The Fenwick Elliott Summer 2000 Review
Welcome to Fenwick Elliott's Summer Review for 2000. In highlighting the latest key developments in our specialist field of construction law over the past year, this year's Review concentrates on the continuing significant impact of adjudication. We also consider some of the effects of the wide-ranging reforms to civil litigation procedure introduced in April 1999, and focus on Health & Safety, which is becoming an increasingly significant lesgal issue. In addition this year's Review contains useful information on other important developments and as usual includes a round up of the key cases reported by Fenwick Elliott in the Construction Industry Law Letter over the past year.
Fenwick Elliott is not alone in the world as a specialist construction law practice. A number of such specialists have now formed the International Construction Law Alliance, which will enable increased co-operation around the globe.
Other founder member firms are:
The object of the Alliance is to enhance the practices of every member and thereby enhance the service we are all able to offer to our clients, primarily through the sharing of expertise and information by providing access to a worldwide network of construction lawyers.
The criteria for membership is that the firm specialises in construction law to the extent that at least half of the firm's business is derived from the construction sector. Therefore we know that if a client needs specialist advice in a country covered by the ICLA then this advice will be available from a like-minded firm with a similar expertise to our own.
Whilst adjudication has predictably and perhaps rightly taken the headlines over the past year, there are other equally important changes afoot.
Robert Fenwick Elliott wrote a recent editorial for CILL about one of these, namely the quiet revolution going on in the world of procurement.
By its open letter of 22 May 2000, the Treasury has hardened its stance: from 1 June 2000 all new works for Central Government must be via PFI, Design and Build or Prime Contracting. Within two years, the same policy must be applied to all refurbishment and maintenance contracts.
The Ministry of Defence is particularly keen on Prime Contracting. In its handbook, it presents it as a startlingly radical concept. The Prime Contractor takes responsibility for pretty much everything, from developing the brief from an initial functional specification through to maintenance costs. Bids are assessed on value, assessed in terms of the true-life cost of a building, rather than the lowest tender. Prime Contractors have to demonstrate to the Employer their determination and commitment to forming long-term relationships with key suppliers. Clusters of suppliers need to be put together, with a long-term supply partner being appointed as a Cluster Leader with responsibility for putting together the price for the completion of their Cluster's work, which will form part of the Prime Contractor's final price to the client. The traditional system of pricing is reversed in favour of a Target Costing approach: instead of starting with the design and then working out its cost, the starting point is the client's functional requirements and the maximum market price, and the design has to be developed from that. The Prime Contractor needs to make trained facilitators available not only to its own project teams but also to its key suppliers; the role of those facilitators is to help people understand and customise these new processes.
Defence Estates have got further than mere concepts; their new "Core Conditions" of contract are now available on their web site (http://www.defence-estates.mod.uk/core/index.htm).
There is much that is attractive in these ideas. They should allow contractors much greater profit margins, and accord with good commercial sense by placing risk with the party best able to manage it. In many respects, the risk profile being undertaken by the Prime Contractor is not so much like the risk he undertakes under a traditional contract, but is something closer to the risk undertaken by a developer who has sold on to an institutional investor pursuant to a development agreement.
Prime Contracting is not going to be without its problems. Take away the jargon, and it looks very much like turnkey contracting, which has had a bit part on the procurement stage for a very long time.
It is easy to see why turnkey contracting has never really taken off in the past. Clients rarely want to get too excited about procurement issues until they have obtained both a general idea of how the building will look and how much it will cost (and hence have been able to make a decision as to whether they want it), and have obtained planning permission. Both of these steps ordinarily require a primary design to be undertaken. And it is hardly surprising that, for that first design stage, the client goes to an architect rather than a contractor. And once the client has gone to an architect, he is already getting steered into the traditional procurement rut. If the client is able to climb out of that rut at all, it is typically into a fairly limited sort of Design and Construct arrangement, with the designers being novated to the main contractor, and with the achievement of a few of the radical benefits envisaged by the prime contracting philosophy.
Against this background, there is much to be said for the middle route of Primary Design Contracting. The client engages his architect to produce the Primary Design, containing in the form of drawings the proposed size, shape and outward appearance of the building, and the outcome specification. Once he has got a Primary Design that he likes, and which he wants to have built out, he gets his planning permission. After that, he goes to the contractor, who undertakes all of the detailed design and construction work.
Some major employers already use this system with considerable success. Of course it involves a significant re-adjustment in the way that the industry works. In particular, firms of architects will become rather more akin to independent design houses in the motor industry. Increasingly, the routine draftsmen will migrate from architects' offices to contractors' offices; that will no doubt be uncomfortable. Ultimately the commercial tide will win out. Teams that produce what the clients want always prosper at the expense of those who do what their staff want.
The revolution that we are witnessing is a quiet one. There has been no 'big bang'. But already, traditional procurement is beginning to carry the aroma of stale air."
At the time of last year's Review, the first decisions of the TCC were just starting to come through. As we reported, these confirmed that adjudication had arrived as an effective means of achieving an enforceable result in construction disputes. This judicial reinforcement, together with the clear time and cost benefits, has meant that the number of disputes being referred to adjudication continues to rise. Figures from the RICS, who are responsible for the greatest number of appointments, show that between January and the end of June this year they received 483 applications. Last year in total there were only 377. By way of contrast, TeCSA made 33 appointments last year but in the first six months of this year have already made 36.
At Fenwick Elliott, we have noticed a marked change in the nature of our workload over the last twelve months. Collectively we have acted in over 90 matters involving adjudication in that time. Our assistance has ranged from providing advice on discrete matters within an adjudication to acting on a party's behalf to seeking to enforce an adjudicator's decision through the courts.
