UK: Case Law Update - Issue 3, June 2011

ADJUDICATION

Failure to consider defence

PC Harrington Contractors Ltd v Tyroddy Construction Ltd [2011] BLM Vol. 28 No. 5 TCC

An adjudication decision in favour of Tyroddy was held not to be enforceable because the adjudicator had failed to consider a defence put forward by Harrington. Harrington's submission was that the adjudicator had construed his jurisdiction so narrowly that he did not have regard to their defence that the release of the retention could not be separated from the taking of the final account, so that they could raise the true value of the latter by way of set-off against the retention. The court held this to be a material breach of natural justice.

Waiver of jurisdiction and writing

Durham County Council v Jeremy Kendall [2011] BLM Vol. 28 No. 5 May 2011 TCC

The result of the case turned on the finding that there was a single binding contract evidenced in writing for the purposes of s.107 HGCR Act, rather than three separate agreements as the defendant argued. However, more important (since such cases are set to become of chiefly historical importance) is the obiter discussion of waiver of jurisdictional objections. The court focussed on the distinction between 'specific' and 'general' reservations and particularly GPS Marine v Ringway ( Samuel Townend and Justin Mort).

ARBITRATION AND DISPUTE RESOLUTION

Mealey's International Arbitration Report Vol. 26 No. 3 March 2011

contains the following articles:

Dallah: agreement or disagreement between the English and French courts?
by Robert Wheal and Paul Brumpton, White & Case, London

New Arbitration Law in France: the Decree of January 13 2011
by Jean-Pierre Harb and Christophe Lobier, Baker & McKenzie, Paris

ICC International Court of Arbitration Bulletin 2010 Vol. 21 No. 2

contains the following articles:

Enforcement and setting aside of foreign arbitral awards in Japan
by Hiroshi Oda, University College, London

Party autonomy and default rules: reframing the debate over summary disposition in international arbitration
by Gary Born and Kenneth Beale, Wilmer Cutler Pickering Hale & Dorr

Incoterms in the arbitral awards of the International Chamber of Commerce
by Emmanuel Jolivet, ICC

Arbitration Law Monthly Vol. 11 No. 5 May 2011

contains the following articles:

Jurisdiction: existence of an arbitration agreement (onStellar Shipping v Hudson Shipping Lines)

Arbitrability: unfair prejudice petitions (on Fulham Football Club v Richards)

Insolvency of a party: discretion to refuse a stay (on Cosco Bulk Carrier v Armada Shipping)

Security for the amount of the award (on A v B)

Stay of proceedings: validity of the arbitration agreement (on JSC BTA Bank v Ablyazov)

Error of law and serious irregularity
(on Schwebel v Wolf Schwebel in the TCC)

See Dawes v Treasure and Son under Keating Chambers Reported Cases on whether an arbitrator becomes functus officio at the conclusion of a settlement agreement.

Lloyds Maritime and Commercial Law Quarterly Part 2 May 2011

contains the following articles:

Determining jurisdiction and choice of law in contractual disputes coupled with property related claims
by Herman Boonk, Boonk Van Leuwen, Rotterdam

Forum selection, choice of law and mandatory rules
by Martin Davies, Tulane University

The position in the United States on foreign forum selection and arbitration clauses
by Robert Force, Tulane University

Conflicts between jurisdiction and procedure: pre-action civil procedure and jurisdiction – a poor fit
by Philip Morgan, University of Southampton

Documentary fundamentalism in the Senior Courts: the myth of contractual estoppel
by Gerard McMeel, University of Bristol

CONSTRUCTION AND ENGINEERING CONTRACT DISPUTES LAW

International Construction Law Review Vol. 28 Part 2 2011

contains the following articles:

Apportionment in the evaluation of construction delays
by Franco Mastrandrea

ICSID Arbitration as an option for international construction disputes
by Bart Ceenaeme, Jan de Nul Group

Professional negligence
by the Hon Sir Anthony Mason

Consequential loss

McCain Foods (GB) Ltd v Eco-Tec (Europe) Ltd [2011] CILL 2989 TCC

Upholding Hotel Services v Hilton International, the court confirmed that direct losses for the purposes of the first limb of Hadley v Baxendale can include loss of profit or loss of revenue. The respondent vendor had agreed to indemnify the claimant purchaser against losses, liabilities, damages and expenses arising out of any breach of an equipment purchase agreement. There was an exclusion of indirect, special, incidental and consequential loss. The purchaser could recover the profit which use of the equipment would have generated and also the cost of a comparable system, rather than additional cost expended on attempts at repair of the existing system.

