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The Fenwick Elliott Summer 1997 Review

Due to popular demand, we started up the Fenwick Elliott Review again last summer. Its reincarnation has been a great success - the case summaries were particularly well received. We plan to continue to produce the Review on an annual basis.

Firm News

We are pleased to announce that Jean Elliott, previously an associate, became a partner in the firm on 1st January, and Alison Godkin, who has been with the firm since March 1995, was appointed as an associate.

At the beginning of March, we celebrated Simon Tolson's 10 year anniversary with the firm, he having joined at the conclusion of his articles in March 1987.

Building Contract Disputes

One of the highlights for the firm this year will be the publication of Robert Fenwick Elliott's new book, Building Contract Disputes - Practice and Precedents. Robert's first book, Building Contract Litigation, has been used as a starting point and has been updated and expanded. The new book will also include precedents, not only of court documents but also of letters and contract clauses. It will contain contributions from a number of other leading lights in the construction industry, including Humphrey Lloyd QC, one of the Official Referees. Published by FT and Tax (we hope in June 1997), Building Contract Disputes will run to some 700 pages in loose leaf format. It will be updated annually and will cost around £190. We expect that it will become an essential tool for any serious practitioner in the construction law field, just as Building Contract Litigation has been since it was first published in 1981.

Maintaining our Record on Costs

We have continued with our successful run of settling cases for our clients and have remained very high up in the ratings of the legal directories. The latest Legal 500 describes us, with Masons, as the leading firm for Contractors and notes that we have seen a substantial increase in Employer clients as well as non-contentious work across the board.

One feature of the Woolf Report last year was that it provided some statistics as to typical costs in construction litigation. Those statistics showed how often costs fell into which percentage band as a proportion of the sums recovered. We are committed to keeping costs below the very high levels which are shown to be normal from the Woolf statistics and have carried out a comparison with our own record on costs. The table below shows that we are consistently able to keep costs down to a comparatively low proportion of the sums recovered.

Cost Statistics


  1. The Woolf Statistics cover cases of various types. The line shown above is that for cases in the Official Referee's Courts.

  2. The figures were obtained by Lord Woolf from the Court Taxing Office; in order to reflect the fact that standard basis costs are typically about 70% of the costs that clients pay their solicitors, the figures have been grossed up so as to compare like with like.

  3. The Woolf statistics are not limited to cases that run their full course. Indeed, about 2/3 of the Woolf statistics cases were settled prior to trial. The proportion of cases that we settle pre-trial is much higher.

  4. The Fenwick Elliott statistics are taken from our in-house CHARM database of cases. These figures include not only cases that have gone to litigation, but also cases dealt with by arbitration, adjudication, mediation, negotiation or other forms of ADR.


Richard Smellie joined the DTI Trade Mission to Pakistan in October 1996, looking at the Port Redevelopment Projects in Pakistan, and again joined the DTI Trade Mission to Pakistan in March of this year in celebration of Pakistan's 50 years of independence. The March trip centred around the visit of the Royal Yacht Britannia to Karachi Port.

We continue to be involved in construction and construction related matters in Pakistan, and we have close association with a law firm there. Further details from Richard Smellie.

South East Asia

Tony Francis has established a number of contacts in South East Asia, in particular Hong Kong, and is increasingly advising clients in both contentious and non-contentious matters in that region which continues to boom in terms of substantial construction projects. Of note, Tony has just returned from South Korea where he has been advising in respect of a substantial dispute concerning a turn key contract for a cement plant. In view of the firm's increasing involvement in the Far East, the firm is currently in the process of finalising an association with Hong Kong lawyers Horvath & Giles towards establishing a permanent presence in the region.

Adjudication Services

Although the new Housing Grants Construction and Regeneration Act 1996 is not yet law (see below), adjudication is beginning to pick up pace as a voluntary means of dispute resolution. We are able to offer help in that regard in a number of ways:

  • drafting the appropriate contract clauses or amending your existing contracts;
  • providing legal assistance to people who have been appointed as adjudicators;
  • in suitable cases, where the main issues concern principles of law, acting as adjudicators ourselves. Three of the partners, Robert Fenwick Elliott, Simon Tolson and Richard Smellie are already accredited adjudicators - the others also intend to undergo the training.

Robert Fenwick Elliott has continued his work as a committee member of the Official Referee's Solicitors Association and its Adjudication Sub-Committee. He was a central figure in the preparation of the ORSA submissions on the draft Scheme for Construction Contracts under the new Construction Act. He has also conducted, in Central London, a number of Training and Accreditation days for Adjudicators. These courses have been instant sell-outs and have included one which was open to members of other professions. The fee for non ORSA members is £350 + VAT. Robert has also been asked to conduct a similar series of training courses for the Chartered Institute of Building.

Expert Witnesses

Amongst its other activities ORSA have also produced a useful protocol on Expert Witnesses which is reproduced here.

Building Magazine

Simon Tolson now has a regular monthly slot in the Legal Section of Building Magazine. The first of his columns, from the 28 February 1997 edition, is reproduced here.


A travelling band of 4 Fenwick Elliott lawyers took to the road last September for our Construction Law Roadshow. This was a series of seminars held on consecutive days in London, Bristol, Manchester and again in London. Turnout was very high with the London and Manchester sessions filled to capacity and a good showing in Bristol. Many of our clients attended the Roadshow, along with a number of new faces from all parts of the country and across all sectors of the industry. It was a very intensive day, during which we sought to cover as many relevant areas of construction law as possible, offering practical advice directed at dispute avoidance and resolution. At £75 per head it was hailed by those who attended as being the best value around on the legal lecturing circuit and we have had many requests for a re-run this year. We have also been asked to conduct the Roadshow in-house, as staff training, and to take it to Belfast, which we hope will happen later in the year. The programme is reproduced here. For further information, please call Jean Elliott.

Northern Ireland

On the subject of Northern Ireland, we were also invited by the University of Ulster to take part in a Continuing Education Seminar to be held in Belfast and entitled "Design Liability in the Construction Industry."

The seminar took place in February with Fenwick Elliott represented by Richard Smellie and our practice manager Neil Elliot. Richard presented a paper on Design and Build Contracts which covered the underlying philosophy of design and build, where the primary obligations lie, and how the contracts actually work.

New Arrivals

Since our last Review, four more solicitors have joined our team:

Toby Anderson has come from Bell Gully Buddle Weir, one of New Zealand's oldest and largest law firms. Jeremy Glover joined us at the start of this year from Fishburn Boxer. Sarah McMaster-Christie, who was formerly at Denton Hall, arrived shortly after Jeremy, as did Steve Nightingale, who comes from another highly regarded New Zealand law firm via a Master's degree at Sydney University.

Between them, these recent arrivals have a great deal of construction law experience and expertise.

More Karting

Always keen karters, we have recently had another go-karting triumph. At the March 1997 Keating Chambers Karting competition, Neil Elliot scooped the prize of Top Driver for his consistently fast lap times and overall driving skill. The Fenwick Elliott team narrowly missed a podium finish, coming in fourth by a few seconds.

Legal Developments

The Arbitration Act 1996

A new Arbitration Act came into effect on 31 January 1997. For most purposes, the new Act will apply to all arbitrations commenced after that date. The intention of the new Act is, amongst other things, to make the conduct of arbitrations more efficient and less expensive and views differ as to whether it will in fact achieve that aim. There is, in particular, considerable concern about how the Act will affect the enforceability of Adjudicators' decisions which are destined to become of great importance once the Housing Grants Construction and Regeneration Act 1996 comes into force (probably now next year). The point is that in order to comply with our European obligations, it has been thought necessary to put domestic arbitrations on the same footing as international arbitrations. That in turn means removal of the Courts' discretion to either stay court proceedings or not, according to principles of justice and fairness. It is being mooted that an unfortunate side effect of this is to render Adjudicators' decisions unenforceable in the case of contracts that contain an arbitration clause, in that the only effective way to enforce an Adjudicator's decision is by way of summary judgment in court, and if any attempt is made to bring any legal proceedings at all, the Court will be bound, whether it likes it or not, to refuse to give judgment and to refer the matter on to arbitration (which typically cannot be commenced until after practical completion). If this is the effect of the legislation (and it remains to be seen what approach the courts will take to the provisions) such a result could hardly be regarded as consistent with the Act's avowed purpose of allowing disputes to be resolved more speedily and cost-effectively.

We have been approached by some clients to see whether we would run a, say, half day session on the new Act. If anyone else would be interested, please call Jean Elliott.

The Housing Grants Construction and Regeneration Act 1996

In the Review last year, we reported on the Housing Grants Construction and Regeneration Bill which was then on the verge of becoming law. The Act received the Royal Assent on 24 July 1996 and it was expected by the Government at that time that it would be in force by now. However, the consultation process on the Scheme for Construction Contracts has taken much longer than was anticipated. The submissions were due at the DTI on 23 December 1996 and are still being considered. The generally accepted position at present is that the Act will not come into force now until early 1998. Watch this space.

We did emphasise in last year's Review, the importance of reviewing and modifying your in-house contract documentation so as to comply with the requirements of the Act, particularly in relation to adjudication. The postponing of the Act coming into force allows some breathing space for this to be done.

