Construction, Property & Real Estate (Case Law Review – March 2006)

By Professor Anthony Lavers, Director of Research and Professional Development at Keating Chambers

No term could be implied giving an adjudicator power to award costs in the event of discontinuance of an adjudication. The ordinary principles as to implication of terms would apply and the facts did not meet the requirements: there was no commercial necessity to imply such a term into the RIBA CE/99 standard terms. Note that this decision is reversed by the CA – see this section.

This is the appeal from the TCC decision noted in KC in Brief March 2005. The CA allowed the appeal, holding that the JCT standard form of contract had, on the facts, been incorporated into the parties’ contract and that the adjudication provisions in the contract would not be unenforceable as contrary to the Unfair Terms in Consumer Contracts Regulations 1999.

See Quietfield v Vascroft Contractors under Keating Chambers Reported Cases on whether a second adjudication was decided by the first adjudication.

Construction Law Vol.17 Issue 1 January/February 2006 contains the following articles:

When it’s a domestic
by Paul Newman, Hugh James (on the Unfair Terms in Consumer Contracts Regulations 1999 impact on adjudication in residential occupier contracts).

Another matter of interest
by Fraser McMillan, Pinsent Masons (on Carillion Construction v Devonport Royal Dockyard) (Stephen Furst QC and Louise Randall)

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.

The Court of Appeal reversed the TCC’s decision (see this section) on the power of an adjudicator to award costs in the event of the adjudication being discontinued. The TCC had held that there was no implied power to award costs. However, 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’.

See Carillion Construction v Devonport Royal Dockyard under Keating Chambers Reported Cases on the adjudicator’s power to award interest.

See Surefire Systems v Guardian ECL under Keating Chambers Reported Cases on whether alleged errors by the arbitrator involved a question of law for the purposes of a s.69 Arbitration Act challenge.

Arbitration International 2005 Vol.21 No.4 contains the following articles:

UNCITRAL’s Model Law on international and commercial arbitration: present situation and future
by Pieter Sanders, Erasmus University Rotterdam

The nature of arbitral authority: a comment on Lesotho Highlands
by William Park, Boston University

Why not include arbitration in the Brussels Jurisdiction Regulation?
by Hans Van Houtte, University of Leuven

Judicial supervision of NAFTA Chapter 11 arbitration: public or private law?
by Gus Van Harten, London School of Economics

The arbitrator as settlement facilitator
by Hilmar Raeschke-Kessler, Rechtsanwalt

The arbitrator and the law: does he/she know it? Apply it? How? And a few more questions
by Gabrielle Kaufmann-Kohler, University of Geneva

Journal of International Arbitration Vol 23 No 1 January 2006 contains the following articles:

Limits to enforcement of ICSID awards
by Edward Baldwin, Mark Kanter and Michael Nolan, Milbank Tweed

Anti-suit injunctions an arbitration: a final nail in the coffin?
by Hakeen Serik, Vinson & Elkins

Confidentiality in international arbitration – an introspection of the public interest exception
by Joyiyot Misra, Luthra & Luthra Bombay and Roman Jordans

Distinct features of arbitration in China: an historical perspective
by Wang Wenying, CIETAC Arbitrator

Maleck v Long: truncated tribunals and waiver of Dutco rights
by Denis Bensaude, Paris and New York Bars

The Finnish Supreme Court and the liability of arbitrators
by Gustaf Möller, Supreme Court of Finland

Arbitration Law Monthly Vol.6 No.2 Feb 2006 contains the following articles:

Challenging the findings in an award
on Claire & Co v Thames Water Utilities (serious irregularity and jurisdiction).

Privacy by Alasdair Davidson and Louis Flannery, Howes Percival on Glidepath BV v John Thompson (protection of the private and confidential nature of the arbitral process).

Jurisdiction on Lafarge (Aggregates) Ltd v London Borough of Newham (Paul Darling QC) (determining the arbitrator’s substantive jurisdiction)

Challenges to arbitral awards
on Benaim v Davies Middleton & Davies (Stephen Furst QC) (the basis of judicial intervention).

Error of law
on Demco Investments & Commercial SA v SE Baken Forsakring Holding AB (adequacy of evidence and error of law).

Judge arbitrators on Henry Boot Construction v Alstom Combined Cycles (Stephen Furst QC) (permission to appeal on a point of law).

Where an action for documents, remuneration and confidentiality was stayed for mediation with no settlement achieved, the court had to consider the extent to which Part 36 offers and other occurrences, such as threats, made in the mediation would be covered by without prejudice protection.

Third arbitrator was a barrister who had recently been instructed by solicitors in a similar arbitration. The solicitors made allegations against the same witness in both cases. The Commercial Court held that there was a real possibility of bias amounting to ‘serious irregularity’ under s.68 Arbitration Act 1996. The barrister should not have continued to act as a tribunal member.

