UK: The JCT 2005 Standard forms of Contract - 31st May 2006

ADJUDICATION

Resolving residential occupiers’ disputes by David Miles, Glovers and Adjudication and PFI contracts by Dominic Helps, Shadbolts, Construction Law Journal 2006 Vol.22 No.2 p.117
The regular Construction Act Review contributed by Dominic Helps and Peter Sheridan of Shadbolts includes a short piece by David Miles on the Construction Group’s Construction Conciliation Procedure launched in 2003, which is in essence a form of med/arb. Further details can be obtained from the Group’s website at www.ccgroup.org.uk. The relevance to adjudication is in the potential lacuna created by the HGCR Act s.106 exclusion of residential occupier disputes from the adjudication regime.

The second part by Dominic Helps is largely a commentary on Midland Expressway v Carillion Construction (Nerys Jefford) and the ‘equivalent project relief’ provisions common in PFI contracts but nevertheless inconsistent with ss.108 and 113 of the HGCR Act.

Construction Law March 2006 Vol.17 Issue 2 contains the following articles:

Construction Act review a missed opportunity
by Tom Wrzesien and Sam Nichols, Taylor Wessing

That’s so unfair!
by Lawrence Davies, Pinsent Masons on Ardmore Construction v Taylor Woodrow

John Roberts Architects Ltd v Parkcare Homes (No.2) Ltd [2006] CILL 2323 and [2006] BLR 106 CA
The CA reversed the TCC’s decision that an adjudicator had no power to award costs in the event of the adjudication being discontinued. The CA held that it would be very odd if the power to award costs only arose where there was a substantive contested decision. That would mean that either party, having behaved unmeritoriously in advancing claim or defence, could then avoid the consequences of the expense generated by throwing in their hand at the eleventh hour. Therefore under clause 9.2 of CE/99, which had been used to replace clause 29 in the CIC Model Adjudication Procedure 3^rd ed used, the adjudicator could award costs "as part of what he had to decide".

William Verry Ltd v Camden London Borough Council [2006] All ER (D) 292 TCC
The defendant council notified the claimant contractor that it was going to deduct from an adjudicator’s award in the contractor’s favour liquidated damages certified as due in the final certificate. The court, applying Levolux v Ferson, held that the overall effect of s.108 HGCR Act was to exclude the right of set-off. The defendant council would be required to comply with the adjudicator’s decision pro tem, although its right to bring proceedings for the alleged breaches would be unaffected.

See Captiva Estates Ltd v Rybarn Ltd under Keating Chambers Reported Cases on exclusion of development agreements from the HGCR Act’s adjudication provisions.

See All in One Building v Makers UK under Keating Chambers Reported Cases on existence of a dispute in adjudication.

See Quietfield v Vascroft Contractors under Keating Chambers Reported Cases on failure to consider new evidence in subsequent adjudication.

See Capital Structures v Time & Tide Construction under Keating Chambers Reported Cases on the refusal of enforcement of an adjudication decision under a contract allegedly void for duress.

Construction Law Vol. 17 Issue 3 April 2006 contains the following articles:

Enforcing adjudicator’s decisions
by Sam Bailey, Pinsent Masons (on Bryen & Langley v Boston)

How dangerous is using your initiative?
by Paul Newman, Hugh James (on Rankilor v Igoe)

A motorway pile-up
by Fraser Morrison, Pinsent Masons (on Midland Expressway v Carillion Construction) (Nerys Jefford)

Improving payment practices in the construction industry BLM Vol. 23 No.4 p.1
This is a summary of the Department of Trade & Industry’s paper of January 16 2006 analysing responses to its earlier consultation exercise on reform of the HGCR Act and setting out the Government’s proposals and pay-when-certified clauses, periods of suspension, trustee stakeholder accounts, adjudicators’ entitlement to payment where they stand down, costs and a power to re-open ‘final and conclusive’ decisions.