The following article by Simon Tolson appeared in the 28 February 1997 of Building as the first of his new monthly columns.


The Rule in Day -v- McLea - Take the money and run

A very important practical lesson arises when scrutinising the practical law applicable to tendering cheques, in purported final settlement. Can you take a part payment offered as final? Can you retain the right to claim payment to the full sum?

It is not uncommon for an employer to seek to pay his contractor less than the full contract sum if there is a dispute as to compliance with the contract. If each party genuinely accepts such an unsatisfactory situation, their original legal rights may be released by an arrangement, a process known as accord and satisfaction. In such a situation, as in any other agreement, there must be consideration, ie. a quid pro quo, for something promised or done. Thus, if Stan Laurel, a contractor, agrees his window installation is not up to the contract tolerances and Oliver Hardy is prepared to accept such inferior installed works, then agreement between the parties to conclude their mutual obligations upon payment of a lesser sum by Hardy would be a perfectly good accord and satisfaction, thereby releasing each party from the original contract. However, the agreement will not be binding per se, there must at least be an agreement under seal or supported by fresh consideration. eg. in the example, an abatement in price.

This legal principle can be traced as far back as Pinnell's case (1602). Pinnell's case decided that payment of a lesser sum on the day in satisfaction of a greater was no satisfaction of the whole. This became known as the rule in Pinnell's case.

In the construction context, these principles were fully aired before the Court of Appeal 30 years ago in the case of D&C Builders -v- Rees (1966). The Plaintiffs carried out work for the Defendant to the value of £482. For months they pressed for payment. Finally, the Defendant's wife, who knew that the Plaintiffs were in financial difficulties, offered £300 in settlement of the debt, saying that if the offer was not accepted, nothing would be paid. The Plaintiffs accepted a cheque for £300 and gave a receipt "in completion of the account". Later, they sued for the balance, and the question arose whether the action was barred by accord and satisfaction. The Court ruled that the Plaintiffs were not barred from recovering the balance as there was no true accord. The Plaintiff's consent had been obtained under pressure. The Defendant argued unsuccessfully that the principle of equitable estoppel applied to make the Plaintiffs' "acceptance" binding. An example will help explain this doctrine. Mr Marconi is owed money by his friend, Mr Ferranti. Marconi reassures his friend Mr Ferranti informally at the pub that he will not call in the debt until Ferranti's children finish school. This conversation is intended to effect the legal relationship between them, Ferranti alters his position in reliance upon Marconi's words and pays for a school trip rather than the debt. Marconi will not be allowed to act inconsistently with his representations. He will only be able to demand payment once the postponing event is past.

This principle has been applied to cases where a creditor agrees to accept a lesser sum in discharge of a greater sum. When a creditor and a debtor enter upon negotiations, which lead the debtor to suppose that, on payment of the lesser sum, the creditor will not enforce payment of the balance, and on the faith thereof, the debtor pays the lesser sum and the creditor accepts it in satisfaction, the creditor will not be allowed to enforce payment of the balance when it would be inequitable to do so. This is well illustrated by a case just after the last war. Tenants went away to escape the bombs and left their homes unoccupied. The landlords accepted a reduced rent from the time that they were empty. It was held that the landlords could not afterwards turn round and sue for the balance1. This caused some eyebrows to be raised in high places. The solution was so obviously just.

Applying this principle one must note an important qualification. The creditor is only barred from asserting his legal rights when it would be inequitable for him to insist upon them. Where there has been a true accord, under which the creditor voluntarily agrees to accept a lesser sum in satisfaction, and the debtor acts upon that accord, by paying the lesser sum and the creditor accepts it, then it is inequitable for the creditor afterwards to insist on the balance. He is not bound unless there has been truly an accord between them.

In the D&C Builders case, there was found to be no true accord. The debtor's wife held the builder to ransom. The builder was in need of money to meet its own commitments, as the debtor knew.

In the much older case of Day -v- McLea (1889) a similar point arose. A Defendant sent a cheque for a lesser sum than that claimed for breach of contract "in full of all demands" and enclosed a receipt in that form for signature. The creditor instead sent a receipt "on account" and paid in the cheque. The Court of Appeal held that there was no accord to bar the claim.


The question of whether a claimant who receives a cheque for less than the full claim can bank the cheque and pursue the balance is one that recurs time and time again. It would appear that there are at least three bases upon which the Claimant may be able to pursue a claim for the balance.

First, if there was in fact no dispute about liability for the sum that was paid, then there can be no consideration to support any contract by way of accord and satisfaction in respect of the balance.

Secondly, even if the Defendant has put the whole of his liability into dispute, then it seems that the Plaintiff is entitled to bank the cheque and at the same time write to the Defendant saying that he is accepting the cheque, not in full and final satisfaction, but on account; per Day -v- McLea in 1899.

Further, it seems that if the cheque was banked by an employee of the plaintiff company with authority to bank cheques, but not authority to compromise claims, then again there can be no binding contract of accord and satisfaction; that was the decision of the New Zealand courts of Dunrai Manufacturing -v- CL North in 1988.

1 Central London Property Trust Ltd -v- High Trees House Limited (1947).

Recent Cases

We continue this year with the editorship of CILL; and many of case summaries that appear below are extracted from the CILL reports. CILL is published 10 times a year; if you are interested in subscribing, contact Monitor Press Ltd, Suffolk House, Church Field Road, Sudbury, Suffolk CO10 6YA, telephone 01787 467232, facsimile 01787 880201.

The following cases are noted below; an index appears at the end of this Review

Allridge (Builders) Limited -v- Grandactual Limited

Balfour Beatty v Kelston Sparkes Contractors Limited

Black Country Development Corporation v Kier Construction

Chesham Properties Ltd -v- Bucknall Austin Project Management Services Ltd & Others

Conoco & Others -v- Phillips Petroleum Company & Others

Copthorne Hotel (Newcastle) Ltd -v- Arup Associates

Costain Civil Engineering Limited and Tarmac Construction Limited -v- Zanen Dredging and Contracting Company Limited

Dew Group Ltd -v- Costain Building & Civil Engineering Limited

Europa Holdings Ltd -v- Circle Industries Ltd

Extrudakerb -v- White Mountain

Ferguson -v- Davies

Floods of Queensferry Limited -v- Shand Construction & Others

Mooney v Henry Boot Construction Limited

Nykredit Mortgage Bank Plc v Edward Erdman Group Limited

Philip Alexander Securities -v- Bamberger

R G Carter (West Norfolk) Limited -v- Ham Gray Associates Ltd

Roche Products Limited v Freeman Process Systems and Another

South Australia Asset Management Corporation v York Montague Limited

St Albans City & District Council -v- International Computers Ltd

St Modwen Developments Limited -v- Bowmer & Kirkland Limited

Sweatfield Limited v Hathaway Roofing Limited

TBV Power Limited -v- Elm Energy

Tony Cox (Dismantlers) Limited v Jim 5 Limited

United Bank of Kuwait Plc v Prudential Property Services Limited

Allridge (Builders) Limited v Grandactual Limited

Mr Recorder David Blunt QC.
(Judgment delivered 19 December 1996)


Allridge was one of a number of contractors engaged on the conversion works for the Texas Embassy Cantina in London.

It was found as a fact that the terms of IFC 84, although proposed, were not incorporated into the contract, and that there was no specifically agreed completion date, or even commencement date.

The Court was asked to consider, a number of preliminary issues as to implied terms.

Issues and findings

Was there an implied term that Grandactual would operate with Allridge so as to enable Allridge to carry out the works in a regular and orderly manner and would not hinder or prevent Allridge from so doing (Implied Term (i))?


Was there an implied term that all preceding works at the Cantina to be carried out by other contractors engaged by Grandactual and which necessarily had to be completed for Allridge to carry out the works in a regular and ordinary manner would be so completed by those other contractors prior to Allridge commencing on site (Implied Term (ii))?


Was there an implied term that Grandactual would pay Allridge sums due pursuant to invoices raised by Allridge within no more than 3 days of their submission by Allridge such period being sufficient to allow the said notices to be checked by Grandactual whilst, at the same time, preserving cash flow to Allridge (Implied Term (iii))?


Was there an implied term that Grandactual would ensure that the Cantina would be either entirely or reasonably free from rubbish and other debris as at Allridge's commencement on site so as to enable the works to proceed (Implied Term (iv))?


Was there an implied term that Grandactual would ensure that the Cantina would comply with basic health and safety requirements so as to allow Allridge to carry out the works in a non hazardous environment?



This was, on its facts, a somewhat unusual case as between employer and the main contractor, but would be by no means unusual as between main contractor and subcontractor.

Many standard forms of subcontract contain express provisions entitling the subcontractor to loss and expense where the subcontractor is delayed or disrupted in his work. But equally, subcontract works are often carried out without any formal conditions applying or on main contractor's standard terms which do not contain express provision for loss and expense. In these circumstances, these implied terms are of considerable importance, so that the subcontractor can obtain by way of damages for breach of these implied terms what he would otherwise be able to obtain by way of loss and expense.

Chesham Properties Ltd v Bucknall Austin Project Management Services Ltd and others

His Honour Judge Hicks QC, Official Referee
Judgment delivered 6th September 1996


The plaintiff was a Property Developer. In 1985 and 1986 he engaged all of the defendants as his consultants in relation to a scheme at Royal Court House in London SW1. The building work took place between 1987 and 1989. The original statement of claim against the consultants made a number of allegations of breach of contract and negligence in the performance of the defendants' respective primary professional duties.