An agreement in a Hong Kong construction contract to meet in order to ‘resolve any differences’ and thereafter to submit to ‘third party mediation procedure’ was held to be unenforceable as too vague and unspecific. Cable & Wireless v IBM was therefore distinguished and the effect was that the whole dispute resolution agreement was unenforceable.

Arbitration: the Journal of the Chartered Institute of Arbitrators Vol 72 No 1 February 2006 contains the following articles:

Commercial litigation and arbitration risk assessment techniques
by Michael O’Reilly, Paradise Chambers, Sheffield

Appointment of arbitrators – a lost opportunity?
by Neil Kaplan QC

Do alternative fee arrangements have a place in international arbitration?
by Ian Meredith and Sarah Aspinall, Kirkpatrick and Lockhart Nicholson Graham, London

The right to be heard and the right to hear: cultural dimensions of international commercial arbitration
by Thomas Klőtzel, Thűmmel, Schutze & Partners, Stuttgart.

Journal of International Arbitration Vol 22 No 6 December 2005 contains the following articles:

State arbitrations: predictably unpredictable solutions?
by Marc Blessing, Bär & Karrer, Zurich.

Recognition and enforcement of foreign arbitral awards in Vietnam – shortcomings and suggested remedies
by Quang Chuc Tran, YKVN Lawyers

Court ordered interim relief: developments in English arbitration law
by Haydn Main, Cleary Gottlieb Steen & Hamilton, London

Provisions for resolution of investment disputes within ASEAN
by Rukia Baruti Dames, SJ Berwin, London

UNCITRAL’s current work in the field of international commercial arbitration
by Renaud Sorieul, UNCITRAL

Defining the scope of arbitrable disputes in Australia: towards a ‘liberal’ approach?
by James Morrison, Stockholm University.

Already noted in KC In Brief November 2005, the issue arose from the refusal of Project Manager AYH to concur in the appointment to hear disputes between them and their client 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.

ICC Bulletin Vol 16 No 2 Fall 2005 contains the following articles:

The ICC Court: a behind-the-scenes look
by Jennifer Firby, ICC

Enforcement of commercial arbitration awards in Russia
by Hiroshi Oda, University of London

Drafting awards in ICC arbitrations
by Humphrey LLoyd, Atkin Chambers, Marco Damon, Paris Bar, Jean-Pierre Ancel, French Court de Cassation, Lord Dervaird, University of Edinburgh, Christoph Liebscher, Wolf Thiess, Herman Verbist, Brussels Bar.

Poland’s new arbitration legislation
by Andrzej Kakoleck and Piotr Nowaczyk, ICC.

Distinctive features of the new Danish Arbitration Act
by PR Meurs-Gerken, Supreme Court of Denmark

The extension of arbitration agreements within groups of companies: the alter ego doctrine in arbitral and court decisions
by Dominique Vidal, University of Nice Sophia-Anipolis.

See Henry Boot Construction v Alstom Combined Cycles under Keating Chambers Reported Cases on certificates as a condition precedent to payment and accrual of the right to action.

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 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’ and ‘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.

Construction Law Vol.17 Issue 1 January/February 2006 contains the following articles:

Minor works notes increase transparency
by Michael Phipps, Thurston Consultants (on JCT Minor Works 2005)

Review of the 2005 JCT Framework Agreement
by David Mosey, Trowers & Hamlins

Harmonised Red Book could lead to discord
by John Sheils, Shadbolts (on FIDIC Red Book MDB Edition)

Bid riggers beware
by Alan Davis, Pinsent Masons (on the Office of Fair Trading campaign)

The JCT 2005 contract – risk and insurance clauses
by John Wright, JD Risk Associates

Damned if you do, damned if you don’t
by Greg Richards, Pinsent Masons (on McGlinn v Waltham Contractors (Lucy Garrett))

See Decoma UK v Haden Drysys under Keating Chambers Reported Cases on reliance on contractual cap on damages for breach.

See Shawton Engineering v DGP International under Keating Chambers Reported Cases on termination of a contract for failure to complete within a reasonable time.

The claimant company was held to be entitled to payment following its substitution for the original sub-contractor. The court held that this was a novation.

Although the court held that a false representation had been made in a quotation given by an agent showing a higher figure than that agreed by agent and contractor, this was not sufficient to establish fraud. However, there was a total failure of consideration for the additional amount. The client had not been told of the uplift and because he had not agreed to it, it was not payable.

This is the CA decision dismissing the appeal against the TCC’s decision. The CA held that 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 to the load-bearing capacity of the site. The CA, relying on Yorkshire Water Services v Taylor Woodrow Construction (Timothy Elliott QC and Gideon Scott Holland), held that 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.