In addition, Robert Fenwick Elliott, Simon Tolson, Tony Francis, Richard Smellie, Jean Elliott, Julian Critchlow, Chris Hough, Alison Godkin and Jeremy Glover are all accredited adjudicators themselves. To date they have acted as an adjudicators in over 30 cases.
Potentially the most important court decision relating to adjudication was given by the Court of Appeal in Bouygues -v- Dahl-Jensen summarised below as this year's review went to press.
The good news for those who champion the adjudication process is that the Court of Appeal has upheld the judgment of Mr Justice Dyson and confirmed that the purpose of the adjudication procedure in section 108 of the HGCRA was to provide parties to a construction contract with a speedy method of resolving disputes which, although not finally determinative, could be enforced through the courts by way of summary judgment. Even, where as in Bouygues, an adjudicator had answered the question put to him in the wrong way, the court would not interfere with the adjudicator's award.
The Court of Appeal had the opportunity to disagree with the robust approach taken by the TCC. It declined to do so.
Our experience has shown that the cost of an adjudication averages slightly less than 10% of the sum in dispute. And it is a very rare case indeed where the matters in dispute have to be resolved through litigation or arbitration.
We have set out below, in our review of the cases reported by CILL, summaries of a selection of the adjudication related cases, which have come before the courts. It is clear that the courts continue to take a no-nonsense approach to enforcing the intentions of Parliament. Technical arguments have met with little sympathy and attempts to, in the words of Mr Justice Dyson in the first reported decision, Macob -v- Morrison, "drive a coach and horses" through the HGCRA have met with little success. Our experience of the courts suggests that the following key points have come out over the past 12 months:-
In Fastrack -v- Morrison, Morrison suggested that there was no dispute, since the adjudication notice served by Fastrack superseded the existing dispute between the parties. HHJ Thornton QC held no track with this, saying that a dispute arose once the subject matter of the claim had been brought to the attention of the other party and that other party had had the opportunity to consider, admit or reject that claim. Here, the judge looked at the underlying nature of the claim and decided that the questions in dispute had already been challenged by Morrison and were therefore in dispute at the time the adjudication was commenced.
HHJ Thornton QC in Sherwood & Casson -v- Mackenzie noted that adjudication is a speedy process and that "mistakes will inevitably occur", whilst Mr Justice Dyson in Bouygues -v- Dahl-Jensen, in a decision upheld by the Court of Appeal, allowed the claimant's claim for summary judgment even though the adjudicator made an error of calculation. This latter decision is one of the more controversial decisions of the TCC and some people have suggested that in fact Parliament would only have intended those decisions, which have been correctly made on the merits of a particular case to be binding.
In Bloor Construction -v- Bowmer & Kirkland, HHJ Toulmin CMG QC ruled that, unless the parties had agreed otherwise, a term can be implied into adjudication agreements giving the adjudicator power to correct decisions. However, this power must be exercised within a reasonable time and must not cause prejudice to either party. Therefore an adjudicator's decision should be carefully reviewed as soon as it is delivered in order that any accidental error can be corrected. If this is done immediately it is difficult to see how anyone can be said to be prejudiced. Yes this decision seems to be at odds with Bouygues, but in Bouygues the adjudicator appears to have intended to say what he did and so did not agree that there was an obvious error or omission.
In Grovedeck -v- Capital Demolition, the contract was an oral one. Both parties agreed about that. However, they disagreed about some of the terms of that contract. That was enough for HHJ Bowsher QC to declare that the adjudicator did not have jurisdiction and to deny Grovedeck the right to enforce the decision it had obtained.
HHJ Hicks QC made it clear in VHE -v- RBSTB that one of the principal purposes of section 111 is to exclude the right of set-off in the absence of an effective withholding notice. HHJ Bowsher QC agreed, noting in Northern Developments -v- J & J Nichol that an adjudicator did not have any jurisdiction to consider any matter not raised in a withholding notice.
The Scottish courts tend to agree, Lord Hamilton in Strathmore Building Services -v- Grieg stated that a notice should be "a considered response to the application for payment", which specifies the amount it is proposed to withhold and the grounds for withholding that payment.
Whilst HHJ Thornton QC, in Palmers -v- ABB Power, was asked to decide whether or not the provision of scaffolding services in conjunction with the Defendant's erection of an industrial boiler constituted a construction contract (it did), Mackay J in Lathom Construction -v- Cross found that a settlement agreement reached between the parties to a construction contract dispute did not.
Whilst Mr Justice Dyson in NCHA -v- Powerminster recently found that the provision of an annual maintenance service on the gas appliances owned by a Housing Association did constitute construction operations.
In Herschel Engineering -v- Breen Properties, Herschel decided to adjudicate a dispute, which was bogged down in the county court. Breen refused to take part in the adjudication and resisted enforcement. Mr Justice Dyson ruled that provided a decision of the court was not imminent Herschel was fully entitled to take such a step. Clearly, if you are in the middle of a complex legal dispute it may make perfect tactical sense to hive off a discrete area to adjudication and quite possibly obtain an interim decision, which may substantially affect the balance of those proceedings.
Whilst HHJ Bowsher QC in the Northern Developments case said that an adjudicator under the Scheme did not have the power to award costs, he did say that the parties can by agreement give an adjudicator that power. Here they did so by both making a claim for their costs.
But be aware of surprising clauses within the contract. In Bridgeway Construction v Tolent Construction Mackay J upheld a contractual provision that provided that the referral party would be responsible for all the costs of any adjudication. Whilst this might seem like a clear disincentive to a party's right to adjudicate, and the cost to the subcontractor was over £10k. The judge noted that the contract had been freely negotiated by the parties and that there is nothing within the HGCRA about costs to provide an alternative approach.