The plaintiff applied for leave to make extensive amendments including, in particular, numerous amendments that the defendants were each under a continuing duty to advise and inform the plaintiff of default and breaches by themselves and other defendants.

The court was asked to decide whether the amendments should be allowed in, and to try the questions of whether these duties arose, and if so, when time begins to run for limitation purposes in relation to such breaches.

The amendments were drafted on the alternative bases that the duty to report on own and others failings arose as a matter of the express terms of the engagements, implied terms, in tort, and by way of fiduciary duty.

Issues and findings

Did the new allegations arise out of the same facts or substantially the same facts within the meaning of Order 20 Rule 5(5)?


Are construction professionals to be regarded as agents of the employer in the fiduciary sense of the word?


Did the Project Manager owe a duty to report on his own failings?


Did the Project Manager owe a duty to report on the failings of the Architect, Engineer and/or Quantity Surveyor?


Did the Architect have a duty to report on the failings of the Project Manager?


Did the Architect have a duty to report on defects in his own design?

On the balance of probabilities, no.

Did the Architect have a duty to report on the failings of the Engineer and Quantity Surveyor?

On the balance of probabilities, yes.

Did the Engineer have a duty to report on the failings of the Project Manager?


Did the Engineer have a duty to report on the failings of the Architect and/or Quantity Surveyor?

On the balance of probabilities, no.

Did the Engineer have a duty to report on his own failings?


Did the Quantity Surveyor have a duty to report on anyone's failings?


When does the limitation period for such cases start to run in contract?

On the termination of engagement of the consultant who was under the duty to advise.

When does the limitation period for such cases start to run in tort?

On the expiry of the limitation period against the party about whom the advice should have been given.

Summary of findings of duties to report on failings

(See below) owes duty to report on failings of:-

Project Manager Architect Engineer QS
Project Manager No Yes Yes Yes
Architect No Probably not Probably Probably
Engineer No Probably not No Probably not
QS No No No No


This is an interesting case in a number of respects.

The recognition by the court that some consultants may have a duty to their clients to report on the failings of their fellow professionals may, at first sight, seem somewhat academic. After all, where all of the consultants are joined into the action, then the court has ample power to apportion the blame according to who was primarily responsible. The court may be expected to apportion blame without too much regard to who should have been sneaking on who.

The sting in the tail, however, comes with the limitation point. The broad effect of this judgment is to double the limitation period. Take, for example, the case of a failing by an engineer. Assuming that the engagement is under hand, the employer will have six years from the date of the damage to pursue a case in tort against the engineer. But he will then have another six years from then to pursue a case in tort against the architect for failing to report on the engineer's failing.

Conoco & Others v Phillips Petroleum Company and Others

The Commercial Court, Mr Justice Morrison


The parties entered into an agreement concerning gas in the Audrey Field in the North Sea whereby their respective interests were to be determined by an expert, ERC. Conoco and British Gas contended that one such decision (the third re-determination) was not binding on them, firstly because there was "manifest error" in their work, and secondly because ERC's re-determination was not carried out in accordance with the agreements made between the parties.

The agreement set out the rules and procedures to be followed by the expert at Exhibit D, and provided that:

In his final decision, which shall be in writing, the expert shall give fully detailed reasons therefor, and such decision shall be final and binding on all Unit Interest Owners save in the event of fraud or manifest error.

Issues and findings

How should the court approach challenges to expert determinations?

A balance must be struck between respecting the parties' autonomy in agreeing to a final expert determination on the one hand, and acknowledging their rights to determination by the court of their contractual entitlements on the other.

Is the striking of that balance a matter of policy?

No. It is a matter of contract.

Was it for the court to construe the Exhibit D Rules?

No. It was the intention of the parties that the expert should place its own interpretation on the language of the Exhibit D Rules.

On the facts of this case, was there manifest error?

No. Manifest error means oversights and blunders so obvious as to admit of no difference of opinion.


This case illustrated a dilemma that has been faced by the courts before in relation to expert determinations, adjudicators' decisions and certificates. On the one hand, where the parties have agreed that a particular issue should be decided by a third party, then the parties should be held to that bargain, and the decision of the third party should be honoured. On the other hand, where one of the contracting parties alleges that the third party has not done what was required of him, or has reached a decision that is obviously wrong, then the court is often tempted to intervene. The very process of considering the latter question frequently involves the court performing the very exercise that was agreed to be performed by the third party.

A number of recent decisions, such as in NRHA v Crouch and Crown, Drake & Scull v McLaughlin & Harvey, Balfour Beatty v Channel Tunnel and this one evidence the first consideration. Others, such as Cameron v Mowlem, John Barker v London Portman Hotel and TBV v Elm illustrate the latter consideration.

A particularly interesting feature of this case is the observation of Mr Justice Morrison that the balance should be struck, not on public policy grounds, but according to the language used in the contract in question. This point is likely to be of key importance in the drafting of adjudication rules under the Housing Grants, Construction and Regeneration Act. Where the contract or the adjudication rules expressly confer a wide discretion on the adjudicator to interpret the dispute being put before him, and the basis upon which he makes his decision, then it will be the more difficult to challenge the adjudicator's decision. If, on the other hand, the contract or adjudication rules do not confer such discretion, then it may be fairly easy for a dissatisfied party to challenge the decision on the basis that he has answered the wrong question, or approached it in an impermissible way.

There is also an interesting point arising from this case concerning reasons. The expert was required to give reasons for his decision, and those reasons represented the fuel upon which the challenge was based. Had the decision been given without reasons it seems unlikely that any challenge could have been launched at all.

Copthorne Hotel (Newcastle) Ltd v Arup Associates

His Honour Judge Hicks QC, Official Referee
(Judgment formally handed down 1st October 1996)


Copthorne were developers of a Hotel, and originally instructed Mr Ronald Chipchase as Architect and Mr Tony Elliott as Quantity Surveyor. Mr Elliott estimated that the construction cost of Mr Chipchase's design at £9.5 million.

In order to obtain certain grants, it became apparent to Copthorne that they would have to instruct an established national firm, and Arup was duly instructed on a multi-disciplinary basis in place of both Mr Chipchase and Mr Elliott.

Arup produced a number of cost plans. In the event, the total construction cost as pleaded was £15.2 million. Copthorne sued Arup for, inter alia, inaccurate cost estimates.

At this trial, various liabilities were decided, including cases that:

- At a meeting in April 1988 Arup already confirmed that the Hotel could be completed for £8 million plus or minus 5%

- That Arup's estimate in September 1988 contained an inadequate allowance for piling (the estimate was for £425,000 against an outturn cost of £975,000).

- That in May 1989, Arup put forward a cost plan for £11.186 million when it should have been approximately £13.474 million.

Issues and findings

Did the plaintiff prove its case on the alleged oral advice?

No. In particular the court noted that there were no contemporary documents supporting the alleged oral advice.

Did the plaintiff prove its case on the cost of piling?

No. There was no available "res ipsa loquitur" argument merely because the actual cost greatly exceeded the estimate.

Could the plaintiff succeed on the May 89 estimate?

No, because by then the plaintiff was already committed to the project. The plaintiff's argument that South Australia v York Montague had elided the tests for damage in tort with damage in contract rejected.


There has been something of a spate of viability cases recently, although this is a very rare case of a claim against a Quantity Surveyor for under estimating construction cost reaching trial.

Although cases such as this typically turn upon their own facts and evidence, there are some more generalised points illustrated by this judgment.

First, it is extremely difficult to succeed on a case based on oral advice given years ago unless that oral advice is supported by contemporaneous documentation. In this case, recollections of the relevant meeting varied, and contemporaneous documentation did not adequately support the plaintiff's case. A court is bound to be predisposed to give a defendant the benefit of any doubt in these circumstances.

Secondly, an interesting point arises where an estimate is greatly short of actual cost. It is not always easy to particularise the actual negligence, especially in cases where there is no documentary evidence left as to how the defendant's estimate was arrived at. Suppose a particular piece of work should have been estimated at £100,000, but was in fact estimated at £10,000. Without knowing how that figure was arrived at, it is often difficult to point to the particular respect in which the defendant had got it wrong save by reference to the overall figure. This case is a reminder that it is no good merely pointing to the outturn cost; a plaintiff must prove that the estimate was negligent.

Thirdly, the case illustrates the well established principle that advice given after the plaintiff has committed himself is not ordinarily actionable. This point occurs time and again in dry rot and DPC cases: having exchanged contracts, a purchaser calls in a dry rot/DPC contractor, and in due course complains that the contractor negligently failed to find dry rot/damp. In these circumstances, the dry rot/DPC company is not liable for the cost of the bad bargain, although of course it may be liable in respect of the further spread of the attack before it is eventually discovered.

In this case, the plaintiff took a somewhat novel line, arguing that this orthodoxy had been overturned by the House of Lords decision in South Australia v York Montague. The court found that the traditional tort test had not been varied. Thus if Lemming A says to Lemming B as they are plunging off the cliff: "Don't worry, this is absolutely fine" then Lemming B cannot successfully sue Lemming A in court, however negligent the advice.