Delay analysis

De Beers UK Ltd v Atos Origin IT Services UK Ltd [2011] 134 Con LR 151 TCC

In this IT case, the court had to consider the principles applicable to concurrent delay. The Con LR Editors note that the judgment was handed down some six months after City Inn v Shepherd Construction in the Inner House of the Court of Session, but without citing it. The approach taken seems to have been a straightforward application of Henry Boot v Malmaison Hotel and thus "at odds with the apportionment approach developed in City Inn". The other point seen as worthy of comment by Con LR is the link between contractual mechanisms and repudiatory conduct: "The failure on the part of Atos to have engaged the notice provisions requiring payment fatally undermined its argument that non-payment by De Beers was a repudiatory breach."

CONTRACT AND PROCUREMENT LAW

International Construction Law Review Vol. 28 Part 2 2011

contains the following articles:

Process plant construction: the ENAA Model Form of Contract (2010 Edition) – Comments and Comparisons
by Tony Marshall, Hogan Lovells

The tendering landscape in Australia
by Andrew Chew and Geoff Wood, Baker & McKenzie, Australia

See Harry Yearsley v Secretary of State for Justice under Keating Chambers Reported Cases on what constitutes bringing proceedings for the purposes of time limits in challenges to award of contracts.

See Exel v University Hospitals Coventry and Warwickshire NHS Trust under Keating Chambers Reported Cases on the factors to be considered for relief from automatic suspension of the procurement process following challenge by a tenderer.

Time-bar in public procurement challenge

Mears Ltd v Leeds City Council [2011] BLR 155 TCC

This was an interim application for an injunction by Mears, an unsuccessful tenderer, to prevent the award of contracts for capital improvement and refurbishment works for social housing by Leeds, on the grounds that there had been breaches of the Public Contracts Regulations. Leeds argued that certain of Mears' allegations in its underlying claim were time-barred under Regulation 47. The court reviewed case law regarding "the date when grounds for bringing the proceedings first arose", applying Amaryllis v HM Treasury ( Sarah Hannaford QC) holding that Mears had had full knowledge of what it alleged were discrete breaches of the Regulations and did not need to wait for the final decision. The proceedings were not commenced until 5 months after the decision and thus were out of time: no extension would be granted.

Irrelevant factors in considering tenders

Environmental Waste Controls Ltd v Lancashire County Council [2011] 134 Con LR 90 Court of Appeal

The CA upheld the appeal by the Council against the trial judge's decision that it was in breach of the Public Contracts Regulations 2006. The judge had held that the tender evaluation report on which the Council had relied was unduly influenced by preoccupation with the financial status of the respondents. It was agreed that this was not a proper relevant consideration to a decision to be taken on the basis of the most economically advantageous offer. The CA held that the tender evaluator had been acting professionally and had stated that he had followed advice to avoid consideration of financial status. It was not open to the judge to conclude that the irrelevant factor had been taken into account subconsciously. A judge should be very slow to reach such a conclusion, and the allegation would have to be put explicitly to the witness.

Time limit for tender challenge

Sita UK Ltd v Greater Manchester Waste Disposal Authority [2011] 134 Con LR 1 Court of Appeal

The Court of Appeal dismissed the appeal by Sita against the striking out of its claim against GMWDA. Sita had alleged breaches of public procurement law in the award of a £4 billion contract but GMWDA had been successful in its striking out application on the ground that the claim was out of time. The appeal turned on the interpretation of the Uniplex case in the ECJ and the degree of knowledge of Sita's entitlement to bring a claim that would set time running against a claimant. The CA held that Sita knew enough to bring its challenge and that time should start running then. The dismissal was unanimous, although Lady Justice Arden differed from the majority on the correct formulation of the test for knowledge in Uniplex.