In Cook -v- Shimizu, the adjudication notice sought a valuation of certain items on an application for payment. The Adjudicator duly did this. However, Cook had not asked for payment of these items and so HHJ LLoyd QC refused its application for summary judgment. Make sure you spell out what monetary payment you are looking for in your adjudication notice.
In John Mowlem & Co plc -v- Hydra-Tight Ltd, HHJ Toulmin CMG QC agreed that the Claimant had the right to include in its standard form of contract a provision providing for the appointment by the Claimant of an adjudicator from its chosen list, here, the barristers at Atkin Chambers.
There appears to be no stopping the steady stream of cases continuing to come out of the TCC and the Scottish courts. There have already been at least 30 reported cases. This is one of the reasons why Fenwick Elliott are one of the backers of the adjudication web site. If you log on to http://www.adjudication.co.uk/ you will find not only full details (including where possible transcripts) of the latest reported decisions but also practical assistance on all aspects of the adjudication process. If you have any comments either fill in the feedback form on the site or contact Chris Hough.
In last year's Review we highlighted some of the key changes that were brought in by the procedural reforms, which were introduced at the end of April last year. Now that they have been up and running for over twelve months it seems pertinent to ask what effect they have had.
One of the most striking has been the sharp increase in the number of cases, which have been referred to mediation. Figures from CEDR show an increase in commercial mediations from 192 in the year ended March 1999 to 462 in the year ended March 2000. Of these 31% involved commercial contract disputes whilst disputes within the construction industry accounted for 17%, the second biggest total.
19% of mediations were referred by the courts, an increase from 8%, a result of the judges' new case management powers. That three quarters of these came in the second six months of the period suggests this figure will continue to increase.
Conversely there has been a marked decline in the number of cases issued at court. According to the Zurich Municipal website, in the first six months, the number of cases entering litigation was 34.7% of the previous level. Figures for the number of claims issued in the TCC which show a sudden decline after the reforms were introduced to some extent confirm this:-
Equally in the TCC there are now 7 judges, whereas a year ago there were 9. The wild card in this is the impact of adjudication. For whilst there have been a significant number of claims brought to enforce decisions of adjudicators, the very introduction of adjudication will have had the effect of reducing the number of construction disputes, which go to court.
One reason for the decline is no doubt the wait and see approach, which will have been adopted by a number of parties. However, the increase in mediations does suggest that there has been a marked change in attitude and culture, which was one of Lord Woolf's main aims in introducing the reforms. To Lord Woolf the courts were to be the last resort.
Two additional reasons have been put forward as to why there has been a decline in the number of cases, namely the use of the various pre-action protocols and the success of the introduction of the Part 36 Offer. TeCSA have prepared a draft pre-action protocol for use in construction disputes. Although it has not yet been given formal approval, the key features will remain. These are:-
The protocol has not been adopted yet, but where possible we are trying to run cases in line with it in order to try and encourage an early settlement to disputes or at least agreement to try and resolve that dispute by way of, for example, a bespoke adjudication or expert determination agreement.
The early exchange of information provided for by the protocol will also give the parties the chance to make an informed early Part 36 offer to settle.
This device provides a powerful incentive to both parties. If you beat the offer there is the chance of indemnity costs and interest on costs and damages at an enhanced rate. The TCC, in All-In-One Design & Build Ltd -v- Motcomb Estates & Others1, made it clear that "the power to award enhanced interest is a power to sanction a party for failing to accept a reasonable offer".
The downside of the protocols is an inevitable front-loading of costs in the early stage of proceedings. However, if a case can be settled earlier as a result of the protocols then there is likely to be a saving of costs.
The other notable change is the attitude to experts. In Stevens
-v- Gullis, see case summary below,
the Court of Appeal debarred an expert from giving evidence where that
expert had failed to comply with the provisions of the CPR concerning
the form and provision of the report. Given the warnings in his Access
to Justice Report, this strictness of interpretation by Lord Woolf
is perhaps unsurprising.
That said the courts have recognised that the appointment of a court appointed expert will still mean that it is likely that parties will instruct their own expert to shadow proceedings. In Walker -v- Daniels, which is summarised below, the court, in a case where the quantum was significant, accepted a party's right to instruct their own expert.
Therefore it seems likely that a dual system will emerge with the use of the court appointed expert continuing apace in the smaller cases whilst in larger cases there will be more scope for parties to instruct the experts of their own choice.
However those experts must be familiar with the new court rules and the change in culture which has surrounded it. The judgement of HHJ Toulmin CMG QC in Winther Brown -v- BML, provides a constructive summary of the duties of experts. The Judge found that the experts for one of the parties had failed in their duty to provide independent assistance to the court, and as a consequence found himself unable to rely on the evidence they had produced. He said
Simon Tolson continues to write articles for Building. In an extract from an article entitled "Health & Safety It's a Serious Business" he highlights a key area of concern within the construction industry.
As Simon's article makes clear, public opinion and pressure will ensure that health and safety issues remain, and we would say rightly, at the forefront of everyone's mind. However, you should be aware that the tide is turning to such an extent that soon it will not just be the problem of fines that will be exercising the minds of company directors but the very real possibility of imprisonment.