Costain Civil Engineering Limited and Tarmac Construction Limited v Zanen Dredging and Contracting Company Limited

Official Referees' Business
His Honour Judge David Wilcox
(Judgment delivered 8th December 1996)


Costain and Tarmac were in joint venture for the construction of the A55 Conwy Bypass and river crossing for the Welsh Office. The original intention was to form a dry basin for the casting of certain tunnel elements, and to then flood and backfill that basin. During the course of the works, supplemental agreements were entered into such that, instead of back filling the basin, it was used to provide a marina for the Crown Estate Commissioners. The supplemental agreements were profitable to the joint venture.

The main contract was ICE 5th Edition, and the joint venture engaged Zanen under the blue form.

The joint venture instructed Zanen, purportedly by way of variation under the blue form subcontract to execute the work necessary to accommodate the changed plan.

By an interim award, the arbitrator found that this work was outside the scope of the contract, such that Zanen was entitled to be paid on a quantum meruit basis. The arbitrator awarded Zanen not only £370,756 plus on costs in respect of the works themselves, but also a further £386,000 to reflect the profit being obtained by the joint venture on the work, and to reflect the competitive advantage that Zanen had, in that they were already on site and mobilised with their equipment.

The joint venture appealed.

Issues and findings

Was the work covered by the subcontract?

No. The variations clause of a subcontract cannot oblige the subcontractor to carry out works which are not part of the main contractors obligations under the main contract.

Can a quantum meruit include a sum in respect of the profit being earned by the recipient of the service?


Can a quantum meruit take account of the competitive edge that the provider of a service has which would enable him to strike a better bargain?



This is the first judgment reported in CILL of His Honour Judge David Wilcox, who was appointed as a London OR last year. It is a case of very considerable importance in the assessment of quantum meruit.

It has often been assumed that quantum meruit in construction cases must always be assessed on a "cost plus" basis. The construction industry has never known quite what to do with the House of Lords decision in the mining prospecting case of Way v Latiller, which suggests that in appropriate circumstances, the entitlement of a provider of a service may be assessed as a percentage of the benefit obtained by the recipient of the service.

This case makes clear that "cost plus" is not the invariable measure for quantum meruit. The question is "what is a fair commercial rate?". Where the recipient of the service can reasonably expect a substantial profit from the enterprise, the fair commercial rate may be greater than would otherwise be the case. Similarly, if the provider of the service enjoys some other commercial advantage, such as already being on site or, presumably, having some specialised knowledge.

Generally speaking, this emphasis on a hypothetical commercial bargain will generally imply a minimum of "anticipated cost plus" because otherwise, presumably, the provider of the service would say "no".

Dew Group Ltd v Costain Building & Civil Engineering Limited

In this Scottish case, Lord Weir had to decide whether the subcontract pursuers were entitled to pursue their own arbitration against the main contractor, or whether they were bound to join in a main contract arbitration.

On the facts of the case, Lord Weir decided that the subcontractors were indeed entitled to pursue their own separate arbitration.

Europa Holdings Ltd v. Circle Industries Ltd

His Honour Judge Anthony Thornton QC
(Judgment delivered 2nd June 1995)


This case involved claim and cross-claim arising out of the Canary Wharf development; Europa claimed approximately £1.1m plus interest and Circle counterclaimed approximately £420k plus interest.

In 1992, Circle unsuccessfully endeavoured to obtain a Order for Security for Costs against Europa. Whilst it was established that Europa, if unsuccessful, would be unable to pay Circle's costs, yet an order for security was refused because such an order would stifle the claim.

Europa, unable to afford continuing legal costs, sought leave to be represented by its principal shareholder and director, Mr Keepax.

Issues and findings

Do Sections 27 and 28 of the Courts and Legal Services Act 1990 empower the Court to permit a company director rights of audience and the right to conduct litigation on behalf of the company?


Should pre-CLSA guidelines govern the exercise of the Court's discretion in this matter?


Was it right to grant Mr Keepax the right of audience and the right to conduct litigation in this case?



Despite, or perhaps because of, the sums spent on this litigation, all parties seem to have been tilting at windmills here. Neither Europa nor Mr Keepax had the assets to meet Circle's substantive claim, and after this Application was heard but before Judgment was delivered Circle itself appointed a Receiver. It is thus ironic that this ultimately futile case has been a pathfinder in two respects, ie:-

- To show that security for costs will not be ordered where it would stifle the claim (the Court of Appeal decision on security, reported in July 1992)

- That in an appropriate case, a company can save on its own legal costs by being represented by a director (this decision).

Extrudakerb v White Mountain

In July, the Queen's Bench Division in Northern Ireland entered the debate as to whether arbitration agreements could be incorporated by reference; it said that they could.

Expectations that the decision was to be reversed were frustrated by settlement of the case before the Court of Appeal in Northern Ireland could deliver its judgment.

Ferguson v Davies

Court of Appeal
Henry, Aldous and Evans LLJ
(Judgment delivered 21st November 1996)


The plaintiff sued the defendant, initially for £486.50, later amended to £1,745.79.

In the standard form of County Court defence, the defendant ticked the box saying that he disputed the claim because he had already paid it but also acknowledged liability for £150, and sent a cheque to the plaintiff for £150 to the plaintiff "as a full payment on the County Court Summons".

The plaintiff presented the cheque, and then sought to pursue the balance of his claim.

At first instance, the Court decided that the plaintiff's presentation of the cheque for £150 amounted to a compromise, such that he was not entitled to pursue the balance. The plaintiff appealed.

Issues and findings

Had the action been compromised?

No. There is a difference between an open admission and an offer by way of compromise. There was no consideration supporting any compromise here.


The question of whether a claimant who receives a cheque for less than the full claim can bank the cheque and pursue the balance is one that recurs time and time again. It seems that there are at least three bases upon which the claimant may be able to pursue a claim for the balance.

First, this case shows that if there was in fact no dispute about liability for the sum that was paid, then there can be no consideration to support any contract by way of accord and satisfaction in respect of the balance.

Secondly, even if the defendant has put the whole of his liability into dispute, then it seems that the plaintiff is entitled to bank the cheque and at the same time write to the defendant saying that he is accepting the cheque, not in full and final satisfaction, but on account; that was decided in Day v McLea in 1899.

Further, it seems that if the cheque was banked by an employee of the plaintiff company with authority to bank cheques but not authority to compromise claims, then again there can be no binding contract of accord and satisfaction; that was the decision of the New Zealand case of Dunrai Manufacturing v C L North in 1988.

Floods of Queensferry Limited v Shand Construction & Others

His Honour Judge Humphrey Lloyd QC., Official Referee
(Judgment delivered 13th February 1997)


This case arose out of a FCEC "Blue Form" of subcontract between the plaintiff company and the defendants for work done on the A494 Mold Bypass. The claim was for over £1 million of which £97,000 was admittedly due subject to a counter claim of £500,000.

The plaintiff claimed against the contracting defendant pursuant to the contract, and also for misrepresentation; the plaintiff also made claims in restitution for other members of the defendant company group who had taken over the business of the contracting defendant, and in that capacity received payment from the Welsh Office.

The writ was issued in 1994. In the Autumn of 1995, the plaintiff company was ordered to provide security for costs, and the action was stayed until that was done. The defendants served notice of intention to seek an order against the managing director and majority shareholder of the plaintiff company, Mr Flood, pursuant to Section 51 of the Supreme Court Act 1981. In consequence, the plaintiff company assigned to Mr Flood "absolutely all its assets including the causes of action". In February 1996, His Honour Judge Thornton allowed Mr Flood to be substituted as plaintiff, on the basis that Clause 2(3) of the FCEC Form did not prevent a valid assignment; the Court of Appeal reversed that decision in December 1996.

Security was obtained by the plaintiff company.

The plaintiff and Mr Flood applied for an order that Mr Flood be joined as co-plaintiff, and, on the basis that the plaintiff company has no money to finance the retention of Solicitors and Counsel, that Mr Flood be permitted to conduct the litigation on behalf of the Company as well as on behalf of himself.

RSC Order 15 Rule 4(1) provides as follows:-

4. -(1) Subject to rule 5(1) two or more persons may be joined together in one action as plaintiffs or as defendants with the leave of the Court or where -

(a) if separate actions were brought by or against each of them, as the case may be, some common question of law or fact would arise in all the actions, and

(b) all rights to relief claimed in the action (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions.

Statutory Provision

Section 27(2)(c) of the Courts and Legal Services Act provides that:-

A person shall have a right of audience before a court in relation to any proceedings only in relation to the following cases ... where ... he has a right of audience granted by that court in relation to those proceedings.

Section 28(2)(c) provides that:-

A person shall have a right to conduct litigation in relation to any proceedings only in the following cases ... where ... he has a right to conduct litigation granted by that court in relation to those proceedings.

Issues and findings

Was the misrepresentation claim a claim for the "benefit of the subcontract" within the meaning of Clause 2(3) of the FCEC Form?


Was the plaintiff's claim against other members of the defendant company group such a claim?


Did the court have a discretion as to whether to permit Mr Flood to be joined as a plaintiff under Order 15, Rule 4(1)?

