ADJUDICATION
Construction Law Vol. 21
Issue 3 April 2010
contains the following articles:
Strong court backing for
adjudication
by Peter Stockill, Berrymans Lace Mawer and Michael Taylor
and Daniel Goodkin, 4 Pump Court
(on Anglo Swiss Holdings v Packman
Lucas)
A new regime for
notices
by Simon Plunkett, Pinsent Masons
(on the effect of the Local Democracy Economic Development and
Construction Act)
Construction Law Journal
Vol. 26 No. 2 2010
contains the following article:
Suspension of work
by Peter Sheridan
(in the Construction Act Review feature)
See Speymill Contracts v Baskind under Keating Chambers Reported Cases on evidence of fraud or deceit as grounds for resisting adjudication enforcement.
Jurisdiction and Corporate insolvency in adjudication
Enterprise Managed
Services v Tony McFadden Utilities Ltd [2010] BLR 89 and
[2010] Con LJ Vol. 26 No. 3 TCC
Following the insolvency of Tony McFadden Ltd, by a deed
of assignment drainage sub-contracts were assigned to Tony McFadden
Utilities (Utilities), including one which Enterprise had acquired
from the original main contractors. Utilities served a notice of
referral to adjudication on Enterprise, which sought declarations
that Utilities could not adjudicate. The court held that only one
claim could be pursued by Utilities, namely for an account and net
balance under the Insolvency Rules, because of TML's
insolvency. An adjudicator could only deal with one dispute under
one contract and so there was no jurisdiction to deal with several
sub-contracts and the account and balance had not been referred to
the adjudicator. No dispute had crystallised as Utilities had not
informed Enterprise of the assignment until after the purported
reference to adjudication. Coulson J observed that this is the
first case since Bouygues v Dahl-Jensen
(Stephen Furst QC) to consider adjudication in the
light of Rule 4.90 of the Insolvency Rules. For a commentary on
this case, see Construction Act Review by Peter Sheridan at p.185
of the same Con LJ issue.
Construction Law Journal
2010 Vol. 26 No. 3
contains the following articles
Insolvency Update:
assignment and Rule 4.90
by Peter Sheridan
(on Enterprise Managed Services v Tony McFadden
Utilities)
Adjudication at the
crossroads: the Construction Act – one size fits
all?
by Mark Atherton, Hill International
See William Hare v Shepherd Construction under Keating Chambers Reported Cases on the CA decision on the meaning of 'insolvency' as an exception to the invalidity of pay-when-paid provisions.
See O'Donnell Developments v Build Ability under Keating Chambers Reported Cases on an implied slip rule in adjudication and the time for exercising it.
Section 107(5) HGCR Act
SG South Ltd v Swan Yard
(Cirencester) Ltd [2010] BLM Vol. 27 No. 4 TCC
The court interpreted s.107(5) of the HGCR Act as creating a kind
of "statutory estoppel" whereby the parties would not be
allowed to dispute jurisdiction on the ground of lack of a written
agreement once they had expressly stated in writing that they did
not object to jurisdiction on that ground. See also SG South v
King's Head Cirencester (Thomas Lazur), for other
arguments in resisting enforcement in separate litigation.
ARBITRATION AND DISPUTE RESOLUTION
Construction Law Vol. 21
Issue 3 April 2010
contains the following articles:
A renaissance for Scottish
arbitration
by Shona Frame, MacRoberts
(on the Arbitration (Scotland) Act 2010 which received Royal Assent
5 January 2010)
Mediation minefield
by Ed Freeman, Clyde & Co
Construction Law Journal
Vol. 26 No. 2 2010
contains the following articles:
'Chess clock'
arbitration and time management techniques in international
commercial arbitration: from the perspective of the arbitrator and
counsel
by Andrew Burr, Atkin Chambers and Pierre Karrer,
University of Zurich
Crossing the Rubicon
by Michael Reynolds, LSE
ICC Dispute Resolution
Rules: ICC Dispute Boards and ICC Pre-Arbitral Referees
by Suzanne Kratzsch, Thümmel, Schütze and
Partners, Stuttgart
Major oil and gas projects
– the real risks to EPC contractors and owners
by Vincent Hooker, Hill International
CONSTRUCTION AND ENGINEERING CONTRACT DISPUTES LAW
Unjust enrichment
Contract and unjust
enrichment: a blurry divide
by Paul Davies, Gonville & Caius College, Cambridge, Law
Quarterly Review Vol. 126 April 2010 p.175
This is an extended case commentary on Whittle
Movers v Hollywood Express (see February 2010 issue),
in which the Court of Appeal held that a letter of intent expressed
to be "subject to contract" gave rise only to a potential
restitutionary claim by the claimant suppliers against the
defendant purchasers and not a contractual one. The decision draws
upon Regalian Property v London Docklands Development
Corporation (Piers Stansfield) and
also Yeoman's Row Management v Cobbe
in the House of Lords.