Construction Act Review by Dominic Helps and Peter Sheridan, Shadbolts, Construction Law Journal 2006 Vol.22 No.3 p.176
The regular HGCR Act column considers the responses to the DTI consultation exercise under the three principal headings of payment framework (adequate payment mechanism under s.110, removal of s.110 notices, applications for payment, content of withholding notices and pay-when-certified clauses). Other payment proposals (s.112 suspension and remobilisation, outlawing cross-contract set-off, pay-when-paid clauses in insolvency, staged payments) Adjudication (outlawing trustee stakeholder account suspensions, adjudicator’s powers on own jurisdiction, ‘final and conclusive’ decisions on interim payments, adjudicators’ immunity and adjudicator independence.)

Michael John Construction Ltd v Golledge [2006] TCLR T3 TCC
Where a construction contract was concluded between a contractor and an unincorporated club, it was signed by trustees of the club. The contractor referred payment problems to adjudication and obtained awards in its favour. The defendant trustees resisted enforcement on the ground that the adjudicator had no jurisdiction to bind the trustees since, under the club’s constitution, the proper responding parties were each and every club member and that the second reference comprised two disputes. The court rejected the defendant’s arguments: the club’s constitution was irrelevant as between the contracting parties and it would be contrary to the purpose of adjudication if simple disputes were required to be separated into individual components.

Wethered Estate Ltd v Davis [2006] BLR 86 Ch.Div.
This is a relatively rare example of refusal of mediation being approved by the court. Defendants parked every day on the claimant’s property and the claimants refused to mediate until they stopped and the issues in dispute were clarified. Mediation proved unsuccessful and the claimants won at trial. The court rejected the defendants’ submission that the claimants were not entitled to their costs because of refusal of mediation. It was certainly reasonable to refuse mediation until the vehicle was removed. While often it would not be reasonable to wait until litigation proceeded before agreeing to mediation, here the defendants had failed to show that the claimants were unreasonable in wanting the issues defined.

Mediation outcomes: lawyers’ experience with commercial and construction mediation in the United Kingdom by Penny Brooker, University of Wolverhampton and Anthony Lavers, Pepperdine University Dispute Resolution Law Journal 2005 Vol.5 p.161.
The article reports on the final phase of a three year study at Oxford Brookes University of the role of lawyers in the development of ADR, drawing on US and Canadian studies. Whereas reaching settlement is typically regarded as the measure of success, this research, deriving from interviews with 30 lawyers experienced in mediation, focuses on other mediation outcomes. These include assisting the parties in narrowing the issues in dispute, testing the strengths and weaknesses of cases and sending messages to opponents. Tactical considerations revealed in the interviews are explored.

City & General (Holborn) Ltd v AYH Ltd [2006] BLR 66 TCC
The issue arose from the refusal of project manager AYH to concur in the appointment to hear disputes between them and their clients of an arbitrator who had already been appointed to hear disputes between the client and the main contractor. The court exercised its discretion under s.18 Arbitration Act 1996 to appoint the same arbitrator, given that a material number of the issues were the same or substantially connected with those in the dispute already referred to arbitration. The commercial purpose of the arbitration clause was clearly that such related disputes should be heard by the same arbitrator, to avoid multiplicity of proceedings and inconsistent findings.

Arbitration International 2006 Vol. 22 No. 1 contains the following articles:

Law and practice of escalation clauses
by Klaus Peter Berger, University of Cologne

The timely arbitrator: reflections on the Bockstiegel Method
by Jan Paulsson, Freshfields, Paris

Nothing if not critical for Investment Treaty Arbitration: Occidental, EureKo and Methanex
by Zachary Douglas, Matrix Chambers

A principal approach to adjourning the decision to enforce under the Model Law and the New York Convention
by Gerald Ghikas, Borden Ladner Gervais, Vancouver

The essential judge: the role of the courts in a system of national and international commercial arbitration
by Markham Ball, International Law Institute, Washington DC

Arbitration and criminal law: reflections on the duties of the arbitrator
by Alexis Mourre, Paris Bar

Swire Properties revisited: appeal on a question of law arising out of an arbitration award in Hong Kong
by Gu Weixia

The status and operation of unilateral or optional arbitration clauses
by Simon Nesbitt, Lovells and Henry Quinlan, Skadden Arps

Enforcement of foreign arbitral awards: application of the public policy rule in Russia
by Diana Tapola, Tikkurila Group, Finland

The Journal of International Arbitration Vol. 23 No. 2 April 2006 contains the following articles:

Provisional enforcement of international arbitral awards made in France – the dilatory effect of the French set-aside application
by Alan Farhad

New Arbitration Acts in Denmark and Spain
by Ana Lopez-Rodriguez, University of Aarhus

Arbitration agreements in China: battles on designation of arbitral institution and ad hoc arbitration
by Jian Zhou, University of Wisconia

Towards finality of arbitral awards: two steps forward and one step back
by Alexis Mourre, Castaldi Mourre Sprague and Luca Radicati di Brozolo, Bonelli, Eredo, Pappalardo.

