ADJUDICATION
NEC Adjudication and Arbitration Provisions
Anglian Water Services Ltd v Laing O'Rourke Utilities Ltd [2010] 131 Con LR 94 TCC
"One of the few reported judgments relating to the NEC form of contract" as the Con LR Editors remark. It concerns the relationship between HGCR Act adjudication provisions and the dispute resolution provisions of the (amended) NEC contract used for a sewage works project. These provisions included the requirement that, in the event of arbitration after an adjudication decision, notice must be given within 4 weeks. The court held that there was nothing in this requirement which conflicted with the HGCR Act requirements: the court had power to extend time under the Arbitration Act.
It is noteworthy that the judge complained that "the task of construing the provisions in this form of contract is not made any easier by the widespread use of the present tense in its operative provisions. No doubt this approach to drafting has its adherents within the industry but, speaking for myself and from the point of view of a lawyer, it seems to me to represent a triumph of form over substance".
Apparent Bias
Fileturn Ltd v Royal Garden Hotel Ltd [2010] 131 Con LR 118 and [2010] BLR 512 TCC
The defendant client failed in its allegation that there was a real possibility that the adjudicator was biased. The basis of the allegation was that the adjudicator had been a director of a consultancy firm at the same time as Fileturn's representative had been a director of another office of the same firm. The court reiterated that the test was "whether an informed and fair-minded observer would conclude that there was a real possibility that (the adjudicator) was biased." It was well established that there was no objection to the legal representative of one of the parties being well known to the judge and the defendant had no real prospect of establishing at trial that there was apparent bias, so Fileturn would be granted summary judgment.
Interaction of Determination Provision and Adjudication
Banner Holdings Ltd v Colchester Borough Council [2010] 131 Con LR TCC
An adjudicator had ruled on the issue of determination of the contract, in which the claimant was to build an arts centre for the defendant. The contract purported to provide that such matters were outside the scope of the adjudication provisions, but the adjudicator regarded himself as able to decide on them. The court upheld this. If the contract had been interpreted as the contractor wished, it would have been contrary to s.108 HGCR Act and the Scheme rules would have applied.
Adjudicator's Jurisdiction on Different Case
Nickleby FM Ltd v Somerfield Stores Ltd [2010] 131 Con LR 203 and [2010] BLM Vol. 27 No. 9 TCC
The main issue between the parties to a dispute over a management services contract was whether the claimant could rely in the enforcement hearing on a factual case which was different from that put before the adjudicator, because of e-mails found after the adjudication, or whether, as the Con LR Editors put it, "he was stuck with his 'election' as to the basis of the alleged extension of the contract." The court held that the adjudicator had jurisdiction and that enforcement should be granted.
Adjudication in Ireland
Clarke Quarries Ltd v PT McWilliams Ltd [2010] BLR 520 1HC
Although statutory adjudication in Ireland is not yet operating (it soon will be), adjudication is already relevant to Irish construction to a limited extent because of the use of some UK standard forms. In this case, the client, Clarke Quarries, sought an injunction to prevent contractor PT McWilliams from pursuing an adjudication claim under the contract while an arbitration was undertaken. The judge held that the effect of the dispute resolution provisions of the contract was that a party was not precluded from referring to adjudication a matter not yet determined in arbitration. In effect, in this contract, adjudication came before arbitration, which was then the final stage of dispute resolution.
Delay in Delivery of Decision
Lee v Chartered Properties Ltd [2010] BLR 500 TCC
The TCC refused to grant summary judgment to the defendant contractor Chartered against the claimant owner, a litigant in person. The decision of the adjudicator, made by mid-afternoon on the Friday, was not communicated to the parties until the Monday and was thus not delivered as soon as possible after the decision was reached. The BLR Editors take the view that this aspect will in future "be confined to the particular facts of the present case."