Following the Southall rail disaster an attempt was made to prosecute South West Trains for corporate manslaughter. This failed for similar reasons to the attempted prosecution of P&O after the Zeebrugge disaster. The prosecution could not point to an individual or "directing mind" within the company responsible for the company's actions. As a result, the Attorney General referred the issue of corporate manslaughter to the Court of Appeal, which in February of this year confirmed that a non-human (eg corporate) defendant can only be convicted of manslaughter if it was possible to prove the guilt of an identified individual for the same offence. Clearly the larger a company is the more complex its decision-making process will be and the less likely a director is going to be involved in the day to day running of a business making the day to day decisions which are more likely to lead directly to death or injury. The three successful prosecutions for corporate manslaughter have been of small companies.
In part in response to this, in May this year the Government introduced proposals to improve health and safety standards and thereby reduce the number of workplace deaths and injuries. The first step will be to introduce the new crime of corporate manslaughter or killing. Corporate killing will be committed where a company's (or partnership's or unincorporated association's) conduct in causing death falls below what can reasonably be expected. There will be no need to show that the risk was obvious or that the accused was capable of appreciating the risk.
A death will be deemed as having been caused by the conduct of the company if it is caused by management failure. Therefore even if the immediate cause is the act or omission of an individual, if the way in which a company's activities or business is organised fails to ensure the health and safety of individuals employed in the company or affected by its activities then that company will be liable for prosecution. Successful prosecutions will result in an unlimited fine, high enough to act as a deterrent even for the largest of companies and possible orders for remedial action. Individuals held to have been responsible for the management failure may find themselves disqualified from acting in a management role in any undertaking, which carries out business in the UK or even sentenced to prison.
Julian Critchlow recently gave a lecture to the Defects & Design Liability in Construction conference, on this topic. In the extract below, having reminded his audience of the draconian punishments that used to be imposed on designers and builders whose faulty work caused the death of others, he discusses the liability of individuals within an organisation who may find themselves liable for prosecution for reckless killing or killing by gross carelessness.
Julian ended his talk by reminding his audience not to forget that it is not possible to insure against criminal liability.
The Government is seeking feedback to its proposals by 1 September 2000, but there is little doubt that they or something similar will become law sooner rather than later. In the interim it is likely that the number of prosecutions and the level of fines imposed will continue to rise. The Government statement Revitalising Health & Safety Strategy, issued at the beginning of June, which calls for a 10% reduction in workplace injuries and deaths and specifically targets those industries, of which the construction industry is one, where there must be an improvement is but a further example of the increasing pressure for reform which if necessary will be imposed by government law reform.
The Human Rights Act 1998 is due to come into force on 2 October 2000. The purpose of the Act is to give further effect to the rights and freedoms guaranteed under the European Convention on Human Rights. Its scope is very wide indeed, covering for example:
Whilst exactly what this will mean will not be known until the first decisions of the courts are known, the forthcoming implementation of this Act has been given widespread publicity. Commentaries have covered everything from asylum seekers to speed cameras. Additional judges have been appointed. Such has been the publicity that Lord Woolf, in the case of Walker -v- Daniels, felt compelled to warn practitioners to take care not to make a claim based on the Human Rights Act just because it is there. He said that "the provision of the Civil Procedure Rules 1998 make it clear that it is the obligation of the court to deal with cases justly" and that it was "highly undesirable for the consideration of issues to be made more complex by the injection of Article 6 (right to a fair trial) arguments and it is hoped that judges will be robust in resisting such arguments."
Under the Act, a court must take into account the case law from the European Court of Human Rights and give effect, as far as it is possible to do so to legislation in a way that it is compatible with the Human Rights Convention. Further it will be unlawful for a Public Authority (i.e. a court or tribunal or anybody who exercises a public function) to act in a way, which is incompatible with the Convention Rights.
This means that litigants will be able to rely on their Convention Rights in English Courts and should not have to travel to Strasbourg. If the Courts cannot give effect to legislation in a way, which is compatible with Convention Rights, they may make a declaration of incompatibility. Whilst this will not invalidate the legislation or effect the proceedings before the court, it will alert Parliament of the need for Reform.
You might think that the Human Rights Act will have no bearing on construction. In fact, this is unlikely to be the case. The way in which Article 6 has been applied and interpreted elsewhere is such that it has the potential to effect matters over a broad area of activities.
Article 6(1) states as follows:
Any dispute, which involves one party to the dispute paying a sum of money to the other party, will involve the civil rights and obligations of both parties. These proceedings do not have to take place before a civil court.
The Article also requires the right to a fair and public hearing. Fair probably means little more than giving every party to civil proceedings a reasonable opportunity of presenting its case to the court under conditions which do not place him under a substantial disadvantage to his opponent. As such, it is not so dissimilar to the recent Woolf Reforms, which have aimed to provide a level playing field, and you can perhaps see why Lord Woolf has made the comments, which we refer to above, warning practitioners to take care about challenges they make.
Following the recent case of Storer -v- British Gas(7), a public hearing will mean nothing more than a hearing held in a place to which the public have access if they so wish. Here, an industrial tribunal hearing was heard in a courtroom, which was accessible through a door with a combination lock. The Court of Appeal held that the hearing had not been heard in open court and that the hearing was found to lack jurisdiction because it had effectively been in private. Justice must not only be done but must be seen to be done. However, a hearing behind closed doors will not necessary conflict with the Convention if both parties consent.
Insofar as litigation is concerned, as Lord Woolf is clearly well aware, there is speculation that most of the new litigation procedures will be challenged on the basis of breach of the Convention at some point.
One point of particular interest may be the role of experts. The court appointed expert has been one of the headline features of the Woolf Reforms. It is conceivable that arguments may be raised that the imposition of the single expert is a restriction on a party's right to present its own case and then cross-examine the other party on its own case. The courts may already be aware of this and in the case of Walker v Daniels, Lord Woolf accepted a party's right to instruct a shadow expert albeit in a case where the size of the quantum at stake made it proportionate to do so.
