UK: Case Law Review - Construction, Property & Real Estate (September 2008)

Last Updated: 12 September 2008
Article by Keating Chambers

ADJUDICATION

Natural Justice

Cantillon Ltd v Urvasco Ltd [2008] 117 Con LR 1 TCC
Already reported in BLR, in a piling dispute referred to adjudication, the defendant argued unsuccessfully that the adjudicator had breached the rules of natural justice. The court held that if one party argued a point and the other failed to address it that was not the adjudicator's fault. In ascertaining what the dispute comprised, the claimant was not limited to matters raised before it crystallised. The court had to consider the severability, or separate enforceability, of different parts of the decision.

Construction Law Journal 2008 Vol.24 No.5 contains the following articles:

Adjudication – the New Zealand position
by Tómas Kennedy-Grant QC, Auckland

Construction Act Review
by Peter Sheridan and Dominic Helps, Shadbolt & Co. comprises two papers from the Association of Independent Adjudicators Conference, London, April 2008:

Adjudication Case Law Update
by Sean Brannigan, 4 Pump Court
on Cantillon v Urvasco

and Reflections on Alternative Dispute Resolution – think A or D
by Sir Anthony Evans QC

See Avoncroft Construction v Charba Homes under Keating Chambers Reported Cases on contractual defence to liquidated damages based on partial possession, set-off and validity of withholding notice.

ARBITRATION AND DISPUTE RESOLUTION

NHBC Conciliation

Holloway v Chancery Mead Ltd [2008] 117 Con LR 30 TCC
The claimants sought to refer to the NHBC Arbitration Scheme financial disputes relating to defects in a newly built house. The defendants argued that it was a condition precedent for the dispute to be referred to conciliation with the NHBC Resolution Service. The court held that NHBC Resolution was not applicable to seller-buyer disputes of this kind, so it was not a condition precedent to arbitration. It was held per curiam that the reference to the NHBC Resolution Service would have been sufficiently certain to identify it.

See Cubitt Building and Interiors v Richardson Roofing (Industrial) under Keating Chambers Reported Cases on refusal of stay of arbitration pending adjudication and incorporation of contract terms.

Arbitration International 2008 Vol. 24 No. 2 contains the following articles:

W(h)ither international commercial arbitration?
by Charles Brower, 20 Essex Street

Arbitral jurisdiction and the dimensions of 'consent'
by Alan Scott Rau, University of Texas at Austin

The settlement privilege
by Klaus Peter Berger, University of Cologne

The status of vacated awards in France: the Cour de Cassation decision in Putrabali
by Philippe Pinsolle, Shearman & Sterling, Paris

Prudent anticipation? The arbitration of public company shareholder disputes
by Perry Herzfeld, Allens Arthur Robinson, Melbourne

International Arbitration Law Review 2008 Vol. 11 Issue 3 contains the following articles:

When is an arbitration agreement 'inoperative'?
by Max Bonnell, Mallesons Stephen Jaques, Sydney

International commercial arbitration and Constitutional Court review: contemporary trends and national policies
by Mohamed S. Abdel Wahab, Shalakany Law Office, Egypt

Independence and impartiality of arbitrators
by Shivani Singhal, National Law School of India, Bangalore

Extension of time for challenge refused

Colliers International Property Consultants v Colliers Jordan Lee Jefaar Sdn Bhd [2008] All ER (D) 50
In a dispute between members of the international property consultancy, Colliers, and a former member of the group, the defendant, the latter applied for an extension of time to challenge the award under s.68 of the Arbitration Act for serious irregularity and also to set aside the order that the award be entered as a judgment. The grounds were procedural flaws but the court held that they were properly corrected by giving the claimants seven days to remedy the (minor) deficiencies. The defendant's application was dismissed.

No costs for invalid arbitration

Crest Nicholson (Eastern) Ltd v Western [2008] All ER (D) 249 TCC
In a dispute over the NHBC Buildmark scheme, the court held that an arbitrator who had heard submissions from both parties had no jurisdiction, because there was no arbitration clause in the Buildmark policy. This gave rise to the question as to whether the court could award costs in respect of the invalid arbitration. It was held that there was no clear statutory power to do so, and so the court could not make such an award.

See Cubitt Building & Interiors v Richardson Roofing (Industrial) under Keating Chambers Reported Cases on refusal of stay of arbitration pending adjudication.