Adjudication and Stay to Arbitration
MBE Electrical Contractors v Honeywell Control Systems Ltd [2010] BLR 561 TCC
In a dispute over electrical works, the parties agreed that the significant underlying issues would be governed by arbitration pursuant to the arbitration agreement in the contracts. There were disputed issues on the Final Account which MBE referred to adjudication, obtaining a £37,000 decision. Honeywell sought to resist enforcement by seeking a stay to arbitration. The BLR editors describe the judge as having dealt with this argument "in a very robust manner". Since their contract incorporated the Scheme, an adjudicator's decision was to be complied with or enforced immediately and could be the subject of later review in arbitration when the main issues were also decided. The BLR editorial view is that the matter is rather more complex than this would suggest.
Reservation of Position on Jurisdiction
Aedifice Partnership Ltd v Ashwin Shah [2010] BLM Vol. 27 No. 9 TCC
Already reported in CILL, in a dispute over professional fees which the claimant surveyors referred to adjudication, the respondent client submitted that there was no adjudication agreement and that the adjudicator had no jurisdiction. The adjudicator indicated that he thought that he had jurisdiction and the respondent asked for his reasons. In enforcement proceedings by the claimant, the respondent successfully argued that he had reserved his position on jurisdiction and that his request for reasons did not constitute an agreement that the adjudicator had the power to decide his own jurisdiction. It would be open to the claimant to proceed with a contractual or quantum meruit claim.
HGCRA s.105(2) Interpretation
Construction operations: Broad and Narrow
Approaches
by Peter Sheridan, Construction Law Journal [2010] Vol. 26
Issue 7 p52
The regular Construction Act Review column revises the issue as to what constitutes a construction operation and the exemptions under s.105(2). The case law is reviewed, with particular emphasis on North Midland v Lentjes (Stephen Furst QC) and Cleveland Bridge v Whessoe-Volker Stevin (Adrian Williamson QC and Lucy Garrett).
See Straw Realisations v Shaftsbury House under Keating Chambers Reported Cases on jurisdiction of adjudicator to order payment following contractor's insolvency.
ARBITRATION AND DISPUTE RESOLUTION
Arbitration Law Monthly Vol. 11 No. 1 December
2010/January 2011
contains the following articles:
Serious irregularity
on Price & Carter in the TCC
on tribunal appointed expert and extension of time for appeal.
Stay on judicial proceedings
on Drydocks World-Singapore v Jurong
Port in the Singapore High Court on power to impose
conditions on stay.
Stay or proceedings
on Kaye v Nuskin on English law
contract providing for arbitration in Utah.
Serious irregularity
on B v A on whether disregard of
applicable (Spanish) law could be serious irregularity under UK
Arbitration Act.
Anti-suit injunctions
on Dreyfus Commodities Kenya v Bolster
Shipping on refusal to grant injunction against
Mexican proceedings.
Enforcement of arbitration awards
on Pacific King Shipping v Glory Wealth
Shipping in the Singapore Courts on the effect of a
winding-up petition.
Religious Qualification for Arbitrator
Nurdin Jivraj v Hashwani [2010] CILL 2929 Court of Appeal
The Court of Appeal allowed in part its appeal against the Commercial Court's decision that the Employment Equality (Religion and Belief) Regulations 2003 did not apply to arbitrators. The CA held that arbitrators are to be treated as (a special kind of) employers for these purposes. The application of the Regulations meant that the requirement that the arbitrator should be a member of the Ismaili community would be void. This requirement was not severable, so the effect would be to make the whole arbitration clause void. The CA upheld the part of the lower court's decision negating the appointment of a particular arbitrator, because the clause was invalid.
Construction Law Journal 2010 Vol 26 Issue 7
contains the following articles:
Is construction mediation changing?
by Peter McCartney and Alexander Dain, Contract &
Construction Consultants (Southern) Ltd.
Cross-border mediation and civil proceedings in national
courts
by HH Judge Toulmin QC
The Chinese experience of international
arbitration
by Hong Song Wang, Beijing Arbitration Commission.