ACICA’s new International Arbitration Rules
by Simon Greenberg, Decherts, Paris

The International Construction Law Review Vol. 23 Part 2
contains the following articles:

Balancing sovereignty and the contractor’s rights in international construction arbitrations involving state entities
by Philip Dunham and Simon Greenberg, Decherts, Paris

Pakistan’s construction disputes at ICSID
by Syed Bulant Sohail, Orr Dignam & Co, Karachi

The new CIETAC Rules and Enforceability of agreements to negotiate and mediate: where does Hong Kong stand?
both by David Bateson and Kim Barton, Mallesons Stephen Jaques, Hong Kong.

Arbitration Law Monthly Vol.6 No.5 May 2006
contains the following articles:

Jurisdiction on Primetrade v Yrhan Ltd (loss of the right to challenge jurisdiction).

Parties to the arbitration on AMB Generali Holding v SEB Trygg Liv Holding (proceedings commenced in the wrong name).

Enforcement of arbitration awards on Svenska Petroleum v Republic of Lithuania (enforcement of awards against states)

Agreement to arbitrate on AXA Re v Ace Global Markets (incorporation of a clause by reference)

Combination of arbitration proceedings on City & General v AYH (appointment of a common arbitrator).

International Arbitration Law Review Vol.9 Issue 2 April 2006 contains the following articles:

State immunity and arbitration
by Hakeem Seriki, DLA Piper Rudnick and Mark Beeley, Vinson & Elkins

Arbitration in the finance sector: avoiding the ‘Italian torpedo’
by Simon James and Robert Lambert, Clifford Chance

International character of disputes as a requirement to the validity of arbitral agreements and awards
by Edin Karakas, Zuric i Partneri

Consolidation by stealth: a case study
by Paul Dillon and Peter Limbert, Hammonds

Are you in? Or are you out? An analysis of Section 69 of the English Arbitration Act 1996: appeals on a question of law
by Taner Dedezade, Tanfield Chambers

London Bus Services Ltd v Tramtrack Croydon Ltd [2006] All ER (D) 259 Commercial Court
Under a PFI contract, the defendant Tramtrack, a private sector concessionaire, agreed to operate the Croydon tram system. The claimant brought proceedings seeking interpretation of the agreement and specifically whether the defendant was obliged to provide a 33% increase in passenger carrying capacity. The court held that the defendant was obliged to enhance carrying capacity, but only insofar as specifically provided in the contract.

See Shawton Engineering v DGP International under Keating Chambers Reported Cases on circumstances allowing termination for delay in performance.

Temporary disconformity in construction and engineering contracts
by Ellis Baker and Anthony Lavers, White & Case, Construction Law Journal [2006] Vol. 22 No. 281
This is a published version of the authors’ Society of Construction Law presentation considering situations where, during the currency of a project, the works do not comply with the contract requirements and the legal consequences flowing from that, specifically whether the owner is entitled to a remedy against the contractor. The ‘temporary disconformity’ argument has met resistance in the English courts, but has been applied in other common law jurisdictions. The authors conclude that it has a role to play in dealing with the regulation of the relationship between the parties.

Disruption and delay: fair entitlement and the regulation of risk
by Patrick Lane SC Construction Law Journal [2006] Vol. 22 No. 292
The article looks at causes of delay and disruption and issues of causation and allocation of risk, comparing the FIDIC Red Book 4^th edition with the 1999 FIDIC General Conditions, largely to the latter’s disfavour and considering provisions of the SCL Protocol and relevant case law. The conclusion is that greater certainty is needed in contractual provision for allocation of risk and especially the mechanism for dealing with applications for extensions of time and compensation for delay and disruption.