Liquidated damages and rectification
Penta-Ocean Construction
Co. Ltd v CWF Piling and Civil Engineering Co. Ltd [2010] Con
LJ Vol. 26 No. 2 p.131 Hong Kong SAR High Court
The Hong Kong SAR Court granted leave to appeal to the
main contractor against the respondent sub-contractor. The
arbitrator rejected the main contractor's claim for liquidated
damages on the ground that the provisions conflicted with another
clause allowing deduction of common law damages from the contract
price, which should prevail, and refused rectification. The judge
granted leave to appeal, holding that there was no conflict, since
the clause allowing deduction of common law damages only deals with
the situation where the sub-contractor's breach leads to breach
by the main contractor. The main contractor would also be allowed
to appeal on rectification, since the letter of acceptance
reflected agreement on liquidated damages in a way which the
sub-contract did not.
Model Plant-hire conditions
MacSalvors Plant Hire
Ltd, Brush Transformers Ltd (3rd party) [2010] TCLR
Z CA
The Court of Appeal considered the provisions of the Model
Conditions of the Construction Plant-hire Association and
specifically whether the hirer could be responsible for a claim
against the owner in respect of the owner's own breach of duty.
In refusing this interpretation, the CA distinguished statements in
Yarm Road v Hewden Tower Cranes
(Adrian Williamson QC).
Liquidated damages and force majeure
Tandrin Aviation
Holdings Ltd v Aero Toy Store LLC [2010] BLM Vol. 27 No. 3
Commercial Court
In this (non-construction) case, the Commercial Court
upheld as valid a liquidated damages clause by which the
purchaser's deposit would be paid to the vendor (of an
aircraft) for the failure of the purchaser to complete the
transaction by the specified date. The judge held that there was no
real prospect of establishing that this was a penalty clause, since
it was neither extravagant nor unconscionable, while the breach was
serious, and a genuine pre-estimate of loss was almost an
impossibility. Nor would the court accept that the
"unanticipated, unforeseeable and cataclysmic downward spiral
of the world's financial markets" triggered the operation
of the force majeure clause.
The International
Construction Law Review Vol. 27 Part 2 April 2010
contains the following articles:
Delay, progress and
programming
by AR Marshall, Lovells
Concurrency, causation,
common sense and compensation
Part 1 Andrew Stephenson, Clayton Utz, Melbourne
Part 2 Ian Bailey, Sydney
Towards a European Consumer
Construction Law
by Benoit Kohl, Stibbe, Brussels
Public procurement and
development agreements and an update on the Construction Bill
by Andrew Brown and Miranda Ramphul, Herbert Smith
See Fenice Investments v Jerram Falkus Construction under Keating Chambers Reported Cases on conflict in interim payment provisions under JCT Design and Build and issue of Part 8 proceedings in adjudication cases.
No frustration of contract on price
Gold Group Properties
Ltd v BDW Trading Ltd [2010] BLM Vol. 27 No. 4 TCC
The defendant developer failed in its argument that a
development agreement had been frustrated by the fall in the
property market as a result of which the houses to be built under
the agreement would not reach their minimum sale price. The court
held that the agreement remained capable of performance, even if
less financially attractive. The defendant was, however, given
leave to defend the owner's claim for repudiation on the ground
that the claimant had repudiated the contract first.