See L Brown & Sons v Crosby Homes (North West) under Keating Chambers Reported Cases on an application to extend time limit for challenge to award and serious irregularity based on fraud/breach of public policy.

See Taylor Woodrow v RMD Kwikform under Keating Chambers Reported Cases on whether arbitration had been validly commenced by a letter from the claimant.

Construction Law Journal 2008 Vol.24 No.5 contains the following articles:

Arbitration and ADR in the German construction industry
by Dr. Susanne Kratzch, Thümmel, Shütze and Partners, Stuttgart

International commercial arbitrations in the United Kingdom: the Scottish dimension
by Richard Anderson, Arbitration Chambers

Dispute Resolution Magazine Vol.14 No.3 and 4 Spring/Summer 2008 contains the following articles:

The future of ADR
by David Hoffman, Boston Law Collaborative

Dispute resolution and the quest for justice
by Jean Sternlight, University of Nevada

Looking forward in mediation
by Linda Singer and Michael Lewis, Washington DC

Business arbitration can and should be improved in the United States
by Kathy Bryan and Helena Tavares, CPR Institute, New York

Reflections on institutionalizing mediation
by Geetha Ravindra

ADR and Family Law
by Gregg Herman, Loeb & Herman, Milwaukee

The ADR Case Evaluator's role in contemplated and pending litigation
by the Hon Allen van Gestel, Boston

Doing the best mediation you can
by John Lande, University of Missouri

Improving mediation training and regulation through collaborative assessment
by Ansley Barton

Dispute Resolution Magazine Vol.14 No.2 Winter 2008 contains the following articles:

Consent in mediation
by Jacqueline Nolan-Haley, Fordham University

Achieving meaningful threshold consent to mediator style(s)
by Frank Sander, Harvard Law School

Midstream mediator evaluations and informed consent
by John Cooley, Northwestern University and Lela Love, Yeshiva University

Informed consent in public sector dispute resolution
by Patrick Field, University of Montana

Consent in international mediation
by Melanie Greenberg

The (new) ethics of collaborative law
by Scott Peppet, University of Colorado

CONTRACT AND PROCUREMENT LAW

Letter of intent and formation of contract

RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co [2008] BLM Vol. 25 No. 6 TCC
The defendant dairy manufacturer wished to retain the claimant to supply services for automation of processes and equipment. After providing some quotations, the claimant was awarded the contract and a letter of intent was issued by the defendant, confirming its wish to proceed with the project 'as set out in the offer' subject to finalisation of price and completion date and stating that it would be using an amended version of the MF/1 form of contract, to be executed within 4 weeks. The claimant started work and negotiations proceeded, during which the letter of intent was extended for some three months. A final draft contract was produced but never signed and disputes arose, leading the claimant to commence proceedings. The court held that the letter of intent had constituted a counter-offer. The final draft had never become binding, but after the eventual lapse of the letter of intent, the parties had reached full agreement on the obligations relating to the work.

Take or pay clause

M&J Polymers Ltd v Imergys Minerals Ltd [2008] 117 Con LR 88 Commercial Court
A take-or-pay clause required the buyers to take a minimum quantity of products or pay for a minimum if they did not order enough. The defendant argued that this was a penalty clause. The court found that on the facts the clause was not a penalty, but it was not correct to say that a take-or-pay clause could not be a penalty. As a matter of principle, the rule against penalties could apply to a take-or-pay clause even when expressed as a claim in debt. The Con LR editors note that this appears to be the first reported case on the point.

Construction Law Vol. 19 Issue 6 July 2008 contains the following articles:

New text not always an improvement
by Michael Phipps, Thurston Consultants (on JCT 2005 With Quantities)

Peace in the brave NEC world?
by Sam Boyling, Pinsent Masons

Project insurance – the perfect answer?
by John D. Wright, JD Risk Associates

The Office of Fair Trading objects
by John Pheasant and Marceline Tournier, Hogan & Hartson

International Construction Law Review Vol. 25 Part 3 July 2008 contains the following articles:

Contract issues in the use of Construction Building Information Modelling
by Kimberley Hurtado and Patrick O'Connor, Faegre & Benson, Minneapolis

The use and abuse of first demand guarantees in international construction projects
by Philip Dunham, Decherts, Paris

Tendering procedure at common law
by RH Christie, University of Cape Town

The right law for construction? Choice of law and European reform
by Philip Britton, King's College, London