No. If the requirements of that rule were satisfied, then Mr Flood was entitled to be joined as co-plaintiff.

Should Mr Flood be permitted to conduct the litigation on behalf of his company?

No. Europa Holdings v Circle Industries not followed.

Is there an absolute rule that co-plaintiffs must have common representation?


Should Mr Flood be granted rights of audience on behalf of his company?



This case and the Europa case are plainly irreconcilable, such that we now have conflicting authority as to whether an impecunious company can save itself the cost of engaging Solicitors and Barristers.

In this case, Judge Humphrey Lloyd took the traditional view that self representation is a privilege ordinarily available to individuals but not limited companies, and that this principle applies not only to the right to speak in Court (the right of audience) but also to the traditional Solicitors role (the right to conduct litigation).

Mooney v Henry Boot Construction Limited

Balfour Beatty v Kelston Sparkes Contractors Limited

(Judgment delivered 10th July 1996)
Court of Appeal, Staughton LJ, Simon Brown and Aldous LLJ


In each of these Appeals, which were heard together, the subcontractors (Mooney and Kelston Sparkes respectively) had entered into subcontracts in the FCEC Blue form. The main contractors (Henry Boot and Balfour Beatty respectively) had obtained settlement of claims under the main contract. In each case, arbitrators appointed pursuant to the subcontracts ordered the main contractors to pass on a proportion of the sums recovered by the main contractor. In each case, the Arbitrator's awards were appealed by the main contractors.

In the Mooney v Henry Boot case, Judge Humphrey Lloyd QC. found at first instance for the contractor, on the basis that the sum in question recovered by the main contractor was probably not in fact due under the main contract, and that the main contractor was entitled to keep the windfall. In the Balfour Beatty v Kelston Sparkes Case, Mr Recorder Crowther QC. found at first instance that, where the engineer under the main contract gives instructions by way of variation in light of unforeseen ground conditions, then the subcontractor is entitled to a fair proportion of sums recovered by the main contractor in respect of those instructions.

Contractual Provisions

Clause 10(2) of the FCEC Blue form provides as follows:-

(1) Subject to the subcontractor's complying with this sub-clause, the Contractor shall take all reasonable steps to secure from the employer such contractual benefits, if any as may be claimable in accordance with the Main contract on account of any adverse physical conditions or artificial obstructions or any other circumstances that may affect the execution of the subcontract Works and the subcontractor shall in sufficient time afford the Contractor all information and assistance that may be requisite to enable the Contractor to claim such benefits.

(2) On receiving any such contractual benefits from the Employer (including any extension of time) the Contractor shall in turn pass on to the subcontractor such proportion if any thereof as may in all the circumstances be fair and reasonable.

(3) Save as aforesaid the Contractor shall have no liability to the subcontractor in respect of any condition, obstruction or circumstance that may affect the execution of the subcontract Works and the subcontractor shall be deemed to have satisfied himself as to the correctness and sufficiency of the Price to cover the provision and doing by him of all the things necessary for the performance of his obligations under the subcontract.

(4) Provided always that nothing in this Clause shall prevent the subcontractor claiming for delays in the execution of the subcontract Works solely by the act or default of the Main Contractor on the ground only that the Main contractor has no remedy against the Employer for such delay.

Issues and findings

Is Clause 10(2) merely procedural, or does it give the subcontractor a substantive right?

It gives the subcontractor a substantive right.

Does Clause 10(2) bite on what the main contractor actually recovers, or only on what can be shown to have been due under the main contract?

On what the main contractor actually recovers in respect of claimable benefits.

What does "claimable" mean?

The test is whether a claim for a benefit can be made in good faith.

Should the appeal against Judge Lloyd's decision be allowed?


Does Clause 10(2) bite on sums recovered by the main contractor pursuant to instructions issued in light of unforeseen ground conditions?

No. Clause 10(2) only bites on Clause 12 itself. There are other provisions in the subcontract dealing with subcontractors' entitlement for variations.


It is ironic that the Court of Appeal has overturned both of the first instance decisions, in the first case deciding that Judge Lloyd was too generous to the main contractor, and in the second case deciding that Mr Recorder Crowther was too generous to the subcontractor. If nothing else, the case illustrates that the more procedure is built into contractual arrangements, the more scope for legal uncertainty.

Of the cases, the first seems the more straight forward. In short, the Court of Appeal found that the contract called for the main contractor to pass on a fair and reasonable proportion of what it recovered for unforeseen ground condition claims, and it was hardly a meritorious position for the main contractor to argue, in effect, that it should be permitted to keep the whole of its recovery on the ground that the money had not really been due to it at all.

The second case is more surprising. Both parties had appealed the first instance decision, and the end result, although still entitling the sub contractor to a fair and reasonable proportion of the main contractor's recovery, may be thought surprisingly restrictive. Under Clause 12 of ICE, where there are unforeseeable ground conditions, the contractors may have to change to more expensive methods. The engineer might or might not issue a variation order in respect of the issue; the main contractor is entitled to be paid either way. But in the light of this new decision, it is only where the engineer does not issue the variation order that the automatic sharing provision of clause 10(2) of the sub contract will bite.

Although this decision is of profound importance to the way in which subcontractors' claims must be pleaded, it may make comparatively little difference to the end result. Whichever procedural route is adopted, a main contractor must provide details on discovery to his sub contractor of what he has obtained from the employer, and arbitrators will always be predisposed to require main contractors to pass a fair and reasonable proportion of that money "down the line".

Philip Alexander Securities v Bamberger

In July of 1996, the Court of Appeal declared that Section 2 of the Consumer Arbitration Agreements Act 1988, which distinguishes between domestic arbitrations and international arbitrations, was discriminatory and therefore impermissible pursuant to Articles 6 and 59 of the EC Treaty.

Although this decision is ostensibly limited to the case of consumer arbitration agreements, it is being suggested in some quarters that, by application of the same logic, all refusals of stays under Section 4 of the Arbitration Act 1950 are similarly illegal.

RG Carter (West Norfolk) Limited v Ham Gray Associates Ltd

In June last year, the Court of Appeal dismissed an appeal against the decision of Judge Bowsher reported in CILL in September 1994 (CILL page 967).

In that case, Judge Bowsher had refused to set aside a default judgment by the defendants, following a consent "unless" order. The facts appear from the earlier CILL report; far from finding any grounds to review the exercise of Judge Bowsher's discretion, the Court of Appeal endorsed Judge Bowsher's approach, and said that judgments signed after failure to comply with an order after repeated extensions of time and unless orders should be upheld unless substantial reasons are advanced. Delay, said the Court of Appeal, is the enemy of justice.

Roche Products Limited v Freeman Process Systems and Another

Black Country Development Corporation v Kier Construction

His Honour Judge Hicks QC.
Judgment handed down 10th July 1996


In each case, the Plaintiffs issued proceedings in Court, and the Defendants sought a stay in order that the disputes may be referred to Arbitration.

In each case, the arbitration clause was incorporated by reference, and the issue arose as to whether such incorporation was effective.

In the Roche case, there was an additional complication, in that the plaintiff employer sued not only the defendant contractor, but also its guaranteeing parent.

Issues and findings

Can an Arbitration clause effectively be incorporated by reference?

Not following Ben Barrett v Boot, yes.

In the exercise of its discretion, should a stay be refused to avoid multiplicity of proceedings?

In this case, no.


The question of whether an arbitration clause can effectively be incorporated by reference is now rather equally balanced. The point was addressed directly by the Court of Appeal in Aughton v Kent, each of the two Judges reaching directly contrary opinions. In both this case and the Ben Barrett v Boot case, Official Referees took the point head on, and have reached contrary decisions. There are a number of other decisions where the arbitration clause was not treated as incorporated by reference, they may perhaps be regarded as turning on their particular facts.

This debate will be overtaken by the Arbitration Act 1996, the Delphic terms of which provide at clause 6(2) that:

The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement.

Section 5(1) of the new Act provides, however, that Part I of the Act (which is most of it) only applies where the arbitration agreement is in writing, and Section 5(3) provides that:-

Where parties agree otherwise than in writing by reference to terms which are in writing, they make an agreement in writing.

Part I of the new Act, section 9(4) says that a stay of court proceedings is mandatory. Part II of the Act applies in the case of domestic (ie non-international) arbitrations; section 86 provides that Section 9 (4) does not apply in the case of domestic arbitrations, and instead the Court does not have to grant a stay of the litigation if it thinks that there are sufficient grounds for not requiring the parties to abide by the arbitration agreement.

The literal effect of this rats' nest is probably that where there is reference to a set of conditions including an arbitration clause, that constitutes an "arbitration agreement" but not an "arbitration agreement in writing". As such, the court still has a power to stay court proceedings, but the substance of the new Act (Part I) would not apply, nor the provisions of the Arbitration Act 1950 (which is being repealed). A more attractive interpretation would be that the new legislation is probably trying to permit incorporation of arbitration agreements by reference. Either way, it much to be regretted that the new Act is drafted in such an obscure way, and the different treatment of arbitration agreements in writing and arbitration agreements that are not in writing will leave ordinary commercial men non-plussed.