Letter of intent and contract formation
RTS Flexible Systems Ltd
v Molkerei Alois Muller GmBH [2010] BLM Vol. 27 No. 4 Supreme
Court
The Supreme Court allowed the appeal from the Court of
Appeal decision reported in 123 Con LR and noted in September 2009
issue. The claimant supplier of services began work for the
defendant manufacturer under a letter of intent. The manufacturer
confirmed its wish to proceed with the project 'as set out in
the offer' subject to finalisation of price and completion date
and using an amended version of the MF/1 form of contract, to be
executed within four weeks. Work started as negotiations proceeded
and the letter of intent was extended for three months. A final
draft contract was produced but never signed. The CA had held that
no contract was concluded after the lapse of the letter of intent,
but the Supreme Court held that there was the necessary intention
and all the essential terms were agreed, even though the draft
written contract provided that it would not become effective until
executed.
CONTRACT AND PROCUREMENT LAW
Construction Law Vol. 21
Issue 3 April 2010
contains the following articles:
Beware knock on effects of
changes
by Michael Phipps, Thurston Consultants
New dawn for third party
rights
by Janine Collyer, Collyer Bristow
Value testing PFI
projects
by Hamish Lal and Emily Busby, Jones Day
Underwriting the design and
build risk
by John D. Wright, JD Risk Associates
See European Dynamics v HM Treasury under Keating Chambers Reported Cases on interim injunction to restrain award of contract and delay in bringing claim promptly under Public Contracts Regulations.
Procurement injunction refused
B2 Net Ltd v HM
Treasury [2010] 128 Con LR 53 QBD
Following the scoring of pre-qualification questionnaires
for IT infrastructure hardware contracts, B2 Net, an unsuccessful
supplier, challenged the scoring of the responses. It had been
marked down on experience because in some projects it had been
sub-contractor and not main contractor. Its application for an
interim order to prevent the Government proceeding with the
procurement exercise failed because others might be affected by the
injunction. The judge's preliminary view was that it might be
objectively justifiable to distinguish between experience as a
sub-contractor and as a main contractor.
Construction Law Journal
Vol. 26 Issue 3 April 2010
contains the following articles:
Legal implications of the
assignment of a construction contract under New York Law
by Steven Bennett, Jones Day, New York
Pandemic flu risk for major
projects
by Peter Dzakula, Corrs Chambers Westgarth
Pre Construction Services Agreements – early lessons from
experience by John Barber, King's College London and Shy
Jackson, Pinsent Masons
GENERAL AND PROFESSIONAL NEGLIGENCE
Defective Premises Act appeal dismissed
Bole v Huntsbuild
Ltd [2010] BLM Vo. 27 No. 3 CA
The Court of Appeal dismissed the defendants' appeal
against the TCC judgment in favour of the claimant purchasers. It
was held that both the defendants, contractor and design
consultant, owed a duty to the claimants under the Defective
Premises Act and that foundation defects and visible defects in the
super structure caused by heave, comprised unfitness for habitation
for the purposes of s.1. The court also held the duration of
remedial works to be relevant in ascertaining the unfitness
question, and that fitness for habitation, not fitness for purpose
is the standard.
See Costain v Charles Haswell under Keating Chambers Reported Cases on existence and scope of engineer's design duty to design and build contractor and cost issues.
Right to connect to sewer
Barratt Homes Ltd v Dwr
Cymru Cyfyngedig [2010] 128 Con LR 1 Supreme Court
A majority of the Supreme Court (Lady Hale dissenting)
held that where connection of development to a public sewer
required additional works because of the increased loading, the
cost would fall on the water authority. The Water Act did not
permit the authority to refuse connection at a particular point.
The developer would have to pay for works solely for the benefit of
the development.
Damages for defective work
Strange v Westbury Homes
(Holdings) Ltd [2010] 128 Con LR 26 CA
The Court of Appeal upheld the judge's decision in
choosing between two competing quotations for remedial works, in
circumstances where the repairs had not been executed. The
appellants had contended for a lesser scheme where some of the work
would have been subcontracted. The court could also award a modest
figure for diminution in value.