With arbitration, there is an immediate argument that the proceedings themselves will not be in accordance with the Convention since they are rarely held in public. Confidentiality is one of the key concepts of arbitration. There has already been a Swedish case where the European Commission decided that an arbitration was in breach of the Convention because of a lack of a public hearing.(8)
There is also a potential problem with the independence of an arbitrator. In the Swedish case, whilst the arbitrators were found to be impartial they were held not to be independent of the parties. One arbitrator was appointed for the applicant, but the other party had chosen its own arbitrator. Then the two arbitrators together appointed a third. This was held to have led to a degree of imbalance.
However this Swedish case has certain distinct features, which serve to distinguish it from English arbitral law. The relevant Swedish Arbitration Act made no provision under which applicants could challenge the arbitrators' decision on findings of fact, merely allowing for procedural objections. More importantly the arbitration was compulsory under a Swedish statute. The Commission in its ruling specifically drew a distinction between a voluntary reference to arbitration (i.e. through a contract or provision) and cases where arbitration is compulsory in the sense of being required by law In such cases the arbitral process must comply with Article 6.
Of course, it may still be possible to launch a claim if the arbitrator, in carrying out his functions in compliance with the relevant arbitration clause, conducts the arbitration in a manner incompatible with the Convention itself. However, this is unlikely to add much scope to the challenges that are already available to a dissatisfied party.
Then, there is adjudication. There is already a body of opinion that adjudication is both incompatible with the Convention and contrary to the spirit of Article 6.
Does the tight timetable really give both parties the chance to put their cases without one (presumably the referring party) suffering a disadvantage? Is the short 28-day timetable compatible with the requirement that the hearing is within a reasonable time? That clearly does not give the parties a fair opportunity to present their case or even the adjudicator sufficient time to come to a reasoned decision.
More pertinently, Article 6 actually requires there to be a hearing, something in the discretion of an adjudicator. Article 6 also requires hearings to be in public and judgments to be published, something which would require a major change. European law has also suggested that a judgment should contain reasons, a safeguard to allow the losing party to decide whether or not to take the matter further. The TeCSA rules amongst others state the opposite.
Further, Article 6 requires that the adjudicator is independent. Adjudicators are often named (effectively chosen by the employer), in the contract. In such circumstances can they truly be independent?
Given the success of adjudication and the support it has received from the courts to date, it would be unfortunate if these arguments were to result in wholesale changes or worse. However, there are a number of counter arguments which we believe would ultimately prove convincing and which would ensure that adjudication will not prove susceptible to any knockout blow.
The HGCRA requires the adjudicator to act impartially. Further, adjudication is a right but it is not mandatory. You have the right to go to adjudication at any time but you do not have to exercise that right. Hence the fact that adjudication is held in private will not make the process incompatible.
And perhaps most importantly of all, adjudication does not take away the right to a final hearing by way of arbitration or litigation. It is only an interim measure.
As ever it is unclear what the attitude of the courts will be. So far the courts have encouraged adjudication and we suspect that this will mean that they will lean towards the latter viewpoint, even if what happens in actuality is that the courts offer guidance as to the extent to which the various schemes comply with the Act. This might result in a few procedural changes but nothing more.
Nevertheless, whatever happens you can expect that there will be challenges to the adjudication process under the auspices of the Human Rights Act. Watch this space!
The area of employment law is another, which is developing rapidly. Over the past year there have been a number of developments. The new changes are increasingly affecting even the smallest firms. We summarise below just some of the more important developments over the past year. If you require any further information please contact Simon Tolson.
There are an increasing number of cases coming to the Employment Tribunals concerning alleged breaches of the Disability Discrimination Act. This number is likely to increase now that the Disability Rights Commission, the equivalent of the Equal Opportunities Commission, has been set up.
An employer will discriminate against a disabled person if that person receives less favourable treatment than a person without that disability unless that treatment is justified. This will affect existing as well as new employees. On a practical level, Codes of Practice have been produced giving advice on the care to be taken in advertising jobs. For example, suggesting that access to the building is difficult is not an acceptable way of discouraging disabled job applicants.
We have touched on the impact of the Human Rights Act above. Unsurprisingly it is almost certain that the Act will affect every area of employment law. Employees will need to show an infringement of one of the Rights under the Act. The most likely are Articles 8 (the right to respect for family and private life) and 14 (anti-discrimination). However, until the first decisions of the tribunals and courts filter through just how wide-ranging that will be remains to be seen.
From 15 December 1999, ordinary maternity leave was increased by 4 weeks to 18 weeks. After the birth of the child, a mother has the right to two weeks maternity leave plus a further 29 weeks provided she had a year's continuous employment by the eleventh week before the expected week of childbirth.
Also from 15 December 1999, both parents of any children born after this date and which are under 5 years old will have the right to take up to 4 weeks unpaid leave per year up to a maximum entitlement of 13 weeks per child. Again, one year of continuous service is required.
In June 2000, the youth rate, which is payable to workers aged between 18 - 21, will rise by 20p an hour to £3.20. In October 2000, the adult minimum wage will rise by 10p an hour to £3.70.
The Part-Time Workers (Prevention of Less Favourable Treatment Regulations) are aimed at ensuring equal treatment for part-time workers. They came into force on 1 July 2000. In short, unless the difference can be objectively justified, the terms of a part-time worker's contract must be no less favourable than their full-time colleagues'. This will include hourly rates of pay, access to pension schemes, pro rata holiday entitlement, etc. The regulations apply to part-time workers not employees and so this may well apply to agency and contract workers as well.