CONSTRUCTION AND ENGINEERING CONTRACT DISPUTES LAW
Breach of Contract Under IDDCO Form
Seadrill Management Services Ltd v OAO Gazprom [2010] 131 Con LR 9 CA
This is the CA appeal against the first instance decision reported in 126 Con LR. Under an International Day Work Drilling Contract Off-shore (IDDCO) form, Gazprom, the defendant client, purported to terminate for alleged repudiation by the claimant rig managers. On the IDDCO contract, it was held that there had been no repudiatory breach, by Seadrill, but that Seadrill could terminate for Gazprom's non-payment. Gazprom was entitled to recover damages for actual loss attributable to Seadrill's negligence. The CA dismissed Seadrill's appeal, upholding the judge's interpretation of the IDDCO form. Nothing in the contract displaced the normal inference that reasonable care and skill was required and Seadrill had been negligent.
See WW Gear Construction v McGee Group under Keating Chambers Reported Cases on the effect of a condition precedent in claims procedure.
Concurrent Delay
City Inn Ltd v Shepherd Construction Ltd [2010] BLR 473 CSIH
The Inner House of the Court of Session largely confirmed, by a majority, the findings of the Lord Ordinary in the Outer House interpreting Clause 25 of JCT 80. They applied the rules of causation in deciding on an extension of time by means of an apportionment as between the delaying effect of relevant events and of other events, when both together cause the delay. The majority stated 4 main principles:
- Relevant event must be shown to be cause of delay
- Whether it has such causative effect is a matter of fact, to be decided by commonsense.
- The decision maker can decide on causation on any acceptable evidence available. A critical path analysis, if soundly based, may assist, but absence of one does not mean the action must fail.
- If a dominant cause can be identified, non-material causes should be left out of account.
- Where neither of two causal events is dominant, one being relevant and the other not, the decision maker can resolve the matter by apportionment.
Entire Agreement Clauses and Incorporation of Terms
North Eastern Properties Ltd v Coleman and Quinn [2010] BLR 579 CA
Already reported in the TCLR, the case concerns an agreement by the appellant purchasers that they would receive a 2% 'finder's fee' from the respondent vendor in respect of each unit in a development of flats but this term was not included in the contracts for the sale of the land. The purchasers argued that these were therefore void under the Law of Property (Miscellaneous Provisions) Act. The CA upheld the trial judge's finding that the entire agreement clause confirmed that nothing had been omitted which governed the contract, so that the purchasers had not been entitled to rescind the contracts. The CA held the contracts for sale to be valid and enforceable, though the appellants' counterclaim for payment of their fee should have succeeded, since this was a separate agreement.
See Gold Group Properties v BDW Trading under Keating Chambers Reported Cases on the meaning of a duty of good faith in a contract.
Utmost Good Faith and Reasonable Endeavours
CPC Group v Qatari Diar Real Estate Investment Co. [2010] BLM Vol. 27 No. 9 Ch. Div.
Already reported in CILL, the Chancery Division held that the phrase 'all reasonable endeavours' does not necessarily require a party to sacrifice its own commercial interests to meet the obligation. It was considering the Sale and Purchase Agreement on the Chelsea Barracks site and its obligations on Qatari Diar as joint venture partners of CPC. The court thought it difficult to see how there could be a breach of duty of good faith without showing bad faith.
Contract and Unjust Enrichment
Benourad v Compass Group Plc [2010] BLM Vol. 27 No. 9 QBD
This is a non-construction case, being concerned with fees for introduction of business. The claimant operated as a business facilitator and agent and claimed contractual commission or alternatively a fee for his services based on restitution. The judge held that there was no contract on the facts, so that no commission was payable. Whether a restitutionary claim is sustainable was described by the judge as a very fact-sensitive question. Following Regalian Properties v LDDC (Piers Stansfield) a 'subject to contract' stipulation should normally eliminate both contractual and restitutionary claims. Other factors include whether work has actually been undertaken, whether terms are still to be agreed, the nature of the benefit received, who took the risk and any preparatory work done. There may also be issues of waiver, estoppel and unconscionable conduct, reflecting the fact that restitution is an equitable doctrine.
Construction Law Vol. 21 Issue 10 December 2010
contains the following articles:
Economic loss and complex structures
by Ashley Pigott and Alex Freeman, Wragge & Co.
Challenging conditions precedent
by Alastair Young, HBJ Gateley Wareing
How late is too late?
by Alexander Whyatt, Clyde & Co.