Construction Law March 2006 Vol. 17 Issue contains the following articles:

Minor Works drops archaic words
by Michael Phipps, Thurston Consultants

Construction Law – review of 2005
by Chris O’Carroll, Pinsent Masons

Frameworks fail to fit with Europe
by David Mosey, Trowers & Hamlins
(on the new NEC3 Framework Agreement)

Insolvency does not affect final date for payment
by Shona Frame, MacRoberts

Technology and Construction Court Guide
by Paul Newman, Hugh James

Professional indemnity – pitfalls for the unwary
by John Wright, JD Risk Associates

The International Construction Law Review Vol. 23 Part 2 contains the following articles:

Calculation of a reasonable time to complete when time is at large
by Keith Pickavance, Hill International

Construction loans in Israel: bank’s liability towards third parties
by Ruth Plato-Shinar, Netanya Academic College

Public Private Partnerships – the new Greek law
by Panagiotis Verveniotis, Verveniotis & Partners, Athens

The Mitcham-Frankston Project: streets ahead of City-Link?
by Lawrence Mahaffy, BOS International

Recent legal developments in China on the use of bonds
by Rico Chan, Baker & McKenzie, Hong Kong

Standard construction contract forms; statutory and regulatory changes; case law (England and Wales)
by Martin Bridgewater, Nicholas Downing and Marina Milner, Herbert Smith, London

Construction Law Vol. 17 Issue 3 April 2006 contains the following articles:

Systematic contracts increase clarity
by Michael Phipps, Thurston Consultants (on JCT Intermediate Form 2005)

Liability insurance – what constitutes an event?
by John Wright, JD Risk Associates

Saints or Sinners?
by John Sheils, Shadbolt & Co (on partnering contracts)

Corporate homicide – diverging solutions
by Edward McHugh, Dundas & Wilson

‘Equivalent project relief’ in PFI – is there a future?
by Hamish Lal, Four New Square (on Midland Expressway v Carillion) (Nerys Jefford)

Robertson Group (Construction) Ltd v Amey Miller (Edinburgh) Ltd [2006] BLM Vol.23 No.4 p.4 Court of Session Inner House
The Inner House dismissed the appeal from the decision of the Outer House reported in BLR. The case concerned the interpretation of the words "all direct costs and directly incurred losses" as contained in a letter of intent, which purported to limit the extent of reimbursement claimable by the contractors against the Joint Venture on a school PFI project in Edinburgh. The Outer House had held that failure to make a profit should be accounted a loss in calculating damages for breach of contract. Costs in the sense of expenditure and losses would be recoverable under the contractual formula. The costs or losses, to be ‘direct’ or ‘directly incurred’ would have to be such as arise naturally in the usual course of things from the relevant event: in this case, the instructions for works under the letter of intent. The Inner House, dismissing the appeal, held that the meaning of reasonableness of sums recoverable for the purposes of damages was an issue best resolved at trial.

See Scheldebouw BV v St James Homes under Keating Chambers Reported Cases on requirement of impartiality and fairness in contract administration.

This is the CA’s decision dismissing the appeal by Arup against the TCC’s decision noted in KC In Brief 2005. The CA held that Arup, the defendant designers, who had been working on a power station project in the Philippines, were in breach of their obligation under the design agreement to verify their design assumptions as to the load-bearing capacity of the site. The CILL Editors note that, following Yorkshire Water Services v Taylor Woodrow (Timothy Elliott QC and Gideon Scott Holland), the defendants would have a ‘distinctly uphill task’ in trying to persuade the CA to interfere with a specialist judge’s findings in a complex technical case. The CA upheld the TCC in finding that Arup had a duty to verify design assumptions which they had breached and that the judge’s findings on causation of the foundation failure were justified and not amenable to appeal.

See Plymouth & South West Co-operative Society v Architecture Structure and Management Ltd under Keating Chambers Reported Cases on an architect’s failure to advise on contract structure and cost saving.

Where an action is compromised before a draft judgment has been issued, the court, as a court of first instance, has no discretion to publish the draft. If it had, any discretion would have to be exercised against publication if either party objected to it. In addition, where judgment is reserved, the parties and their professional advisers have a duty to inform the court immediately of any development which may make it necessary for judgment to be delivered.