These are designed to give an employer the chance to protect its business when an employee leaves. There have been three recent cases, all of which have favoured the employer. In Stephenson -v- Mandy a clause preventing the disclosure of information in relation to a company's affairs and thus preventing the solicitation of employees was upheld. In ICS -v- Hart a clause preventing someone from approaching anyone who was negotiating with the employer failed. In addition, a solicitor was successfully prevented from working in a ten-mile radius of his former firm for one year after leaving. This may sound harsh but the area concerned was a rural one, which was looking to protect passing trade.
In every case the key was that there was a legitimate interest to protect, for example, a workforce in whom the firm had heavily invested in. However, do not go over the top; if the clause goes beyond your legitimate need, you will be left with no protection at all.
As of 6 June 2000, Trade Unions now have the right formally to request recognition from companies with more than 20 employees. If they achieve this recognition, an employer will be obliged to enter into collective bargaining in respect of their employees' pay, hours and holidays.
From June 1999, the qualifying period for claiming unfair dismissal was reduced from 2 to 1 year.
From 25 October 1999, the limit on compensation for unfair dismissal was increased to £50,000.
Under the Public Interest Disclosure Act 1998, which came into force at the beginning of July 1999, an employee who is sacked for blowing the whistle on wrongdoing within a company will be able to claim unlimited damages against their employer at an industrial tribunal.
The Act was a response to Piper Alpha and Zeebrugge but will have an equal bearing on any form of suspected malpractice. There are a number of safeguards within the legislation, for example any disclosure by an employee must be reasonable in the circumstances, and a number of public agencies have been listed as prescribed regulators. Whistleblowing direct to one of these will be protected provided that the employee believes that the allegations are substantially true.
Potential damages are high. In two recent cases, a former accountant sacked after exposing his manager's expense claims was awarded £293,000 whilst the MSFU paid an out of court settlement £140,000 to a secretarial assistant.
The Contracts (Rights of Third Parties) Act 1999 received the Royal assent on 11 November 1999, and, unless excluded, will apply to all contracts entered into from 11 May 2000.
The Act is intended to reform the previous privity of contract rule. Under the Act, third parties will have rights where the effect of any term of the contract would confer a benefit on them, unless those rights are excluded. Under the Act, the third party need not be named or even in existence at the time of contract (section 1(3)). Where third party rights under the Act arise then:
The Act applies not only to formal contracts, but also to all contractual arrangements, whether made by letter (including letters of intent), purchase orders, etc. Until the Act bites, it is difficult to say with precision how it will work out in practice. The Act undercuts many well-established principles of English law, and it is far from clear how in practice the legislation will be implemented.
Excluding the Act should not be difficult; all the parties have to do is to state that third party rights are not intended. It is also possible to draft more limited exclusions, such that the Act is excluded for some purposes but not for others. These partial exclusion clauses are, however, inherently difficult to draft.
It will be rare for it to be in the interests of contracting parties for the Act to apply. How the courts will apply the Act has yet to be seen, but on the face of it parties can exclude it simply by adding the words "No Third Party Rights are intended by this arrangement" before signing any document which could create a contract. A simple stamp is all that is required in this regard.
We continue to be rated as one of the leading construction law firms, and continue to strengthen our team and look for ways to improve the service we offer to clients.
We are pleased to announce that Chris Hough became a partner on 20 June 2000, just one year after joining us.
In September, Victoria Russell will be joining us from Berrymans Lace Mawer. Victoria, who will be a joining as a Partner, has long been recognised as one of the leading construction specialists in London, and was formerly a Partner at Freedmans. A German speaker, she is a practising arbitrator, CEDR accredited mediator and TeCSA adjudicator.
In March of this year, John Denis-Smith, a barrister from leading construction set, Keating Chambers, joined us as an assistant.
As technology continues to advance at an ever-increasing pace, the need to keep up-to-date with the latest changes is becoming more crucial. Our commitment to the adjudication.co.uk website (see above) is one example of our response to our clients' needs.
We have also introduced a monthly bulletin, entitled "Dispatch", which is available in hard copy or electronic form. This summarises the recent legal and other relevant developments. Click to see recent editions .
If you would like to receive a monthly copy please contact Jeremy Glover.
Arbitration Forms and Precedents
Julian Critchlow, together with Professor Robert Merkin, has just published a looseleaf publication entitled Arbitration Forms and Precedents. This provides a step-by-step procedural guide to arbitration claims, together with precedents for letters and forms that are used throughout the arbitration process. Updates will be issued every 6 months so the information will never be out-of-date. If you would like any more information, please contact either Julian or his secretary Jo Hindley.
Tony Francis continues to edit CILL. The following extracts are of particular interest. We have split the case round-up into two, and deal first with those cases relating to adjudication. In addition we have included summaries of one or two important cases, which have only recently been decided. An index appears at the end of this review.
…On 11 February 2000 the adjudicator gave his decision that the Defendant should pay the Claimant within 14 days the sum of £122,098.76. However, on receipt of the decision the Defendant realised that in making the decision the adjudicator had failed to take into account payments on account made by the Defendant. The error was immediately pointed out to the adjudicator who corrected the decision and sent out a corrected decision that same day. The result of this correction meant that in fact a small overpayment had been made to the Claimant as opposed to an underpayment. In a letter to the parties of 21 March 2000 the adjudicator concluded as follows:
The Claimant sought enforcement of the original decision and a payment of £122,098.76 on the basis that the adjudicator had no power to correct the original decision.
Issues and Findings
Should a term be implied into an agreement for an adjudication giving the power to an adjudicator to correct an error arising from an accidental error or omission or remove any ambiguity in the decision?
Yes, provided this is done within a reasonable time and without prejudicing the other party.