(on the need for timely adjudication decisions)
Net Contribution Clause
Langstane Housing Association Ltd v Riverside Construction (Aberdeen) Ltd [2010] Con LJ Vol 26 No 7 566 (Court of Session Outer House)
This was reported in 124 Construction Law Reports, the judgment is mistakenly dated April 2010, instead of April 2009, in the Con LJ report. A consultancy agreement between Langstane, the client housing association, and their consultant engineers was held to have incorporated the ICE Conditions of Engagement. These included a net contribution clause. Langstane sought to deny that the net contribution clause formed part of the contract, but it was held to do so. They also sought to argue that it breached the Unfair Contract Terms Act, but it was held not to do so, since it was not on the engineers' written standard terms of business and was not an exclusion of liability.
Liquidated Damages
Azimut-Benetti SpA v Healey [2010] 2921 and [2010] TCLR 7 Commercial Court
The buyer of a yacht sought to resist a claim for summary judgment under a guarantee on the ground that the liquidated damages clause (set at 20% of contract price) was a penalty. The provision in question had been heavily negotiated, but Benetti had maintained that it represented the minimum it would cost to re-sell the yacht. The court reviewed the law on penalties and granted summary judgment. The clause, read as a whole, had a clear commercial and compensatory justification, and had been freely entered into, during negotiations in which both parties had expert representation. The clause placed obligations on both parties. It was not even arguably a penalty and the court would apply the presumption that such provisions should normally be enforced.
Fitness for Purpose and Unreasonable Disclaimer
Kingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Ltd [2010] Con LJ Vol 26 Issue 7 542 TCC
In an IT contract dispute, it was held that the software and systems provided by the defendant supplier were not fit for purpose and not of satisfactory quality. The supplier was unable to avoid liability by reliance on its standard exclusion clauses, to which the Unfair Contract Terms Act would be applied and which did not pass the test of reasonableness.
CONTRACT AND PROCUREMENT LAW
Construction Law Vol. 21 Issue 10 December 2010
contains the following articles:
Minor work oddity
by Michael Phipps, Thurston Consultants
(on contractor's possession of site under JCT MW 2005).
Beware of 'doorstep selling'
by Daniel Goodkin, 4 Pump Court
(Cancellation of Contracts made in a Consumer's Home or Place
of Work Regulations 2008).
An introduction to the Bribery Act
by Vijay Bange, Trowers & Hamlins
Tenders must be truthful
by Richard Dartnell, Pinsent Masons
(on BSky B v EDS).
Anticipating the worst: the broker's rule
by John D. Wright, JD Risk Associates
GENERAL AND PROFESSIONAL NEGLIGENCE
Measured Duty of Care
Lambert v Barratt Homes Ltd [2010] 131 Con LR 29 and [2010] BLR 527 CA
Following development of Council owned land by Barratt Homes, drainage was affected and the claimants' property flooded. The TCC held Barratt liable in negligence and held the Council to be in breach of a 'measured duty of care', meaning an occupier's duty of care to a neighbour to remove or reduce natural or artificial hazards on his land, following Holbeck Hall Hotel v Scarborough BC (Paul Darling QC). The Council succeeded in its appeal to the CA. Although the judge had not been wrong in principle to hold that the Council was under a 'measured duty of care', this would require a careful examination of the facts, which the judge had not carried out. The appeal was allowed, despite the fact that the application was made nine months after the first instance judgment was handed down, which the Con LR Editors describe as a "relatively long period of inactivity."
Economic Loss in Tort of Negligence
Linklaters Business Services v Sir Robert McAlpine [2010] BLR 537 TCC and
How Engineering Services Ltd v Southern Insulation (Medway) Ltd [2010] BLR 552 TCC
Already reported in Con LR, the cases concerned the possible liability of a subcontractor in respect of economic loss caused by negligence. Damage had occurred allegedly because of defective insulation of chilled water pipes. The BLR Editors have chosen to report the two cases with a single head note and commentary, as very closely related. The courts dismissed both an application for summary judgment on a defence and also a defendant's application to strike out the claim, noting that it should in such cases not conduct a 'mini-trial' and should be especially cautious of striking out a claim in a developing area of jurisprudence. It appears that the 'complex structure' theory may still have potential relevance to such cases; there are few decisions covering the situation where one subcontractor's work affects the work of another on a different part of the building. The judge gave leave to appeal to Southern, who had lost out in both cases, in its application for summary judgment on its defence and on its application to strike out How's claim.