The judge then went on to revisit the subject matter of the McAlpine v Unex case (CILL page 952). In that case, the guarantor did not volunteer to accept the results of the arbitration, and so the court proceedings against him were not stayed. By contrast, the guarantor in this case was prepared to abide by the results of the arbitration, and accordingly the action against him was stayed.

South Australia Asset Management Corporation v York Montague Limited

United Bank of Kuwait Plc v Prudential Property Services Limited

Nykredit Mortgage Bank Plc v Edward Erdman Group Limited

House of Lords
Lords Hoffmann, Goff, Jauncey, Slynn, Nicholls
(Judgment delivered 20th June 1996)


In each of these cases, Defendant valuers had made valuations pursuant to which Plaintiff lenders had lent money. The valuations were negligently high, and the loss suffered by the Plaintiffs was exacerbated by a fall in the property market between the date of the valuation and the time that the asset could be realised.

In the Court of Appeal, 6 of the cases were heard together under the name Banque Bruxelles Lambert v Eagle Star; the whole of the loss suffered by the Plaintiff, including that contributed by the fall in the market, was held to be recoverable.

Issues and findings

Is a Plaintiff lender entitled to recover the extent of the fall in the market from a negligent valuer?


Is there a limit on damages recoverable in these circumstances?

Yes, the difference between the defendant's valuation, and what the valuation should have been.


In the construction law context, the main relevance of this decision is in those cases where an architect, surveyor, management contractor or construction manager has given the employer some advice, upon which the employer relies in deciding to proceed with the project. If that advice turns out to be negligent, and causative of the employer's loss (in a sense that the employer has relied on the advice in proceeding with the project, but would not have proceeded with the project if he had received the correct advice) is the plaintiff entitled to recover that part of his loss which reflects the fall in the value of the property market?

This question has arisen in a number of cases which have recently been before the courts (see eg. Gable House v Halpern (CILL July 1995, page 1072) but recently these cases appear to have been settled before trial of that issue. The last such case which was not settled pre-trial was T & S Contractors v Architectural Design Associates, reported at 1993 CILL, page 842. In that case, the Plaintiff was entitled to recover the whole of his losses, including those caused by the fall in the value of the property market.

In this case, the House of Lords has found that such loss is not recoverable, but the decision is by no means as cut and dried as it might at first appear. There are at least two circumstances in which a plaintiff may indeed be able to recover this full loss.

First, a plaintiff may be able to recover his full loss if he pleads the case, not by way of damages for breach of a duty of care (contractual or otherwise) but by way of damages pursuant to the Misrepresentation Act 1967. Such course would not have been open to any of the plaintiffs in these valuation cases, because the contract induced by the negligent valuations was not a contract with the defendant valuers, but with the defaulting borrower. But in the context of at least some construction industry cases, particularly claims against contractors who make negligently optimistic assessments of what is achievable, an action pursuant to the Misrepresentation Act may be possible, and indeed preferable in that the burden of proof of negligence is effectively passed to the defendant.

Secondly, a plaintiff may be able to recover the fall in the value of the market by a contractual route if there is a warranty of some sort from the defendant. Lord Hoffman was careful in his judgement to distinguish the measure of damages for breach of warranty from the measure recoverable for injury caused by negligence, but his reasoning is markedly opaque. He seems to equate damages for breach of a contractual duty to take care with a tortious duty, but where does that leave the ordinary implied collateral warranty in these cases, formulated by Lord Denning in Esso v Marden as a warranty that the estimate be a sound and reliable estimate?

The position is not clarified by Lord Hoffman's example of the mountaineer, where there would appear to be no causative link at all between the negligent diagnosis and the mountaineer's injury.

It thus remains a matter of some speculation as to how these loose ends will be tied up.

St Albans City and District Council v International Computers Ltd

In the Summer 1996 Review we noted that the first instance decision in this case, where the local authority was obtaining a windfall, had been remarked upon with surprise.

That aspect of the decision was overturned on Appeal by the Court of Appeal in August. The case concerned software errors whereby the community charge rate was set too low for 1990/1991. The Court of Appeal found that the local authority could not recover by way of damages from ICL, the loss of community charge that it was able to make good later.

St Modwen Developments Limited v Bowmer & Kirkland Limited

(Judgment delivered 20th August 1996)
His Honour Judge Fox-Andrews Q.C.


The Plaintiff (SMD) engaged the Defendant (BK) for the construction of an office block. Disputes arose. Mr Harold Crowter was appointed arbitrator. There was an express agreement, recorded in Mr Crowter's Order for Direction number 1:

It is agreed that I may use my professional knowledge and experience in assisting in the determination of any of the matters in dispute in this reference, although the parties are given leave to address me further on this point at the pre-hearing review.

By his first interim award, Mr Crowter awarded BK the sum of £57,549.29 for shortfall in the recovery of company overhead requirements due to prolongation of the financial period with financial charges and simple interest. SMD applied for an order that such award should be set aside or alternatively remitted for the reconsideration of Mr Crowter together with the court's opinions on the questions of law arising.

Issues and findings

Had the arbitrator misdirected himself by awarding loss of head office overheads on a formula basis?

After reviewing the authorities, no.


This decision does not break new ground, but it does drive yet another nail in the coffin of the argument that formula calculations are never appropriate.

In line with modern thinking, the decision underlines the point that the formula should not be applied indiscriminately; it should only be applied where there is evidence that the delayed contractor was there by prevented from earning overhead recovery on other projects.

Sweatfield Limited v Hathaway Roofing Limited

Sir Michael Ogden QC., sitting as a Deputy High Court Judge.
(Judgment delivered 31st January 1997)


The plaintiff, formerly known as JT Design Build Limited, subcontracted roofing and cladding work to Hathaway.

The subcontract work fell behind, partly because of bad weather, and partly because of earlier disputes between JT and Hathaway which, while settled, impaired cordial relations between JT and Hathaway.

On 27th January 1995, JT complained that Hathaway's operatives were not working a full day, and sought Hathaways assurance that Hathaway would use its best endeavours to mitigate further deterioration of the programme, and would work normal site hours.

In a telephone conversation on 1st February, JT asked Hathaway to increase the number of men on site; Hathaway said that would not be practical, but if JT issued an instruction to accelerate then Hathaway would respond by setting out the additional costs involved. JT adverted to their intention to bring additional men on the site; Hathaway objected to that course.

On the following day, JT bought onto site 6 operatives from another subcontracting company; it was found as a fact that those men were undertaking Hathaway's subcontract work.

Hathaway immediately left site, and claimed that JT were in repudiatory breach.

JT claimed that Hathaway were in repudiatory breach by leaving site.

Issues and findings

Were JT in repudiatory breach by ordering or permitting those other workers to do Hathaway's subcontract work?



The interesting point about this case is not so much that JT were in breach by bringing on the additional men, but that that breach should be regarded as repudiatory. The amount of subcontract work that had been executed by the additional workmen seems to have been very small indeed, and it seems that no de minimis or similar approach was considered.

The legal doctrine of repudiation was not explored in detail in the judgment. Traditionally, it is thought that there are two circumstances in which a breach of contract by one party may be treated as repudiatory namely:-

  • Any breach of condition, ie. a term which the parties agreed, whether by express terms or implication of law is such that any breach shall entitle the other to terminate the contract.
  • Fundamental breach, ie. where the breach of any term (whether condition, warranty or intermediate term) is so grave as to have the effect of depriving the other party of substantially the whole of the intended benefit of the contract.

It is not immediately evident into which category the supplementation of labour falls, and it is interesting to compare the approach of Deputy Judge is that of Lord Wilberforce in Woodard Investment Development Ltd v Wimpey Construction U.K. Ltd [1980] 1 WLR 277, in which he said:

Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations.

Following this decision, main contractors, management contractors and construction managers will need to be particularly cautious before bringing in labour to supplement that of a slow moving subcontractor.

Is the main contractor any better off in omitting part of a slow moving subcontractor's work, in order to then let it to someone else? Probably not, because to omit work with a view of letting it to someone else is ordinarily regarded as a breach of itself. Ironically, the likely effect of this decision will be to encourage main contractors to determine subcontracts in their entirety pursuant to express provision.

There is also something of a moral for those who draft subcontract conditions on behalf of main contractors: include an express right to supplement the subcontractor's labour if the works fall behind program.

TBV Power Limited v Elm Energy

Mr Recorder David Blunt QC., Deputy Official Referee
(Judgment delivered 19th July 1996)


TBV agreed to design, construct and install for Elm a rubber tyre fuelled electricity generating plant. Under the contract, Elm was entitled to reject the plant in it entirety, and to repayment of all sums paid if the plant failed to achieve the certificates from the engineer as to performance of the plant. The engineer held that the plant had failed to meet the required levels of performance. Elm rejected the plant and claimed to be entitled to repayment of sums as certified by the engineer and upheld by the adjudicator of some £29 million.

TBV issued proceedings challenging the validity of the engineer's decisions on the grounds of unfairness and/or failing to have regard to material circumstances. Elm sought to strike out that claim under Order 18 Rule 19 on the ground that, the plant having failed to achieve the minimum performance criteria laid down in the contract, the engineer was


to issue the certificate in question, and accordingly that no judgement or exercise of discretion was involved.

Issues and findings

Should the claim be struck out?



This decision represents an interesting contrast with the Conoco Decision.