Notwithstanding the absence of any detailed discussion as to the legal basis for the implication of the term in question, this is a welcome decision. Had the Claimant succeeded in their enforcement proceedings such an obvious injustice would have highlighted a flaw in the adjudication process.
However, so as not to detract from the aim of adjudication to provide quick decisions it is important that any power to amend slips is used sparingly. The power should only be used to correct decisions containing accidental errors or omissions or to clarify ambiguities. It is not to be used to enable parties to raise further arguments on the issues in dispute or for the adjudicator to change his mind.
Also, the judge imposed additional limits on the use of this power. Firstly the power must be used within a reasonable time of the issue of the decision in question. Any party wishing to seek the correction of a slip must bring it to the attention of the adjudicator immediately. Secondly, it seems the power would not be available where the other party might suffer prejudice. However, provided any slip is bought to an adjudicator's immediate attention and rectified forthwith it is difficult to see how the other party could suffer any prejudice.
…Dahl-Jensen issued a Notice to Adjudicate claiming sums in excess of £5m for additional works, delay and disruption and losses for wrongful determination of the subcontract. On 9th September 1999 Bouygues issued a Notice to Adjudicate claiming almost £6m in respect of overpayments, liquidated damages for delay and damages arising as a result of the determination. It was agreed that Bouygues' claim should be treated as a counterclaim to Dahl-Jensen's claim in the adjudication.
Mr William Gard was appointed as Adjudicator and he made an award in favour of Dahl-Jensen of £207,741.46. However, in arriving at that sum in his calculations he took account of a gross figure, which included 5% retention and deducted from it the sum paid during the subcontract which excluded retention. The effect of this was to pay the retention to Dahl-Jensen of £348,885.63 when the parties were in agreement that the retention was not yet due under the subcontract. Bouygues argued that given the effect of the Adjudicator's decision which was to award retention money to Dahl-Jensen this was outside of the Adjudicator's jurisdiction and therefore the decision was not binding on the parties. The matter came before Mr Justice Dyson upon Dahl-Jensen's application under Part 24 of the CPR for enforcement of the decision.
Issues and Findings
Where an adjudicator makes an error in calculating the amount payable to a party the effect of which is to pay monies which are not due under the contract is that decision void?
No, provided the adjudicator has answered the issue that had been referred to him then a mistake in his calculations that has the effect of releasing monies not due does not prevent the decision being enforceable.
The issue of the retention monies was not referred to the Adjudicator and both parties were in agreement that the retention monies had not yet become due to Dahl-Jensen under the subcontract. The Adjudicator did not even attempt to consider the question of retention but because of an error in his calculations in the manner in which he used net and gross sums the effect of his decision meant a payment to Dahl-Jensen of retention. Bouygues argued that as the question of retention had not, and could not have been referred to the Adjudicator the decision was therefore made in excess of jurisdiction. Mr Justice Dyson held that notwithstanding the effect of the decision the mistake made by the Adjudicator should not be characterised as excess of jurisdiction. Here the mistake was one of calculation.
Many commentators have expressed the view that there is a close analogy between expert valuation cases and adjudication when considering possible grounds for challenging an adjudicator's decision. This decision follows the position of those expert valuation cases and confirms that if an adjudicator has answered the right question in the wrong way his decision will be binding. If an adjudicator answers the wrong question then his decision will be a nullity. Where a mistake is one of calculation made by an adjudicator in answering a question referred to him notwithstanding an obvious error the Adjudicator's decision will still be binding.
Court of Appeal - 31 July 2000
This matter came before the Court of Appeal on 31 July 2000 which upheld the decision and confirmed that the purpose of the adjudication procedure in section 108 of the HGCRA was to provide parties to a construction contract with a speedy method of resolving disputes which, although not finally determinative, could be enforced through the courts by way of summary judgment. Even where an adjudicator had answered the question put to him in the wrong way, the court would not interfere with the adjudicator's award.
Significantly, Dahl-Jensen the successful party had gone into liquidation. The Court of Appeal held that where there were latent claims and cross claims between the parties, rule 4.90 of the 1986 Insolvency Rules would apply to provide for a mutual set-off between the parties.
Therefore summary judgment was not the appropriate way to proceed. This was because the amount due under the award to the insolvent party would become part of the fund for distribution amongst its creditors. Accordingly, Bouygues would only receive a pro-rata dividend on its cross-claim and would be deprived of the benefit setting off its own claim under the construction contract as envisaged by rule 4.90.
For this reason, there would be a reasonable prospect of successfully defending the claim and no real reason to dispose of the claim summarily in circumstances where the account between the parties would have to be re-opened. In other words, had this argument for set off been raised before Mr Justice Dyson, then for the reason peculiar to this actual case, summary judgment would not have been granted.
…A dispute arose concerning the Claimant's final account and by a letter of 15 October 1999 the Claimant gave Notice of Adjudication. The letter stated as follows:
The adjudication was conducted in accordance with the TeCSA Rules, version 1.2. The adjudicator found that the Claimant was entitled to be paid £73,461 plus VAT in respect of acceleration and that whilst the Defendant was entitled to make deductions in respect of negative variations and contra-charges, the amounts deducted were excessive and, accordingly, the Claimant was entitled to recover a proportion of the sums deducted. The adjudicator then concluded as follows:
The Claimant treated the decision as entitling it to a payment of over £200,000 whereas the Defendant read the decision as indicating how particular items and issues were to be treated in the overall final account under negotiation at the time. The Defendant duly issued a payment notice taking into account the adjudicator's decision, which resulted in a further payment to the Claimant of just £22,246.26. The Claimant issued proceedings for summary judgment for a sum in excess of £200,000.