PRACTICE AND PROCEDURE
Penalties
Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2010] 131 Con LR NSW CA
This (non-construction) case is of value as an expansive review by an Australian appellate court of the law on penalties. The court observed that a penalty need not be expressed in terms of money, but could, for example, involve a transfer of property: it must be payable on breach. The rule against penalties involves assessment at the time of making the contract and is distinct from relief against forfeiture. The provisions in this case were not penalties on the facts.
Liquidated Damages
J-Corp Pty Ltd v Mladenis [2010] 131 Con LR 188 SCWA
The Supreme Court of Western Australia held that the entry of 'Nil Dollars' in the liquidated damages provision would not preclude the recovery of unliquidated damages. The Con LR Editors observe that this was the opposite conclusion, on similar facts, to the English position as decided by the CA in Temloc v Errill (Paul Darling QC). The Australian court held that quasi-exclusion clauses would have to be narrowly construed and clearly stated to deprive a party of its rights.
Indemnity Costs Refused
BSkyB Ltd v HP Enterprise Services Ltd (No. 2) [2010] 131 Con LR 42 TCC
This was the costs hearing of the high-profile TCC decision in which BSkyB succeeded in its claim for deceit and negligent misstatement against the defendant IT service suppliers, reported in 129 Con LR. BSkyB was held to be entitled to a proportionate order, rather than an issue-based one, which would here result in them receiving 85% of their costs. Despite the perjury of one of its principal witnesses, who lied about a purchased MBA, indemnity costs were held not to be appropriate: the defendants' overall conduct was not sufficient to justify them.
No Extension of Time for Service of Claim
City & General (Holborn) Ltd v Royal & Sun Alliance plc [2010] 131 Con LR 1 CA
This is the CA decision on the appeal from the TCC reported in 126 Con LR (as City & General v Structure Tone). The claimant employer had sought extensions of time for service of the claim forms for a negligence/nuisance claim against subcontractors and insurers, at first on the basis of a relevant pending arbitration. Subsequently, the TCC case administration unit advised the claimant's solicitors that the mid-term break would delay the assigned judge's deliberation on the applications and so service of the claim forms was delayed. The TCC discharged the order to extend time and set aside the claim forms. The CA dismissed the appeal. It was too late to argue in the CA that limitation should have been considered separately for each head of claim. The TCC decision did not prevent new arguments as to new causes of action and new limitation periods, and as to acknowledgment, which could be the subject of further action. But that did not provide a reason to overturn the TCC decision.
Security for Costs and ATE Insurance
Michael Phillips Architects Ltd v Riklin [2010] BLR 569 TCC
The court rejected the argument that the existence of an ATE (After the Event) insurance policy would serve to meet an application for £60,000 security for costs applied for by the defendant owners to a £147,000 fees claim by their architects. It held that such a policy, because of its wording and effect, provided no real costs security for the defendants and ordered the claimant to provide security of £30,000.
The Commercial Litigation Journal No. 34
November/December 2010
contains the following articles:
Privilege: EU competition investigation
by Mark Powell and Geneva Forwood, White & Case
Jurisdiction: not in my back yard
by Alex McGurk, Harbottle & Lewis
(on anti-suit injunctions)
Civil procedure: an easy mistake to make
by Joanne Williams, Weightmans
(on the slip rule).
Enforcement: the first claim
by Richard Power, Berwin Leighton Paisner
(on standby letters of credit).
Contract law: rules of the game
by Kieron O'Callaghan, Yacine Francis and Nathan
Searle (Hogan Lovells)
(on the EC contract law policy consultation).
Bribery Act: commercial sensibility in corruption
cases
by Nicholas Cropp, 7 Bedford Row
Enforcement: do not pass Go, do not collect
£200
by Anthony Dutton, Christian Tuddenham and George Walton
(Norton Rose)
(on committal of a judgment debtor).