The key point is essentially a procedural one. All TBV had to do was to plead a case that, on the facts, the contractual machinery had broken down. The court could not determine that question without a full trial. An earlier attempt by Elm to obtain Summary Judgment pursuant to the Bond had been unsuccessful.

The practical effect of the judgment is to render the contractual machinery largely worthless, insofar as the contractual machinery was intended to provide a prompt and certain way of resolving disputes. As in the Conoco case, the moral appears clear - a certification/adjudication procedure is unlikely to be effective unless there is clear express language showing that the certificates/ decisions are enforceable summarily even in the case of challenge.

Tony Cox (Dismantlers) Limited v Jim 5 Limited

(Judgment delivered 28th August 1996)
His Honour Judge Bowsher QC. Official Referee


An agreement was entered into between the Plaintiffs, who were demolition specialists, and the Defendants, who were builders, whereby the Plaintiffs were to transfer certain development land to the Defendants, and to execute certain infrastructure work, in respect of which they were to be paid a price of £800,000. The agreement made no mention of VAT.

Issues and findings

Was the £800 to be regarded as inclusive or exclusive of VAT?

Distinguishing Franks & Collingwood v Gates, exclusive


It is perhaps surprising that this issue has not been before the courts more often. It is clear that when a consumer in a shop is quoted a price for a pound of beans, then she does not have to pay VAT on top. It is also clear that when one contractor quotes another a rate for brickwork, then VAT must be paid on top. It is by no means always clear where the borderline between these two cases will lie.

Where the employer is a consumer, and she accepts a quote for building work which made no mention of VAT, then Franks & Collingwood v Gates (1983) CILL p 30, 1 Con LR 21 probably remains good authority for the proposition that VAT is to be treated as included in the price, regardless of the employer's nationality or residence. It is worth bearing in mind that the point is not merely one of construing the contract; even if the price is treated as exclusive of VAT, it is be no means clear that the contractor can require the employer to pay the VAT. After all, the VAT legislation requires the contractor to account to Customs and Excise for the VAT, with no statutory right over against the employer, and the question arises: "What is the contractor's cause of action to recover the VAT from the employer?". In the light of the statutory position, it is difficult to see that any term could be implied as a matter of law. It would require a clear case to justify rectification of a contractual provision from "A shall pay B £100" to "A shall pay B £117.50". Similarly, for a term for the payment of VAT to be implied as a matter of business efficacy it would have to pass the officious bystander test, i.e. whether both parties would have said "Of course" if asked whether VAT was to be paid on top. In practice, the employer may need to do little more than assert that she expected the contractor to be responsible for the VAT to prevent rectification or the implication of a term as a matter of business efficacy.





ORSA believes that the relationship between solicitors and expert witnesses is of the utmost importance in view of the duties of both to the court or other tribunal. This protocol has been prepared with a view to assisting clarity of communication and to provide a framework against which solicitors and experts are able to operate freely. It is not intended that this protocol should operate in a rigid way but that reference to it will enable experts and solicitors to consider key areas at an early date.


A. Selection

1. The solicitor shall provide sufficient information to the expert to enable him to confirm whether or not the issues, as identified by the solicitor, are matters on which the expert is competent to act as expert witness. ORSA encourages the appointment of experts who maintain active professional practices.

Conflicts and confidentiality

2. The solicitor shall provide the expert with a list of relevant parties and the expert shall state whether or not he has any connection with any of the parties named or reasonably inferred from the list.


3. The expert should normally expect to provide information about his experience and suitability for the role in which he is under consideration together with details of his proposed basis of charge. If the solicitor intends to approach more than three persons to discuss their potential suitability for an appointment as an expert witness, he should inform each expert that he is one of a number under consideration.

Independent of Expert

4. In any selection and appointment process the solicitor should remember that a witness who is not selected or whose appointment is subsequently terminated may be free to take an appointment from other parties. The solicitor may wish to ensure that documentation and information made available as part of any selection process is carefully chosen and when necessary documentation is retrieved at the end of the process or an appointment.

B. Brief

5. As soon as possible after the expert has been appointed the solicitor shall explain the client's commercial and legal objectives in a manner commensurate with the independence of the expert and prepare for the expert a brief which shall be in a form suitable for the nature and complexity of the matter on which the expert is asked to form an opinion. The Brief will normally contain the following information:

  • Party making appointment.
  • Subject matter.
  • Contacts.
  • Nature of proceedings.
  • Timetable fixed in any proceedings and current status.
  • Pleadings in any action which has commenced.
  • Details of other experts appointed by the party making appointment and others if known with field of expertise.
  • In a large or complex matter the method by which experts are to co-ordinate their services. Is there to be a lead expert with which other experts will liaise?
  • Area in which the expert is called upon to give his opinion.
  • Specific issues on which the expert is asked to advise and the context of the expert's role. In an appropriate case the solicitor should prepare a detailed Statement of Issues for the expert.
  • Time scale with which the expert is asked to prepare:
    • initial review and advice as technical issues pleaded;
    • draft report for discussion and review of brief;
    • report for issue.
  • Details of key documentation and details of location of all relevant documents. In a straightforward case appropriately bundled documents should accompany the brief but in a complex case the expert may be required to review documentation and the brief itself will contain only limited documentation.
  • The brief should outline principles of privilege and discovery.

6. On receipt of the brief the solicitor and the expert should review the nature and extent of the brief with regard to the role of the expert and the roles of any other experts appointed by the solicitor. The proliferation of experts should be avoided. The solicitor should be aware that there may be no need to appoint an expert in every relevant discipline and that a carefully selected expert may be able to cover more than one area.

7. The solicitor and the expert should keep the brief under review at all times and advise each other if relevant issues change in the material way. The expert should not undertake work outside the brief without the approval of the solicitor.

8. The scope of the expert's appointment should be defined and the expert appointed in a way that will avoid costs being wasted or too many experts appointed.

9. The solicitor may wish to discuss with those representing other parties the matters on which expert opinion is required in order to assist and refine the brief.


10. The solicitor and the expert shall agree the overall timescale and the programme within which the expert shall work. If the solicitor or the expert becomes aware of any matter likely to affect that timescale, each should advise the other. The exact timing and sequence will vary from case to case. These issues should be discussed at an early stage.

Hearing date

11. The solicitor should keep the expert advised of the timescale set in any litigation or arbitration or of any timetable which is to be met and of any changes that are likely to be made including the expected length of, or dates of, any hearing or trial.

12. The expert when advised of any hearing or trial date on which he is likely to be required to attend or give evidence shall make that date available and inform the solicitor if there are any pre-existing commitments likely to affect the expert's ability to fulfil the appointment.

13. Where the expert has pre-existing commitments the solicitor and the expert shall work together in order that the interests of the client can best be served. The expert shall not take on new commitments which might interfere with his existing responsibilities without assessing the position with the solicitor.

C. Reports

14. The report should normally be issued as a draft for discussion which should be accompanied with any documents not originally supplied by the solicitor to the expert. The solicitor and the expert should discuss the format of the report. It is wise for the solicitor and the expert to test the experts' opinions in the light of alternative facts contended for by the client's opponent.

15. When the expert's report has been finalised it will normally be exchanged by the solicitor and not by the expert. Most usually simultaneous exchange is appropriate, but in certain cases sequential exchange may be required. The expert and the solicitor should discuss this early in the appointment.

16. The expert and the solicitor will need to review the status of the report if the underlying facts change or if the expert's opinion alters.

D. Without prejudice meetings

17. It is common practice for a tribunal to order the parties' expert witnesses to meet to identify those parts of their evidence which is in issue. There is no standard format for such meetings. What follows is intended as a guide.

18. Meetings of experts should normally take place before exchange of the experts' reports. The predominant view of ORSA is that if exchange takes place first it is more likely that "positions" are taken too early to the detriment of proper discussion at the meeting.

19. The meeting is likely to be most effective if it is chaired by one expert and if an agenda is agreed in advance. It is appropriate for the parties' solicitors in conjunction with the expert to identify matters in issue to determine items for the agenda. Lawyers and clients should not be present at the without prejudice meeting of experts. It is important that the meeting of experts addresses the matters of expert evidence that relate to the matters in issue in the proceedings. The meeting is not the place for the lawyer to "surprise" the other party's expert with a new theory or new documents.

20. Close liaison will be necessary between solicitor and expert in order to make best use of the meeting. Occasionally it will be appropriate to have meetings of experts to more than one discipline, usually as a follow on from the initial meeting. For example, Architect, Structural Engineer and Quantity Surveyor, where appropriate, from all parties, might meet to discuss the nature and extent of remedial works contended for.

E. Notes of without prejudice meetings

21. The expert should report to the solicitor promptly after the meeting and discuss any apparent agreement or narrowing of issues.

22. The expert should, in conjunction with other experts of like discipline, prepare a written note signed by each of them as to matters of opinion on which they are agreed and the matters on which they are not agreed. The note should where possible give brief reasons for the views held. It should be remembered that matters of fact are for the tribunal or the agreement of the parties and not matters for the experts to agree between them.

23. If areas of apparent agreement on matters of opinion emerge at a without prejudice meeting, it is good practice to record these promptly to ensure accuracy. It may be appropriate for the expert to reflect on the issues following the meeting. A solicitor should not instruct an expert to apply pressure upon other parties' experts.