Contractor's duty of care and limitation
Robinson v PE Jones
(Contractors) Ltd [2010] TCLR T79 TCC
The defendant contractor was successful in defeating the
claimant purchaser's action in respect of defective chimney
construction in a house. The court accepted that in principle a
contractor could owe a duty of care in tort concurrent with its
contractual duty but that in this case it had successfully excluded
such liability through contractual wording, which was not unfair
within the meaning of the Unfair Contract Terms Act. No tortious
duty of care therefore arose. Had there been one, it would have
been statute barred under s.14A of the Limitation Act 1980, because
the claimant would be taken to have acquired constructive knowledge
of the defect more than three years before proceedings were
issued.
PRACTICE AND PROCEDURE
Pre-judgment interest
Pre-judgment compound interest
by Pauline Ridge, Australian National University Law Quarterly
Review Vol. 126 April 2010 p.279
The article discusses the Government's 2008 rejection of the
Law Commission's recommendation of a rebuttable presumption of
pre-judgment compound interest on awards or settlements over
£15,000. The response was based on the Sempra Metals
case and an apparent willingness to allow common law to take its
course, while not ruling out subsequent intervention. The author
considers the historical framework and the conceptual arguments for
compound interest as restitution for unjust enrichment and
concludes that they are not yet fully established.
Fiduciary duties
When do fiduciary duties
arise?
by James Edelman, Keble College, Oxford
Law Quarterly Review Vol. 126 April 2010 p.302
The article considers the origins of the word
'fiduciary' and the debate surrounding relationships which
should be treated as fiduciary. It explains the meaning and nature
of a voluntary undertaking and shows why this is a necessary
condition for a fiduciary duty. It shows how the duties most
commonly recognised as 'fiduciary' are express or implied
duties in relationships arising by voluntary undertakings.
Entire agreement clause
BSkyB Ltd v HP
Enterprise Services UK Ltd [2010] BLM Vol. 27 No. 3 TCC
One of the many issues dealt with in BSkyB's claim
regarding its commissioning of a customer relationship management
system was the scope of an entire agreement clause in the contract
between the parties. The BLM report deals exclusively with this
issue, although there are also important findings on liability for
misrepresentation, breach of contract, causation, mitigation and
quantum. Ramsey J. held that the clause in question had the effect
of excluding any alleged collateral warranty or side agreement.
However, the clause did not exclude the bringing of an action for
negligent misrepresentation, despite the fact that such a result
could in principle be achieved by using clearer words.
Bribery statute
The United Kingdom Bribery
Bill
by Toby Duthie and David Lawler, Forensic Risk Alliance,
Construction Law Journal 2010 Vol. 26 No. 2 p.146
The article examines the progress and scope of the Bribery
Bill since its inclusion in the Queen's Speech in November
2009. It received Royal Assent on 8th April 2010. The
Act creates 4 new criminal offences:
- offering or paying a bribe
- requesting or receiving a bribe
- bribing a foreign public official (under OECD Convention)
- failing to prevent bribery (corporate offence)
The article considers the meaning for UK companies, specifically in certain sectors (oil and gas and healthcare), the use of agents and the effect on corporate entertaining.
Third party costs following strike-out
German Property 50 SARL v Summers-Inman
Construction [2010] 128 Con LR 85 TCC
The claimant property developer had instructed the
defendant as cost consultant on a retail development in Frankfurt.
The defendant had sub-contracted valuation work to a third party
and, when sued for negligence by the claimant, had issued a Part 20
claim against that third party. The claimant's case had
collapsed and it had gone into receivership. The claimant was held
liable in costs to the defendant and for a settlement of the third
party's costs which the defendant had negotiated reasonably
under Biggin v Permanite.