Civil procedure: Practice Direction 31B
by Tracey Stretton (Kroll Ontrack)
(on electronic disclosure).
TCC Costs
Review of Civil Litigation Costs –
Construction Litigation and the TCC
by Jane Ryland, Cripps Harries Hall, Construction Law Journal
[2010] Vol 26 Issue 7 p.589
The article considers how Lord Justice Jackson's civil costs report of December 2009 is likely to affect construction litigation. The article covers the Pre-Action Protocol, statements of case and witness statements, lists of issues, disclosure, e-working, low value construction disputes, costs management and the idea of a Costs Council. The Con LR Editor notes that the new Practice Direction on e-disclosure which came into effect in October 2010 and the TCC's e-working pilot scheme (introduced July 2009) make those sections of the article of particular interest.
See Fitzroy Robinson v Mentmore Towers and Anglo-Swiss under Keating Chambers Reported Cases on entitlement of claimant to interest under Late Payment of Commercial Debts (Interest) Act.
See LPI (Hotels) v Technical and General Guarantee Co under Keating Chambers Reported Cases on the irrecoverability of certain expert costs.
KEATING CHAMBERS REPORTED CASES
WW Gear Construction Ltd v McGee Group Ltd [2010] 131 Con LR 63 TCC
The TCC upheld the claims procedure in a trade contract in
connection with the construction of a London hotel. The contractor
was required to comply with the provisions of the contract,
including the time limit, as a condition precedent to its loss and
expense claim. The Con LR Editors comment that "If there
is one lesson to be taken from the case, it is that the court will
be prepared to uphold properly drafted condition precedent clauses,
so contractors faced with such clauses and who want to retain their
rights to matters such as extra payment under the contract must be
scrupulous to comply with the requirements of the same."
Marc Rowlands
Abdul Jinadu
Gold Group Properties Ltd v BDW Trading Ltd [2010] BLM Vol. 27 No. 7 TCC
This is a subsequent part of the litigation which dealt with
argument of frustration by economic factors. This part considered
the nature and extent of the obligation of a party who agrees to
act at all times in good faith. The basic interpretation was that
it does not impose a fiduciary duty so that the party subject to
the obligation is not required to abandon the pursuit of
self-interest. Rather it operates to qualify self-interest,
requiring that both parties act so as to allow both to enjoy the
anticipated benefits of the contract. It does not require either
party to give up a freely negotiated financial advantage clearly
expressed in the contract.
HH Judge Stephen Furst QC
sitting as a Deputy Judge
LPI (Hotels) Ltd v Technical and General Guarantee Co SA [2010] CILL 2926 TCC
Even though the Court endorsed a consent order, in relation to
expert (accounting) evidence, it did not mean that all the costs of
that evidence were recoverable. The point had been reached when the
claimant should have realised that the continued use of the expert
would not take its case significantly further and from that moment,
the expert costs were not recoverable.
Alexander Nissen QC
Straw Realisations (No 1) v Shaftesbury House (Development) Ltd [2010] EWHC 2597 TCC
The administrators of the claimant contractor sought summary
judgment of 2 adjudication decisions in their favour against the
defendant client. The contractor had gone into administration after
the first decision and after the second adjudicator had been
appointed. The contract provided that no money was to be payable to
the contractor after an act of insolvency. The defendants argued
unsuccessfully that the adjudicator had no jurisdiction or was in
breach of natural justice in proceeding after the administration.
Where the adjudicator's decision had become final, summary
judgment could be granted subject to a stay on the first
adjudication, although not on the second, which was valid but had
not become final.
Marc Rowlands
Fitzroy Robinson v Anglo Swiss Holding Ltd (No 3) [2010] BLR 165 TCC
The defendant client failed in its argument that interest on the
amount unpaid to the claimant architects should be denied because
the claimant had been guilty of misrepresentation as to the
availability of a leading architect for the project. The court held
that such arguments went to liability, not to quantum or interest
on sums owing. The Late Payment of Commercial Debts (Interest) Act
1998 would be applied and interest awarded at 8% above base
rate.
Paul Darling QC
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.
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