Use of sub-criteria and marking unlawful

Lettings International Ltd v London Borough of Newham [2008] EWHC 1583 QBD
Lettings, the unsuccessful tenderers for two framework agreements covering procurement, maintenance and management of dwellings for Newham, succeeded in their challenge of the tendering and award process. After first obtaining an injunction (upheld at [2007] EWCA Civ 1522) to stop the award, at the trial they established breach of the Public Contracts Regulations 2006 by Newham. Newham had failed adequately to disclose its award criteria and weightings in advance and specifically had used sub-criteria which were not disclosed, and which were not mere scoring machinery, as Newham tried to contend. Newham had also failed to be transparent in its scoring, offering only 3 out of 5 for fully meeting a criterion and reserving the remaining two marks for those who exceeded it. Some, although not all, of the 'manifest errors' in marking were also held to be established. The recent decision of the ECJ in Lianakis v Dimas Alexandroupolis was applied.

CONSTRUCTION AND ENGINEERING CONTRACT DISPUTES LAW

Construction Law Vol. 19 Issue 6 July 2008 contains the following articles:

Trouble with the LADs
by Shona Frame, MacRoberts
(on Reinwood v L Brown & Sons - John Marrin QC and Stephen Furst QC)

Litigation insurance and funding
by James Delaney, The Judge

Have you been Wronged?
by Paul Newman, 3 Paper Buildings
(on litigation costs and fees)

For your eyes only?
by John Sheils, Shadbolt & Co
(on privilege and disclosure)

Unjust enrichment claim fails

JS Bloor Ltd v Pavillion Developments Ltd [2008] BLM Vol. 25 No. 6 TCC
The claimant contractor failed in its action for recompense from the defendant developer in respect of an access road which the claimant had constructed under a mistake, thus discharging the developer's obligations. The claimant failed to satisfy the judge that the defendant had received a benefit or that there had been any enrichment which was unjust.

Bribery and fraudulent misrepresentation

Ross River Ltd v Cambridge City Football Club [2008] 117 Con LR 129 Ch. Div
The football club succeeded in obtaining an order to rescind transactions for the transfer of its ground to a developer on the grounds of fraudulent misrepresentations made by representatives of the developer and bribes paid in the form of payment made to the club's Chief Executive.

Contract Disputes

See Seele Austria v Tokio Marine Europe Insurance under Keating Chambers Reported Cases on the scope of indemnity under contractors all risk insurance.

Implied terms and best endeavours

Onesteel Manufacturing Pty Ltd v United KG Pty Ltd [2008] Con LJ Vol.24 No.5 431 Supreme Court of South Australia
Employer Onesteel engaged contractor United to reline and upgrade a blast furnace under a Target Estimate Contract designed to minimise shut-down time. There was over-run on time and a large additional cost claim by the contractor. The court was asked to consider what terms should be implied into the contract regarding recoverability of reimbursable costs and time-bars as a condition precedent to claims. The court held that the contractor's entitlement to reimbursement was subject to an implied term that the costs were reasonably and properly incurred. If the contractor could show this, that would be sufficient to show 'best endeavours.' The contractors' claims could be barred by failure to comply with a time-limit for their submission.

International Construction Law Review Vol.25 Part 3 July 2008 contains the following article:

The quantification of termination claims in construction
by Franco Mastrandrea.

GENERAL AND PROFESSIONAL NEGLIGENCE

Nuisance and Rights to Light

Forsyth-Grant v Allen [2008] BLM Vol. 25 No. 6 CA
The Court of Appeal dismissed an appeal by a hotel owner against an award of damages for nuisance and interference with rights to light against the developer of an adjoining site. The appellant would be restricted to damages for the limited infringement of the rights to light and could not claim damages for the benefit obtained by the developer. Such a basis was not appropriate for a claim in nuisance either. The court noted the appellant's unreasonable refusal to co-operate in assessing the extent of the infringement.

SAAMCO revisited by the Lords

Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48 HL
Following delays, a ship which was subject to a charter was not available to the new charterers. The owners of the ship claimed damages from the charterers for the loss of the difference between original rate of hire and reduced rate agreed for late delivery. The charterers denied that damages should relate to dealings with the new charterers but should be the difference between market rate and charter rate. During 2004, market rates had more than doubled. The majority arbitrators found for the owners, on an application of the first limb of Hadley v Baxendale. The Commercial Court and Court of Appeal upheld this. Lord Hoffmann and the House of Lords, however, allowed the appeal by the charterers:

"If, therefore one considers what these parties, contracting against the background of market expectations found by the arbitrators, would reasonably have considered the extent of the liability they were undertaking, I think it is clear that they would have considered losses arising from the loss of the following fixture a type or kind or loss for which the charterer was not assuming responsibility".