This is important for the Court of Appeal’s confirmation that the rules on causation were the same in negligence and in nuisance for the purposes of an action by the claimant householder against the local authority responsible for trees on adjacent land. The claimants would have to prove a substantial contribution to the damage. Paterson v Humberside does not lay down special causation rules for tree-root cases; it applies the principles to a factual situation. The claimants succeeded in the CA in showing that the judge had applied the wrong causation test.

See Burford NW3 v Brian Warwicker Partnership
Under Keating Chambers Reported Cases on contribution allocation between M&E engineer and architect in design liability case.

Payment for additional work
Clark Smith Partnership Ltd v Leyton Football Club Ltd [2006] AllER (D) 05 TCC

The defendant client denied liability to pay the claimant engineers for additional services, carried out by the engineers without informing the client. However, the court held that notification of the additional work was not a condition precedent to payment under the ACE Conditions of Contract.

Already reported in BLR, this is a limitation case upholding Pirelli v Oscar Faber and Ketteman v Hansel. The first instance decision was that "if cracks first appeared within six years of the issue of proceedings, [the claim] is not statute-barred". The Court of Appeal rejected the appeal of the defendant engineers; Murphy v Brentwood has not overruled either of these authorities, which continue to govern cases on the accrual of the cause of action in tort in latent damage cases.

See Decoma UK v Haden Drysys International (No 2) under Keating Chambers Reported Cases on the costs implications of a claimant accepting out of time payment into court.

Already reported in BLR, in this case the Court of Appeal allowed an appeal by the owners of a development site against an order of rectification made in favour of Wimpey in respect of the formula for determining the price of the site. The case provides a major review of the circumstances in which rectification of a contract document might be granted. Here there was a unilateral mistake by Wimpey, but they had not proved sharp practice or dishonesty by the vendors.

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

The defendant owner’s contractors encroached onto the claimant’s property in constructing a boundary wall and fence in Antigua. The claimant got damages, although not an injunction to demolish at trial but the Court of Appeal of Jamaica 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.

See Alfred McAlpine Capital Projects v SIAC Construction under Keating Chambers Reported Cases on grant of a stay on joinder of a new party to allow pre-action protocol procedures.

See Briggs & Forrester Electrical v Governors of Southfield School for Girls under Keating Chambers Reported Cases on orders for disclosure of documents under the pre-action protocol.

Exceptionally, a default judgment granted against the defendants could be set aside under CPR Part 13. This should be done in this case because the remedy sought by the plaintiff was non-monetary i.e. a declaration and an account of profits, which required notice to be given to the defendant under CPR Part 23, before seeking a default judgment. Since this was not done, the default judgment was set aside as invalid. The judge could in any event exercise Part 13 discretion to set it aside, based on conduct and realistic prospects of a successful defence.

See Birse Construction v McCormick UK under Keating Chambers Reported Cases on the meaning and existence of a ‘dispute’ for limitation purposes.

Already reported in CILL, this concerns the effect of Part 36 offers. Landowners had claimed £780,000 for trespass from a utility company, who offered £35,000 ‘without prejudice save as to costs’, but only paid £20,000 into court. The judge took no account of the offer in making his costs order, since the award of £25,600 had beaten the payment in. However, the CA upheld the defendant utility company’s appeal against the costs order. The judge should have taken the offer into account but had been correct in reducing costs because of the claimants’ exaggeration of their claim.

International Construction Law Review Vol.23 Part 1 Jan 2006 contains the following articles:

The Contractor’s view on the MDB Harmonised Version of the New Red Book
by Richard Appuhn and Eric Eggink, Salini Construttori

The Contrat de Partenariat: a new form of French Public Private Partnership allowing the use of arbitration to adjudicate disputes
by Pierre Heitzmann, Jones Day, Paris

NEC 3: a change for the better or a missed opportunity?
by Martin Bridgewater, Herbert Smith and Andrew Hemsley, Cyril Sweett

Optimising contracting for alliances in infrastructure projects
by Matton Van Den Berg and Peter Kamminga, Tilburg University

Construction industry payment and adjudication legislation: the choice that lies ahead for Malaysia
by Adam Constable, Keating Chambers

JCT Standard Forms of Building Contract 2005 Editions: Part 1
by Sarah Lupton, Cardiff University

Dispute Boards – good news and bad news: The 2005 ‘Harmonised’ Conditions of Contract prepared by Multilateral Development Banks and FIDIC
by Gordon Jaynes

Where communications regarding a dispute were sent by e-mail, the recipient treated them as ‘spam’ and they were ignored. The issue arose as to whether the arbitration was validly commenced. It was held that sending of the documents by e-mail to the published address of the recipient was effective. The material sent bore none of the hallmarks of ‘spam’.

Costs – the future of Part 36 payments
by Neil Jamieson and Caroline Evans, Barlow Lyde & Gilbert (on Stokes Pension Fund v Western Power Distribution.

