court to ascertain the objective meaning of the language in which the parties have chosen to express their agreement, taking into account the contract as a whole and giving more or less weight to factual circumstance depending on the sophistication of the document in question.  

As per Lord Clarke in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, interpretation is a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival construction by reaching a view as to which construction is more consistent with business common sense.  However, it must balance against this, considerations such as the quality of the drafting, the possibility that one side may have agreed to something that, in hindsight, did not serve its interest and the possibility that a provision may be a negotiated compromise or one that could not be agreed in more precise terms.

This case is a prime example of how the current principles of contractual interpretation will be applied in practice.  It related to a form of JCT design and build subcontract which attached a schedule of amendments.  The defendant ('SFS') was a sub-contractor, who designed and built a sprinkler system for an office building.  A flood later occurred and the claimant main contractor ('GB') contended that the sub-contractor was at fault.

A preliminary issue was whether the flood occurred before or after the "Terminal Date", which was defined in the standard subcontract conditions as the 'date of practical completion of the Sub-Contract Works or, in respect of a Section, of such works in the Section, as determined in accordance with clause 2.20'.  If the flood occurred before the Terminal Date, the claimant had no claim (as they were co-insured up to that point), whereas, if it occurred afterwards, the claimant did have a claim.

The court had to decide whether or not the 'date of practical completion of the subcontract works', as referred to in the definition of Terminal Date was:

  1. to be read as the defined term "Practical Completion", which was set out in the schedule of amendments and defined as the 'issue of the certificate of practical completion pursuant to the main contract'; or
  2. to have the meaning given in clause 2.20, in which case it would be deemed to occur on a certain date following notice from the sub-contractor and no subsequent dissent by the contractor.

It emerged that in a number of places in the sub-contract – including the definition of Terminal Date and clause 2.20 - references to "practical completion" had not been capitalised as per the defined term in the schedule of amendments.  Despite this, SFS argued for the capitalised term to apply in such instances (based largely on the fact that the schedule of amendments took precedence).

In considering the issue, Davies J noted that where two rival interpretations are plausible the court has to undertake the "iterative process" of checking each interpretation against the provisions of the contract and investigating the commercial consequences of each – i.e. the "unitary exercise" referred to above in the context of the Rainy Sky case.  He noted that neither side gained any advantage from the argument that the other party's interpretation offended the principle of commercial common sense, despite both seeking to rely on it. 

In coming to its findings, the court was of the view that the lack of capitalisation in certain places was important.  The clause which gave precedence to the schedule of amendments only applied if there was an inconsistency between terms (in such cases the schedule would take priority).  However, in Davies J's view, there was no inconsistency, as the "Practical Completion" definition and "Terminal Date" definition simply applied to different parts of the contract.  Accordingly, there was no reason for the definition of "Practical Completion" to replace the lower case wording and thereby alter the meaning of those provisions where it was not expressly used.

The court found, therefore, that the second interpretation referred to above applied and that the contract was perfectly workable in that instance.  By consequence the flood occurred after the "Terminal Date" and the claimant could maintain its claim.

The message that emerges from this case is clear.  It is vital to ensure that, when amending a contract, amendments are fully and comprehensively considered and flowed through the contract where required.  The courts have settled principles of contractual interpretation to follow and a party cannot easily rely on the argument that a specific interpretation was intended, where it is not expressly set out.  The courts will favour an objective interpretation that affords the most commercial common sense, bearing in mind textual and contextual considerations.  Provided the contract is workable, the courts are not inclined to stray far from the express language of the contract.

http://www.bailii.org/ew/cases/EWHC/TCC/2017/1289.html

Industry and regulatory update

Launch of NEC4

On 22 June 2017, the NEC launched their NEC4 suite, which included a new Design, Build and Operate Contract and a consultative version of an Alliance Contract. 

The latest suite has been promoted as one of evolution rather than revolution.  One of the key aims of NEC was to reduce over reliance on Z-Clauses.  As a result, a number of provisions that are usually incorporated by way of Z-Clauses have been built into the NEC contracts as core or secondary options, for example, provisions for collateral warranties, bribery and corruption and assignment, to name a few.

Other key changes include making provision for:

  • consensual dispute resolution (prior to other formal processes) and dispute avoidance boards (which will be mandatory where the HGCRA 1996 does not apply);
  • a final assessment process, allowing for periodic reviews of the contractor's Defined Costs throughout the project to avoid major disputes at the end; and
  • allowing the Contractor to propose changes in Scope, to achieve cost savings, which could be shared between the Employer and Contractor.

We are undertaking a thorough review of the new NEC4 ECC and will be publishing a detailed article regarding the changes shortly.

The House of Commons Library publishes briefing paper on planning for Nationally Significant Infrastructure Projects

On 13 June 2017, the House of Commons Library published a briefing paper on Planning for Nationally Significant Infrastructure Projects ('NSIPs'). NSIPs are large scale developments (relating to energy, transport, water, or waste) which require "development consent" under the Planning Act 2008 (as amended).

The briefing paper looks at the following topics:

  • the legal framework for obtaining development consent for NSIPs;
  • National Policy Statements, which set out the national policy in relation to different categories of NSIPs;
  • the process of obtaining development consent for NSIPs; and
  • the National Infrastructure Commission (an independent body which aims to provide expert, impartial analysis of long-term infrastructure needs).

The Local Government Association publishes guide on the use of Dynamic Purchasing Systems

On 13 June 2017, the Local Government Association ('LGA') published its guide for local authorities on the use of Dynamic Purchasing Systems ('DPS') in the public sector.

A DPS is a form of electronic framework agreement, used exclusively by the public sector, to which new suppliers can be added at any time during the DPS' validity.

DPSs aim to streamline procurement, reducing the amount of administrative work required and consequently saving time and money in the tender process.

The LGA's guide follows a review, in conjunction with the National Advisory Group for Local Government Procurement, on the reasons for limited uptake of DPS. The guide provides case study examples and suggestions on when a DPS might be best used.

Clyde & Co in the news

Dennis Wong, a partner in our Hong Kong and Beijing offices, was quoted in China Daily and XFA Finance about Chinese construction firms planning major global infrastructure projects and how such projects will be funded, commenting that: "...there is still a significant gap between the money required and the money available to fund these infrastructure projects".

View the full China Daily article here.

Robert Meakin, a partner in our London office, was quoted in a number of publications in relation to the recent UK election results. In The Telegraph he commented on the Brexit deal and the potential for a 'softer' Brexit, saying: "A hung parliament could be the worst possible result for business, with the economy already struggling with the uncertainty of Brexit, the last think we need is further confusion and delay in the government's investment strategy.

The Article 50 clock is also ticking and business will be eager to ensure that there is a clear and consistent voice at the negotiating table, so as to minimise further damage to the economy. The sooner a viable government is in place, however it's composed, the better."

Read the article here.

Liz Jenkins, a partner in our London office, was also quoted in the CIOB's Construction Manager following the Queen's Speech about Brexit, saying: "There was a brief mention of an Immigration Bill, which doesn't give much away about Theresa May's current thinking on the issue and her stance towards it with Brexit negotiations in mind.

We all know that the skills shortage for the construction industry is a critical issue that needs addressing. We must continue to make noise about this, so that the government is aware of just how severe a situation this could become post-Brexit."

Read the article here.

Projects & Construction Law Update - "Me First... No Me First!" – Applications To Challenge Public Procurement Decisions

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

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.