GENERAL AND PROFESSIONAL NEGLIGENCE

Pure economic loss

Robinson v PE Jones (Contractors) Ltd [2011] 34 Con LR 26 and [2011] BLR 206 Court of Appeal

The claimant owner sought to sue the defendant contractors in respect of defective construction of a house, claiming economic loss, 12½ years after construction. Since the limitation period had expired, no action for breach of contract was possible and the claimant was unable to bring a claim under the NHBC scheme. On appeal from the TCC, the CA had to consider whether the contractor had concurrent liability in the tort of negligence which would entitle the claimant to succeed. The CA held the relationship between purchaser/owner and manufacturer/contractor to be primarily governed by contract, so that while tort imposes limited duties in respect of personal injury or damage to property, this would not extend to a duty to protect against pure economic loss co-extensive with contractual obligations. There may be exceptions where the duty of care is actually assumed by the defendant taking responsibility, so that a professional giving advice incurs such a duty. The Con LR Editors note that "The case is also a reminder that the parties can effectively exclude any possibility of a concurrent duty arising by the terms of their contract".

Scope of lawyer's duty

Haugesund Kommune v Depfa ACS Bank [2011] 134 Con LR 51 Court of Appeal

A major Norwegian law firm advised the defendant Irish bank on swap contracts with Norwegian local authorities, the claimants. Their advice was that the contracts were not loans and not caught by Norwegian legislation. They were governed by English law. The contracts were held invalid, but the claimants were unable to pay back the money owed. Depfa sought to recover against the lawyers. The Court of Appeal held that there was a crucial distinction in liability between supply of information and provision of advice, as emphasised by the House of Lords in SAAMCO v York Montague ( Vincent Moran QC). The solicitors had not assumed responsibility for the credit worthiness/bad faith/default of the local authorities and had not advised on the desirability of the transaction, although they had provided incorrect information negligently.

Scope of Defective Premises Act

Jenson v Faux [2011] BLM Vol. 28 No. 5 Court of Appeal

The CA held that the Defective Premises Act 1972 only applies to the provision of a new dwelling and not to the refurbishment or modification of an existing dwelling. On the facts of this case, the works in question did not amount to the provision of a new dwelling. The test is whether a 'wholly different' identity results, which could happen by conversion, but had not done so here. The claimants were not allowed to rely on the Act and the CA allowed the defendant's appeal in striking out the claim.

PRACTICE AND PROCEDURE

See Redwing Construction v Wishart under Keating Chambers Reported Cases on recoverability of Conditional Fee Agreement and After the Event Insurance costs in adjudication enforcement proceedings.

Performance Bond enforcement

AES-3C Maritza East 1 EOOD v Credit Agricole Corporate and Investment Bank [2011] CILL 2985 TCC

The court confirmed that on-demand bonds, under the ICC Uniform Rules for Demand Guarantees, should be enforced by summary judgment, provided an appropriately worded demand had been made. The bonds in the case related to the construction of a power plant in Bulgaria. The first demand was held to have been unsuccessful, in that while it demanded payment of £93 million, it only attached invoices and demands for £27 million. The second demand did not repeat this mistake and so that was valid and enforceable. Because of an adverse judgment in the French courts, granting an injunction, the TCC ordered a stay of enforcement pending the discharge of the French injunctions, given that it was an English law contract.

Setting aside judgment in default

Rajval Construction Ltd v Bestville Properties Ltd [2011] CILL 2994 Court of Appeal

The Court of Appeal allowed the appeal against the TCC's decision to set aside a judgment obtained in default of acknowledgment of service. The defendants' failure to serve a response pack under the Civil Procedure Rules rule 7.8 and to acknowledge service was a good reason to set aside a judgment in default for the purposes of CPR rule 13.3.

Costs where proceedings discontinued

Webb v Environment Agency [2011] QB 5 April

After the claimants had issued proceedings against the defendant Agency in respect of flooding of their property following work on a watercourse, the Agency revealed that it had acted under its Water Resources Act powers, so that any dispute had to be heard by the Lands Tribunal. The Lands Tribunal proceedings having been settled, the claimants sought their costs in the discontinued litigation. It was held that, even though settlement had been well below the figure claimed in the litigation, the claimants had won and the defendant was responsible for its change of position. Accordingly 80% of the claimants' base costs would be recoverable.