As well as Hadley v Baxendale, Lord Hoffmann and Baroness Hale considered South Australia Asset Management v York Montague (Vincent Moran) on the role of foreseeability of loss exacerbated by market movement in measure of damages.

PRACTICE AND PROCEDURE

The Commercial Litigation Journal No. 18 March/April 2008 contains the following articles:

Legal advice privilege: secrets and advice
by Michelle Radom, Clyde & Co

Injunctions and disclosure: when is it worth revealing unhelpful information?
by Andrew Howell and Dan Smith, Barlow Lyde & Gilbert

Online defamation: tackling e-libel
by Nicola Bridge and Honor Levy, SJ Berwin

Community design rights: Irish court gives fashion tips
by Nathan Smith, Dechert

BITs: investment protection in central and eastern Europe
by Rotislav Pekar and Roman Prekop, Squire Sanders

Mediation: will the lame duck fly?
by Richard Perkoff, Littleton Chambers

Middle East: the legal area in the Arab states
by Dr. Mark Hoyle, Tanfield Chambers

The Commercial Litigation Journal No. 19 May/June 2008 contains the following articles:

Shareholders' remedies: horses for courses
by Angelina Suvorova, University of Edinburgh

Woolf reforms: quantum of injustice
by Geraint Lewis QC, Tanfield Chambers

Mediation: hard times demand creative solutions
by Stephen Barker, Reed Smith

Legal Services Act 2007: teach your team to fish while you have the time
by Jane Ching, Nottingham Law School

International arbitration: if at first you don't succeed ...
by James Hargrove, Hogan & Hartson

Sub-prime litigation: big in America
by David Greene, London Solicitors Litigation Association

EU Mediation Directive: back into the draft
by Richard Perkoff, Littleton Chambers

Costs: seeking security
by Chris Warren-Smith and Ian Pegram, Fulbright & Jaworski

Security for costs

Lobster Group Ltd v Heidelberg Graphic Equipment Ltd [2008] 117 Con LR 64 TCC
Already reported in BLR, Coulson J concluded that legal costs of participating in a mediation are in principle recoverable costs, if the mediation was convened after issue of proceedings, although not if convened before. The dispute in this aspect of the (non-construction) case concerned the quantification of the security for costs to be given by the claimant.

Pre-action protocol

Orange Personal Communications Services Ltd v Hoare Lea [2008] 117 Con LR 76 TCC
The court considered authorities on its case management powers. In deciding whether proceedings should be stayed for the TCC Pre-Action Protocol process, especially where there are Part 20 proceedings, the following considerations are relevant: (i) when it was known that the party was going to be joined (ii) what information that party had been given and when (iii) how large a part that party would play (iv) what stay could be accommodated without jeopardising the whole timetable (v) any requirement of justice regarding delay of whole timetable and trial date (vi) whether costs order could compensate (vii) alternatives to a stay (viii) utility of stay/protocol process. The Con LR Editors note that the judge was "clearly disinclined to rule conclusively that the non-compliance actually increased the defendant's costs of the proceedings overall".

Costs on abandonment of item and mediation

Nigel Witham Ltd v Smith [2008] 117 Con LR TCC
Already reported in TCLR and CILL, the defendant clients were held to be the successful party, in that the claimant designers had had to pay them a small amount as the net result of an action for fees with a counterclaim, subject to a 15% reduction in respect of a counterclaim item which had been abandoned. The judge rejected the claimants' allegation that the defendants had refused to mediate, although he doubted whether an early mediation would have led to a settlement in the case.

Summary judgment

Landfast (Anglia) Ltd v Cameron Taylor One Ltd [2008] 117 Con LR 53 TCC
Landfast Ltd, a development company, formed Landfast (Anglia) Ltd as a vehicle for a specific development. This action was brought by them against the defendants' consulting engineers, alleging that they had failed to advise on the amount of site preparation needed, so that too high a price was paid. The defendants sought summary judgment on the ground that rights had been assigned between the companies. The court refused to strike out the claim, as it was arguable that Landfast (Anglia) could claim full value. Reference was made to Offer–Hoar v Larkstore (Christopher Thomas QC and Gaynor Chambers).