Application for stay pending protocol
Anglo Swiss Holdings Ltd
v Packman Lucas Ltd [2009] 128 Con LR 67 and [2010] BLR 109
TCC
The defendant consultants obtained adjudication decisions
in their favour against three Jersey companies, the claimants, for
fees for professional work and judgment and charging orders when
these were not honoured. The claimants issued proceedings alleging
overpayment, which the defendants sought to stay. The court refused
to stay proceedings for the TCC Pre-Action Protocol to be complied
with, since most of the information must have been exchanged in the
adjudication, but ordered a stay until the adjudication decisions
had been honoured.
See Buildability v O'Donnell Developments under Keating Chambers Reported Cases on irrecoverability as costs of solicitor's mark-up on fees for success.
See Fitzroy Robinson v Mentmore Towers (No. 2) under Keating Chambers Reported Cases on factors to be considered in deciding request for adjournment of trial.
See Fitzroy Robinson v Mentmore Towers (No. 3) under Keating Chambers Reported Cases on effect of fraudulent misrepresentation on entitlement to fees and interest.
Exclusion of loss and dispute resolution
Ericsson AB v EADS
Defence and Security Systems Ltd [2010] BLR 131 TCC
Although the case revolves around interim injunctions to
prevent termination of an IT contract, the main feature of interest
is the adequacy of damages when recovery of most types of economic
loss had been excluded by contractual provision. The judge's
view was that "I cannot see that it is unjust that a party
is confined to the recovery of such damages as the contract, which
it has entered into freely, permits it to recover." The
BLR Editors question whether this decision can sit with the Court
of Appeal decision in Bath and NE Somerset v
Mowlem (Timothy Elliott QC, Adam
Constable). The court held that the parties had agreed
that they should have the opportunity to go to mediation
or adjudication; it would be commercial nonsense if this were to be
interpreted as an obligation to go to both.
Damages for breach of confidentiality agreement
Pell Frischmann
Engineering Ltd v Bow Valley Iran Ltd [2010] BLR 73 Privy
Council
Engineers Pell Frischman (PF) entered into joint venture
agreements with partners (the defendants) with whom it sought
contracts to develop Iran's offshore oilfields. The agreements
contained confidentiality clauses, agreeing not to share knowledge
or work with other parties. Subsequently, the consortium failed to
obtain the work and broke up, leaving the defendants to enter into
the contracts on the same terms as offered to PF. PF succeeded in
an action for breach of the confidentiality provisions in the
Jersey courts, which awarded £500,000 in damages. On appeal
to the Privy Council, these damages were increased to US$2.5
million, based on loss "of a bargaining opportunity
or...the price payable for the compulsory acquisition of a
right."
KEATING CHAMBERS REPORTED CASES
Speymill Contracts Ltd v Baskind [2010] BLM Vol. 27 No. 3 CA
The Court of Appeal approved the
reasoning of the TCC in SG South v King's Head
Cirencester (Thomas Lazur) in
holding that fraud or deceit by the enforcing party could be raised
as a defence in resisting enforcement of an adjudication decision.
However, on the facts, the allegations of theft were insufficient
to prevent enforcement. Summary judgment was entered, but execution
suspended because of the claimant's poor financial
circumstances.
Marcus Taverner QC
Jonathan Selby
European Dynamics SA v
HM Treasury [2010] Con LJ Vol. 26 No. 3 TCC
Following a pre-qualification exercise for software
applications contracts, the claimants had been unsuccessful with
their tenders and obtained an interim injunction to prevent the
award of contracts to the successful tenderers. The claimants had
complaints regarding the system for scoring tenders and the
fairness of their application. The court discharged the injunction,
considering Regulation 47 of the Public Contracts Regulations 2006
on limitation and that the adequacy of damages and the balance of
convenience favoured the defendants. See also B2 Net v
HM Treasury on similar issues.
Sarah Hannaford QC
James Thomson
Fitzroy Robinson Ltd v Mentmore Towers Ltd (No. 3) [2010] 128 Con LR 103 (TCC)
This is the quantum hearing on
damages arising from the professional liability/fees dispute
reported at [2009] 125 Con LR and noted in the February issue. See
also the application to adjourn reported in 128 Con LR and noted in
this issue. The defendants had established fraudulent
misrepresentation by the claimant architecture practice but this
did not deprive the claimant of its right to fees for work done,
except where affected by the misrepresentations. The fraud would
not prevent interest becoming payable on the unpaid fees.