Third Party costs recovery – myth or reality
by Alex Ferrari, Clyde &Co.

The role of modern non-execs.
by Clare Canning, Barlow Lyde & Gilbert.

Two cautionary tales
by Paul Friedman and Nick Wilcox, Clyde & Co.
on confidentiality and liability for breach of confidence under the Data Protection Act 1998).

Arbitration agreement thrown out
by Richard Power, Berwin Leighton Paisner (on C v RHL)

Getting money out of states – a tale of two countries
by Tim Taylor, SJ Berwin (on the State Immunity Act 1978).

Flattery or rip-off?
by Paul Sutton and Lynn Douglas, Orchard Brayton Graham (on copyright).

A litigator’s perspective
by Loannis Alexopoules, DLA Piper Rudnick (on the Company Law Reform Bill).

This is the appeal decision of the TCC judgment, both making further additions to the body of recent authority on the meaning and existence of a dispute. In the appeal it was contended that express or implied refusal of the estimate for site establishment costs would not give rise to a cause of action and that the judge had confused ‘dispute’ with cause of action. This was rejected: the judge had correctly concluded that the cause of action arose when the defendant had rejected a claim or failed to respond to it within a reasonable time: the dispute arose at the same time.
Paul Darling QC
Alexander Nissen

This was an attempt to obtain leave to challenge an arbitrator’s award under s.69 of the Arbitration Act. Surefire was a trade contractor for the design and installation of a fire and voice alarm system in the County Hall building in London and Guardian, a cable installation sub-contractor, who claimed loss and expense. Surefire attempted to challenge the award of £102,000 out of the £500,000 claimed, on the ground that the arbitrator was wrong on the burden of proof and wrong to award sums where the contractual payment mechanism had not been used. The court held that neither of these issues involved a question of law for the purposes of s.69 Arbitration Act.
Adam Constable

Already reported in CILL, the case concerned alleged asbestos contamination by electrical contractors, leading to closure of the School. The TCC had to consider the extent to which disclosure should be granted against the School in favour of the defendant contractors. The court held that it would exercise its discretion in favour of an order for disclosure of quantum documents, but not for a wider order, since the parties were still operating under the pre-action protocol.
Simon Hargreaves

This concerns the point at which the contractor’s right to payment arises and whether (in an ICE 6^th contract) the issue of a certificate is a condition precedent to payment. The right to claim interest on a sum which should have been certified becomes statute-barred six years after the accrual of the right.
Stephen Furst QC

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

The claimant employer’s action for enforcement of an adjudicator’s award of liquidated damages in its favour was unsuccessful. The court found that the adjudicator had been wrong to refuse to consider the defendant’s submissions in the second adjudication, on liquidated damages, having regarded the first adjudication, refusing an extension of time to the contractor as determinative of this issue. The judge took the view that the contractor’s arguments in the second adjudication were ‘a far cry’ from the matters considered in the first adjudication and so should have been taken into account.
Matthew Holt
Abdul-Lateef Jinadu

The court had to consider the operation of the pre-action protocol in circumstances where the defendant sought to join a Part 20 defendant and the claimant sought to join that party as a defendant in the main proceedings. The question was whether a stay should be granted of both main and Part 20 proceedings to allow compliance with the pre-action protocol in relation to the new defendant. The court, rejecting the application for the stay, set out the following relevant considerations for courts in exercising discretion in such cases:

1. when was it known that the new party was going to join the action?
2. what information about the dispute had been given to that party and when?
3. how large a part did the new party play in the action as a whole?
4. could a stay be accommodated without jeopardising the overall timetable?
5. did justice require a new trial date?
6. could the new party be compensated in costs for non-compliance with the protocol?
7. Was there any alternative to a stay within the existing timetable?
   

Decoma UK Ltd v Haden Drysy International Ltd [2006] CILL 2303 TCC

The issue was whether the party in breach of contract in failing to complete on time and to specification could rely on a contract clause capping its liability. The claimant sought to argue that the defendant contractor would be profiting from its own wrong if it was allowed to do so. The court rejected this argument; it had been clearly agreed that the defendant’s liability would be limited to 5% of contract price and the nature and extent of the breaches of contract were irrelevant.
Marcus Taverner QC

This case arose from a design sub-sub-contract relating to a process plant in 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.
David Thomas QC
Adam Constable

This is part of extensive litigation arising from the dockyard project, being an appeal on the adjudicator’s powers to award interest. The CA dismissed the client’s appeal against the TCC decision. There is no free-standing power to award interest under cl.20(c) of the Scheme. However, in the circumstances, the client had not disputed the adjudicator’s power to award interest on moneys outstanding. The parties had therefore agreed that interest should come within the scope of the adjudication, conferring on him a jurisdiction he would not otherwise have had.
Stephen Furst QC
Louise Randall