24. The expert does not normally have authority to bind the client but the solicitor should make sure that the expert is aware that matters which the expert agrees in a note of the meeting may be binding on him.

25. The solicitor shall never impede the expert in reaching agreement or forming an opinion but can give guidance to the expert in formulating the note to reflect the matters in issue in the proceedings.

F. Expert's duty and reporting

26. The expert will comply with the requirements of the brief and exercise the reasonable skill and care of a person of the expert's profession, occupation or experience in providing advice on the matters in issue and in giving evidence the expert will act impartially.

27. The expert shall not express a final concluded opinion until all relevant issues of fact have been considered by him. The expert will advise the solicitor if the brief appears incomplete or whether the expert believes other information is likely to be available.

28. The expert shall advise and assist the solicitor generally where appropriate beyond the matters on which the expert is required to give a formal opinion. The expert's reports should contain the substance of the expert's evidence which it is intended to give at the tribunal and should be prepared in a clear and succinct manner. The solicitor and the expert should discuss the format of the report. It is not the role of the expert to make a finding of fact and where an opinion depends upon facts which are in issue this should be clearly stated.

29. The solicitor will throughout the currency of the appointment keep the expert up to date with information and issues as they relate to the appointment. The expert will keep any opinion or professional opinion under review and have regard to all relevant matters when advising and assisting the client and the solicitor.

G. Fees

30. Fees should be clearly agreed at the outset of an appointment. An appropriate breakdown and hourly rate equivalent should be provided. Fees shall be inclusive except where expressly stated and agreed otherwise.


31. The expert should normally provide a budget for various stages of any appointment where the work is identifiable. The solicitor and the expert should have regard to fees being proportionate to the value or importance of the matters in issue.

Payment of fees

32. The expert and the solicitor should consider and agree whether the solicitor appoints the expert and is responsible for the expert's fees, or whether the solicitor acts as agent for the client by whom all invoices are to be paid.

33. It should be made clear and agreed at the outset how regularly fee invoices are to be rendered and what level of information they are to contain and whether they are to be sent to the solicitor or the client. The expert shall provide supporting information and keep accurate contemporaneous records sufficient to justify the fees claimed or as may be required in any taxation of costs or similar procedure.

34. The solicitor should always advise the expert where the agreement and payment of the expert's fee is subject to the approval of legal expenses insurers and will notify his expert of any ceiling on fees.

35. If the expert is appointed in a case where the solicitor's client has a legal aid certificate in force the solicitor must advise the expert of the basis on which interim fees can be claimed from the legal aid fund and whether the expert is appointed on the basis that the expert fees may be reduced on legal aid taxation.

Cancellation and commitment fees

36. If the expert is required to reserve dates in his diary for a hearing he may wish to agree a reasonable cancellation charge payable if that reservation is subsequently not required. The level of charge, which may be on a sliding scale, should aim to compensate the expert for disruption and inefficiency in rearranging his diary at short notice and not aim to provide remuneration for the whole of the period cancelled. Cancellation charges shall only apply if they have been discussed and agreed at the outset of the appointment. The expert should not normally charge a minimum or commitment fee.


37. Where the solicitor has appointed the expert as agent for the client, the expert may request that the client lodge with the solicitor, or in a designated account, sufficient monies as may provide reasonable security for the likely fees of the expert. The solicitor and the client will have regard to the financial status of the client.

Roadshow Programme



Look before you leap - Precontract safeguards

  • Know your Client
  • References to other documents
  • Clauses that cause grief
  • The Bill of Errors
  • The inherent dangers of indemnity clauses
  • Project insurances

Liquidated and Ascertained Damages


Extensions of Time, Loss and Expense

  • Genuine pre estimate of loss or penalty?
  • A cap on damages
  • Notice of extension
  • When time is not always money
  • Delay and damages

Keeping the Contract ball in the air

  • Subject to contract
  • Letters of Intent
  • Conditional offers/Retracting offers
  • How rough is an estimate?

Prolongation and disruption claims

The key to successful claims

  • Whose float is it anyway?
  • Hudson Formula
  • RDA and all that

The paper trail - Contract Formation

  • Egyptology factor
  • The uncertainties of the written word
  • The basic and essential rules of construction
  • Expressed intention and implied terms




  • Tort, Contract
  • Concurrency
  • Breach
  • Assessment


The New Arbitration Act


Performance and Completion

  • The primary obligation
  • The effect of a programme, time at large
  • Can we complete early?
  • Certificates/current law
  • Extensions of time, practical completion
  • Defects liability period, Final Certificates
  • Purpose and scheme of the Act
  • New powers of the Arbitrator
  • How it is likely to change things
  • ‘Finality'



BOT projects and PFI



Contract Administrators Liabilities

  • Role and duty of care
  • What to do with a rotten one
  • Conditions of engagement and no set off rule
  • Copyright in drawings/design
  • Defective work - duties regarding
  • Fees and remuneration
  • Warranty of Authority
  • Assessing whether to become part of a contracting consortium taking equity in a BOT project
  • Assessing design, fitness for purpose and performance obligations
  • Assessing payment provisions/risk
  • Assessing bonds, warranties and guarantees



The New Legislation

  • The Housing Grants/Construction and Regeneration Act
  • Adjudication under the new system
  • The ADR alternative

12.40 LUNCH


Quick Fire Session; Legal Ammunition

  • Bonds Guarantees and Warranties
  • Nuisance and the Builder
  • Without Prejudice Correspondence
  • Avoiding the harsh rules of discovery
  • Misrepresentation
  • Design Warranties
  • Acceleration

Settlement Traps


Question Time and Problem Clinic



Adjudication Services

Adjudication Training

Housing Grants Construction and Regeneration Act


subcontractors not bound to join in Main Contract Arbitration
Dew Group -v-Costain Building & Civil Engineering Limited

Incorporation of Arbitration Agreement
Extrudakerb -v- White Mountain

Arbitration Act 1996

Arbitration Act 1950, Section 4 - Exercise of Discretion
Roche Products Limited v Freeman Process Systems and Another
Black Country Development Corporation -v- Kier Construction

Possible illegality of refusal to grant Section 4 Stay
Philip Alexander Securities -v- Bamberger


Chesham Properties Ltd -v- Bucknall Austin


Challenge to Certificate
Breakdown of Contractual Machinery
TBV Power Limited -v- Elm Energy


St Albans City and District Council -v- International Computers Limited

Quantum of damages for negligent valuation;
fall in the value of the market;
South Australia Asset Management Corporation v York Montague Limited
United Bank of Kuwait Plc v Prudential Property Services Limited
Nykredit Mortgage Bank Plc v Edward Erdman Group Limited


Formula approach to Head Office overheads and Profit Approved
St Modwen Developments Limited -v- Bowmer & Kirkland Limited


Challenge to Certificate; Breakdown of Contractual Machinery;
striking out;
TBV Power Limited -v- Elm Energy


Chesham Properties Ltd -v- Bucknall Austin


Challenging decision of expert
Expert determination clauses;
Manifest Error
Conoco & Others -v- Phillips Petroleum Company & Others


ORSA Protocol


Passing on of benefits received under the main contract;
Distinction between what is claimable and what is due;
treatment of windfall recovery;
Mooney v Henry Boot Construction Limited
Balfour Beatty -v- Kelston Sparkes Contractors Limited


Implied terms as to co-operation
Implied term as to no hindrance or prevention
No implied term as to other Contractors
Meaning of "paid weekly"
No implied term as to Health and Safety Requirements
Allridge (Builders) Limited -v- Grandactual Limited


Chesham Properties -v- Bucknall Austin


Accord and satisfaction;
Banking part payment then pursuing the balance
Ferguson -v- Davies

Delay is the Enemy of Justice
Refusal to Set Aside Default Judgment
RG Carter (West Norfolk) Limited -v- Ham Gray Associates Limited


Amendment; the "same facts test"
Chesham Properties -v- Bucknall Austin

Misrepresentation claim is part of the "benefit of the subcontract"
Restitution Claim not part of "benefit of subcontract"
Company not permitted to conduct litigation by non-Solicitor Director
Floods of Queensferry Limited -v- Shand Construction & Others

Striking Out
TBV Power Limited -v- Elm Energy


Construction professionals not Fiduciary agents;
Duties of Project Manager, Architect, Engineer and Quantity Surveyor;
Duty to report on own failings;
continuing nature of duty to report
Chesham Properties -v- Bucknall Austin


Res ipsa loquitur doctrine;
South Australia does not elide tort damages with contract damages
Copthorne Hotel (Newcastle) Ltd -v- Arup Associates


Quantum meruit for subcontract "variations";
Relevance of profit made by recipient of services;
Account to be taken of bargaining position
Costain Civil Engineering Limited and Tarmac Construction Limited -v- Zanen Dredging and Contracting Company Limited


Courts and Legal Services Act 1990;
Company Director permitted rights of audience and conduct;
Europa Holdings Ltd -v- Circle Industries Ltd


Main Contractor in repudiatory breach by introducing other labour or subcontract work
Sweatfield Limited v Hathaway Roofing Limited


Custom in the Construction Industry that prices quoted are exclusive of VAT
Tony Cox (Dismantlers) Limited v Jim 5 Limited


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