Paul Darling QC
Costain Ltd v Charles Haswell & Partners Ltd [2010] 128 Con LR 154 TCC
In this case brought by design and
build contractor Costain against its design engineer Haswell,
regarding water treatment works, a number of important issues
arose. As well as the fundamental existence of a contract where
there appears to be differences over scope and ambit of
professional services and quantum issues relating to delay and
double recovery, the court considered whether a contract might
impose strict liability aspects onto a basic reasonable skill and
care professional duty. In the result, as the Con LR Editors note
"The decision on costs turned out to be much the most
important aspect of the case and had a dramatic effect on the
financial outcome."
Nerys Jefford QC
Fenice Investments v
Jerram Falkus Construction Ltd [2010] 128 Con LR 124 TCC
The case concerned the conflict of interim payment
provisions in the JCT Design and Build Contract 2007 between the
Employer's Requirements (ER) and Clause 4. Section 15(c) of the
ER was in conflict with Clause 4.10; the latter should prevail,
because of Clause 1.3.
The Con LR Editors make the point
that the case is also of interest on the issue of Part 8
proceedings in adjudication proceedings. The court took the view
that it would be wrong to contest an enforcement application
notwithstanding the existence of a Part 8 argument on the issue;
costs consequences might follow if a party ignored this.
William Webb
O'Donnell
Developments Ltd v Build Ability Ltd [2010] 128 Con LR 141
TCC
The adjudicator was held to have been correct in holding
that an implied term in the contract for adjudication gave him a
'slip rule' power to correct an accidental error or
omission. This has to be within a reasonable time; the Local
Democracy Economic Development and Construction Act (not yet in
force) provides for a statutory slip rule in adjudication but
leaves time to be dealt with by implication as well. (For other
litigation between these parties on this project see
Buildability v O'Donnell in this
issue).
Finola O'Farrell QC
Buildability Ltd v
O'Donnell Developments Ltd [2010] BLR 122 TCC
Following seven adjudications on a sub-contract dispute
over preliminary works at the Cube in Birmingham, Buildability, the
main contractor, commenced Part 8 proceedings against
O'Donnell, the sub-contractor. Buildability entered into a
conditional fee agreement by which its solicitors received a 100%
mark-up on their fees in the event of success. Buildability was
held, in broad terms, to have succeeded in the litigation, although
O'Donnell also had a measure of success which would result in a
deduction of costs. Buildability could not recover from
O'Donnell any of the 100% uplift they had agreed with their
solicitors under the conditional fee agreement.
Fitzroy Robinson Ltd v
Mentmore Towers (No. 2) [2010] 128 Con LR 91 TCC
The first hearing in this professional liability/fees
dispute has already been reported [2009] 125 Con LR and noted in
the February 2010 Update. This was an application by the defendants
to adjourn a quantum hearing on the grounds that a meeting of
experts directed by the judge had not taken place. The decision is
of value because the judge sets out the factors to be considered in
hearing such an adjournment application:
- the parties' conduct /reason for delays
- extent to which consequences of delays can be overcome
- extent to which a fair trial may have been jeopardised by delays
- specific matters affecting trial e.g. illness of crucial witness
- consequences of adjournment for parties and court
In the result, the application was
refused, principally because of the defendants' conduct and the
impact upon the claimants.
Paul Darling QC
William Hare Ltd v
Shepherd Construction Ltd [2010] EWCA Civ 283 CA and BLM April
2010 Vol. 27 No. 4
The CA upheld the TCC's decision (noted in October 2009 issue)
that the client was not to be regarded as insolvent for the
purposes of the HGCR Act s.113 exception to the ineffectiveness of
'pay when paid' clauses, since the sub-contract was worded
in accordance with the original 1996 provisions. The Court of
Appeal regarded the onus of getting a clause of this nature right
to be on the party relying on it. It was not the task of the court
to rescue the defendant from the consequences of the
oversight.
Alexander Nissen QC
Stephen Furst QC &
Krista Lee
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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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.
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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