Costs for failure to comply with Protocol

TJ Brent Ltd v Black & Veatch Consulting Ltd [2008] All ER (D) 396 TCC
A claim had been made by the employers against the claimant contractors and the contractors had commenced proceedings against the defendant engineers, who denied all liability and refused to attend meetings to discuss the matter. The employer's claim was settled by the claimant, who now sought a contribution from the defendant under the Civil Liability Contribution Act. The defendant made an application for costs against the claimant for non-compliance with the Pre-Action Protocol. The application was refused; any non-compliance was technical and the application was intended to secure a tactical advantage.

KEATING CHAMBERS REPORTED CASES

Diamond Build Ltd v Clapham Park Homes Ltd [2008] All ER (D) 353 TCC
A letter of intent for a refurbishment project was held to have given rise to a simple contract with all the necessary elements, to cover the period until a formal contract could be entered into. The claimant successfully contended that the contract was based upon the standard form referred to in the specification.
Marc Rowlands

Taylor Woodrow Construction v RMD Kwikform Ltd [2008] BLR 383 TCC
Following collapse of scaffolding provided by the defendant, the claimant's solicitors sent a letter noting the contract contained provision for arbitration and asking whether the defendant would rely on that or would agree to participate in litigation. The claimant then obtained unilateral appointment of an arbitrator by the President of the Chartered Institute of Arbitrators. The court accepted the defendant's contention that there had been no valid reference and so no commencement of the arbitration. The arbitrator was thus not validly appointed. The claimant's letter had not been objectively clear and was thus not sufficient to commence proceedings.
David Thomas QC

Seele Austria v Tokio Marine Europe Insurance [2008] BLR 337 CA
The Court of Appeal, by a majority, allowed the appeal by the claimant, the insured party under a Contractors All Risk policy, against the Commercial Court's decision in favour of the insurer. The first instance court had held the contractors not entitled to an indemnity in respect of loss and expense sustained in doing remedial work to defective windows which they had installed, because it was intentional damage. The CA held that, although the cost of making good defects was not in itself recoverable under the policy, remedial work was necessary to preserve the physical integrity of the building, which was covered by the indemnity.
Adrian Williamson QC

Cubitt Building & Interiors Ltd v Richardson Roofing (Industrial) Ltd [2008] BLR 354 TCC
Already reported in CILL, in refusing the claimant's application for a stay of arbitration pending adjudication, the court emphasised that whether there should be a stay during the arbitration was entirely a matter for the arbitrator's discretion. There is no obligation, either under the DOM/I conditions incorporated into the sub-contract, or under the HGCR Act, to refer a dispute to adjudication, but a party can do so at any time. If involved in arbitration, application would be made for relief which could be built into the arbitration timetable if the arbitrator thinks fit because applying the overriding objective, it involves a prospect of resolution. However, an order for a stay should not be granted if it would prevent expeditious resolution by arbitration (or litigation) already commenced.
Gaynor Chambers

L Brown & Sons Ltd v Crosby Homes (North West) Ltd [2008] BLR 366 TCC
This is a sequel to the TCC adjudication case in 2005 between the parties (Simon Hargreaves and Alexander Nissen QC). This litigation concerned an application to challenge an award for serious irregularity out of time (by 66 days) and whether the delay could be excused by reference to the failure of the other side's solicitor to respond to a letter concerning alleged omissions in disclosure. The court made a statement on the principles for considering application to extend time limits under the Arbitration Act: a weak case would add weight to the party resisting the application, a strong case would militate in favour of an extension. A case which was neither weak nor strong would be insufficient to add weight to the application. On these facts, the application should have been brought within the time limit. Deliberate withholding of documents ordered to be produced might be reprehensible and contrary to public policy, but not where there was no such order.
Marc Rowlands
Nerys Jefford QC

Avoncroft Construction Ltd v Charba Homes (CN) Ltd [2008] TCLR 7 TCC
Although that was chiefly on the issue of entitlement to a stay of enforcement of an adjudicator's decision due to claimant's financial position. The TCLR report also deals with the contractor's contractual defence to a claim for liquidated damages and employer's set-off rights and the invalidity of a withholding notice served out of time. The contractor's defence was based on a partial possession argument.
James Thompson

Note that the defendant is referred to as 'Sharba' but correctly reported as Charba elsewhere.

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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