The defendant’s purported acceptance of a Part 36 offer after the end of the hearing and the judge having reserved judgment came too late. There is even a strong case for saying that a Part 36 offer is subject to an implied term that it is only open for acceptance until the hearing commences, because the risks inherent in litigation often alter significantly at or after that point. But it is certainly the law that a Part 36 offer is subject to an implied term that it is not open for acceptance so late as after the close of the hearing.

See Bella Casa Ltd v Vinestone Ltd under Keating Chambers Reported Cases on the measure of damages for deprivation of use of a building.

The author argues that the traditional English law position that damages are not recoverable for late payment of an insurance claim should be reconsidered, in the light of decisions in the courts of Australia and New Zealand and on grounds of logic and commercial reality. Even in times of low inflation, the value of money changes. His conclusion is that "the basis exists in principle to give an insured damages for consequential loss resulting from non-payment of a valid claim".

Robert Cunningham v Collett & Farmer [2006] BLR 97 TCC
The costs hearing of a professional negligence action by clients against their architects resulted in a finding that both parties’ costs summaries should be reduced. The editors of the BLR describe the case as "a useful practical example of the assessment process that a judge of the Technology and Construction Court will undertake when presented with costs bills for summary assessment." HH Judge Coulson had to deal with changes of legal advisors and allegations that one of the claimants was unable to appear due to unfitness under the Mental Health Act. The defendants were represented in the trial by Justin Mort.

EQ Projects Ltd v Javid Alavi [2006] BLR 130 TCC
Where the claimant had failed to beat the payment into court, which had been increased just before trial, the defendant was entitled to its costs, even though there had been a late amendment to the defence. The claimant could get its costs for the actual amendment, but indemnity costs would be awarded for the trial, since the claimant pursued its case unreasonably when it should have been obvious that it could not beat the payment in.

Annual Report for the Technology and Construction Court 2004/5
by Mr. Justice Jackson, Construction Law Journal 2006 Vol.22 No.3 p.149
The report sets out the post-reshuffle personnel of the TCC in London and nationwide and analyses the categories of the 364 new claims brought in the London TCC. The main categories are: Construction 119, Adjudication enforcement 56, Professional Negligence 46 and Dilapidations 23. There were 15 IT cases. There were 114 cases in Birmingham, 94 in Salford and 50 in Leeds. The 2^nd edition of the TCC Guide is summarised.

What documents are really needed in order to resolve a construction dispute? by Roberta Downey, Lovells, Construction Law Journal 2006 Vol.22 No.3 p.160
The author provides brief guidance on the documents generated in the construction process, the purpose for which they are created and subsequently used, disclosure and presentation to a tribunal and the perils of swamping the tribunal with documents. The article is notable for a summary of documentary requirements from the FIDIC Silver Book (and PPC 2000, NEC and JCT) and for a ‘quick-guide’ to the documents needed to measure delay and the cost of delay.

Horsford v Bird [2006] Con LJ Vol.22 No.3 p.187 Privy Council
Already reported in BLM this was an appeal from the Court of Appeal of Jamaica. The defendant owner’s contractors had encroached onto the claimant’s property in Antigua in constructing a boundary wall and fence. The claimant got damages, although not an injunction to demolish, at trial but the Jamaican CA reduced the damages payable, disallowing aggravated damages. The Privy Council also rejected the claim for aggravated damages; taking unsustainable points in defence did not constitute ‘high-handed, insulting or oppressive’ conduct, although it might go to costs. However, the Privy Council allowed the claimant’s appeal on quantum. The value of the land should be the starting point, plus the value of the enhancement of the amenities of the defendant’s house.

41^st Update of the Civil Procedure Rules, April 2006.
This Update inserts the following wording into all Pre-action Protocols and their Practice Statements:

All in One Building & Refurbishments Ltd v Makers UK Ltd [2006] CILL 2321 TCC
This is an application of AMEC Civil Engineering v Secretary of State (Vivian Ramsey QC, Simon Hughes, John Marrin QC, Sarah Hannaford). In an adjudication dispute arising from non-payment under a refurbishment contract, the court held that, while a contract might prescribe when payment fell due, thus providing guidance on whether a claim was denied, it could not be determinative of the point at which a dispute arose. The court also rejected criticisms of how the adjudicator dealt with apparent contradictions in evidence: these were not matters for the court.
Calum Lamont

Quietfield Ltd v Vascroft Contractors Ltd [2006] CILL 2329 and [2006] BLM Vol. 23 No. 47 TCC
In the first adjudication, the adjudicator had held that Vascroft had failed to show entitlement to an extension of time. Quietfield subsequently began a second and then a third adjudication and the (same) adjudicator held that he was bound by his original finding and refused to consider Vascroft’s new evidence challenging it. Quietfield commenced enforcement proceedings in the TCC but the court held that the adjudicator had been wrong not to consider the new evidence in the third adjudication.