Performance bonds

Meritz Fire & Marine Insurance Co Ltd v Jan de Nul NV [2011] 134 Con LR 252 Commercial Court

The main issue in this case was the status of advance payment guarantees. The court held them to be performance bonds. The underlying transactions were between parties in different jurisdictions and did not contain clauses excluding or limiting defences available to a surety; the undertaking was to pay on demand. The instruments were issued by an insurance company, not a bank. The Con LR editors also deal with two further issues decided: whether any material changes to the contracts or the contractor's corporate reorganisation discharged the guarantees and whether the liquidation of the contractor prevented demand for repayment of the advance sums, precluding demand under the guarantees. The court was dismissive of both arguments.

Injunction of performance bond

Simon Carves Ltd v Ensus UK Ltd [2011] BLM Vol. 28 No. 5 May 2011 TCC

The court held that fraud is not the sole ground on which a call on an 'on demand' bond can be restrained by injunction. A beneficiary seeking payment in circumstances where the underlying contract clearly and expressly prevents it from doing so is a further ground. If the underlying contract contains such a provision, an interim injunction could be granted restraining the beneficiary, subject to the usual American Cyanamid test.

KEATING CHAMBERS REPORTED CASES

Harry Yearsley Ltd v Secretary of State for Justice [2011] EWHC 1160 TCC

The defendant Ministry failed in its attempt to strike out a claim by a disappointed tenderer for prison food contracts, although certain elements of the claim were struck out. The challenge was based on alleged breaches of the Public Contracts Regulations in the tender process. A Claim Form had been issued, although not served, in July 2010. The court held that the former was enough to constitute commencement of proceedings, whereas anything only contained in the latter would come too late. There was no justification for strike out based on the inherent merits of the case; the claimant should be given the chance to prove its case on breach and causation at trial.
Sarah Hannaford QC
Fionnuala McCredie

Redwing Construction Ltd v Wishart [2011] BLR 186 and [2011] CILL 2997 TCC

The detailed facts of this case on adjudication enforcement and the slip rule were noted in the March 2011 issue. This hearing concerned After The Event insurance and conditional fee agreements. It was held that only 20% of the Conditional Fee Agreement success fee was reasonable on the facts of the case and the nature of adjudication proceedings, given the prospects of success: The greater the prospects of success, the lower the reasonable and proportionate percentage will be." Similar considerations would apply to the ATE insurance, where the premium of £8480 for £20,000 cover was described as "substantially excessive"; again, only 20% was held to be recoverable.
Samuel Townend

Dawes v Treasure and Son Ltd [2011] 134 Con LR 133 and [2011] BLR 194 TCC

The latest instalment in long-running litigation originating in an adjudication of a dispute over works on a country house concerned the continuing jurisdiction of an arbitrator and whether he had become functus officio on the conclusion of a settlement agreement. The claimant had argued that the arbitrator had no jurisdiction from that point. The court held that, unless and to the extent that the terms of the settlement or the contract precluded or limited jurisdiction, it would not be thus limited. Accordingly, the arbitrator would have jurisdiction to interpret the settlement agreement and whether it encompassed a further claim.
John Marrin QC

Exel Europe Ltd v University Hospitals Coventry and Warwickshire NHS Trust [2011] 134 Con LR 102 and [2011] BLR 167 TCC

The defendant NHS Trust succeeded in its application for relief from the automatic suspension of its procurement process as a result of the claimant tenderers' challenge of its decision. The TCC described the case as raising issues as to how such suspensions should be treated under the Public Contracts Regulations. It considered the relevance of the American Cyanamid injunction test to the issue of whether the suspension should be continued for relief granted. On the facts, the court gave weight to the 'public interest' factor in continuing expeditiously with the procurement process when conducting the 'balance of convenience' exercise and the suspension was lifted.
Sarah Hannaford QC
Calum Lamont

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. D.Litt MCI.Arb FRICS Barrister) Visiting Professor of Law, Oxford Brookes University.

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