Plymouth and South West Co-operative Society Ltd v Architecture Structure and Management Ltd [2006] All ER (D) 175
The claimant clients succeeded in their action against the defendant architects for professional negligence in failing to advise of a suitable contract strategy and failing to advise on cost saving opportunities during the works. Accordingly, the additional costs incurred plus the cost savings ignored were recoverable.
Paul Darling QC
Justin Mort

Bella Casa Ltd v Vinestone Ltd [2006] BLR 72 and [2006] TCLR 2 TCC
The TCC had to consider the measure of damages in respect of deprivation of use of a residential building following allegedly defective design and construction work. The court held that such matters as service charges and utility bills might be recoverable in principle, but that general damages calculated by reference to interest on the balance of the purchase price could not be recovered as contrary to principle.
Finola O’Farrell QC
Justin Mort

Captiva Estates Ltd v Rybarn Ltd [2006] BLR 66 TCC
An option agreement on a residential development site was held to be a development agreement within the meaning of the Construction Contracts Exclusion Order 1998 and thus excluded from the operation of the adjudication provisions of the HGCR Act. It therefore followed that the adjudicator had no jurisdiction and the adjudication was invalid.
Justin Mort

Shawton Engineering Ltd v DGP International Ltd [2006] Con LJ Vol. 22 No. 2 p. 129 CA
Already reported in BLR and noted in KC In Brief March 2006, this case arose from a design sub-sub-contract relating to a process plant at Sellafield for handling nuclear waste. The issue arose as to the circumstances in which a contracting party could lawfully terminate a contract for delay in performance where the obligation was to complete within a reasonable time. The appellant sub-contractor was unsuccessful in the appeal.
David Thomas QC
Adam Constable

ERDC Group Ltd v Brunel University [2006] All ER (D) 468 TCC
Formal execution of the contract documents being deferred until after planning permission was obtained, work proceeded under a series of letters of appointment and then continued after their expiry. The claimant’s contractor claimed entitlement on the basis of quantum meruit for work done. The defendant denied that this should be assessed on a cost-plus basis and argued that defective work should be taken into account. The court rejected the defendant’s right to set-off sums owing, but accepted that the quantum meruit should reflect any sub-standard work and an allowance for delay. The basis for the quantum meruit would be primarily reference to the rates and prices in the earlier work.
Simon Hargreaves

Scheldebouw BV v St James Homes [2006] BLR 113 TCC
This concerned the issue of independence of the contract administrator. The TCC held that the client could not itself replace its construction manager in the administration of trade contracts for cladding in the Grosvenor Waterside development. The court considered that this would be inconsistent with a decision maker’s obligation of impartiality, fairness and honesty and could only be achieved by express contractual provision.

Note that Jackson J was here obliged to consider issues, albeit on different facts, left over from Costain v Bechtel (David Thomas QC), in which he also presided.
Simon Hughes

Capital Structures plc v Time & Tide Construction Ltd [2006] BLM Vol. 23 No. 410 TCC
Already noted in KC In Brief March 2006, this decides that the adjudication provisions in a contract would be lost if, as alleged later, the contract itself, a settlement agreement, was void for economic duress. If the effect was that there was no valid contract, the adjudication provision had become void, so the adjudicator would have no jurisdiction to hear disputes, including the question as to whether there had been economic duress. Accordingly, it would not be appropriate to grant summary judgment for enforcement of the decision.
Simon Hargreaves

This material is prepared for Chambers by our Director of Research and Professional Development, Professor Anthony Lavers (LL.B. M.Phil Ph.D. MCI.Arb MRICS Barrister) Visiting Professor of Law, Oxford Brookes University.
www.keatingchambers.com