Issues and Findings
What was the nature of the dispute referred to adjudication?
The dispute referred to adjudication by the Notice of Adjudication concerned issues of principle relating to elements or ingredients of an overall final account as opposed to a dispute as to the amount of the next interim payment.
What is the true construction to be given to the adjudicator's decision?
The adjudicator intended to decide only that which he had been asked to decide and thus gave his decision as to the issues of principle relating to elements or ingredients of the final account. Accordingly, the application for summary judgment failed.
This case aptly demonstrates the care that needs to be taken by parties when preparing a notice of adjudication identifying the dispute to be referred to adjudication. In this case the Claimant was no doubt somewhat surprised to learn, notwithstanding the adjudicator's clear decision that a payment should be made in seven days, that in fact all he had sought from the adjudicator was in effect a declaration as to certain figures to be included in the Final Account which was then being negotiated by the parties. Where a party seeks from an adjudicator a decision requiring immediate payment of a monetary sum to avoid the problems the Claimant had in this case, the notice of adjudication should request payment in the clearest terms.
… Disputes arose between the parties as to the reason for delays to Fastrack's works culminating in Morrison informing Fastrack that third parties were to be engaged to progress part of Fastrack's works. Fastrack treated Morrison's actions as a repudiation of the subcontract and in accepting the repudiation withdrew from the site. Morrison then served a Notice of Determination upon Fastrack. Shortly after their withdrawal from the site, Fastrack submitted Interim Application No. 13 to Morrison for an interim payment in the gross sum of £383,873.97. Morrison responded with a notice of set-off in respect of its alleged entitlement to damages and costs to complete in the sum of £226,177, a sum in excess of the net sum claimed in Interim Application No. 13 by Fastrack. Morrison commenced an adjudication and the adjudicator awarded the net sum of £85,401.98 which Morrison refused to pay.
Morrison's contentions were that the only dispute in existence at the time the notice of adjudication was served concerned the contents of Interim Application No. 13. Morrison contended that there were significant differences between the sums claimed in the adjudication and those claimed in the Interim Application… Morrison contended that the sums claimed on Interim Application No.13 had been superseded by a new claim which was not yet in dispute as Morrison had not had an opportunity to consider the new claims. In these circumstances there was no dispute and accordingly the adjudicator was appointed without jurisdiction. The adjudicator found that the issues raised in the notice were not materially different from those raised in Application No. 13 and decided that he did have jurisdiction to address the dispute.
Issues and Findings
Can more than one dispute be referred to an adjudicator at the same time?
No. But the dispute which may be referred to adjudication is all or part of whatever is in dispute when the referring party first intimates an adjudication referral.
What are the requirements for a dispute within s108 of the HGCRA?
A dispute only arises when a claim has been notified and rejected although a rejection can occur when a party refuses to answer the claim.
On the facts of this case was there a notification and rejection of a claim forming the subject matter of the adjudication?
Yes, on the facts of this case.
HHJ Thornton QC comes to the conclusion that s108 of the HGCRA allows only a single dispute to be referred to adjudication at any one time. However, any potential difficulties that this finding could cause in practice appear to be alleviated by the further finding that a single dispute constitutes all issues at one point in time which a referring party decides to refer to adjudication.
As to what constitutes a dispute, this decision confirms that the position in adjudication is analogous to that in arbitration. For a dispute to arise there must be a claim with a rejection of that claim although silence can constitute such a rejection. What this decision does confirm is that care should always be taken in preparing the notice of adjudication in order to avoid future jurisdictional disputes. In this particular case the adjudication notice was drafted in the widest terms thus encompassing a broader range of disputed issues than those raised by Interim Application No.13.
Parties will often want to pick off limited issues for an adjudication and this is particularly so in relation to interim payments. This is permissible under the Act although interestingly HHJ Thornton QC indicates that the courts may consider in time that a failure of the referring party to refer all disputes in question to adjudication could constitute an abuse of process.
In early 1998 the Claimant carried out demolition work at two separate sites as subcontractors of the Defendant pursuant to separate oral contracts. On both sites the Claimant was not paid the sums they claimed and they suspended work in July 1999. On 8 December 1999 the Claimants gave Notice of Referral of both disputes under both contracts to adjudication. On 19 January 2000 the adjudicator gave his decision. The Defendant was ordered to pay £143,908.00 by way of monies due on both contracts. The Defendant refused to pay and the Claimant commenced enforcement proceedings. The Defendant argued that the Act did not apply as the contracts were not in writing and that the Referral Notice was bad because it referred to two contracts not one. The Claimant argued that there was an exchange of written submission in the adjudication constituting an agreement in writing to the effect alleged pursuant to s107 (5) of the HGCRA.
Issues and Findings
Does the failure of a party to deny the existence of an oral contract during the course of written submissions in an adjudication constitute an agreement in writing under s107(5) of the HGCRA?
No, the reference to adjudication proceedings in s107(5) is a reference to previous adjudication proceedings.
Under the Scheme can a party include disputes on separate contracts as part of the same adjudication?
No, under paragraph 8 of the Scheme only with the consent of the other party can a party refer more than one dispute under the same contract or disputes under different contracts to the same adjudication.
Contrary to the opinions expressed by many practitioners, HHJ Bowsher QC finds that the failure of a party to an adjudication to deny the existence of an oral contract is not sufficient under s107 (5) of the HGCRA to constitute a written agreement within the meaning of the HGCRA. The judge decides that "adjudication proceedings" in s107(5) means previous adjudication proceedings and not those proceedings when the matter is first raised.
…The judge comments that disputes as to the actual terms of oral contracts are not suited to resolution by means of adjudication. This decision is likely to impact upon the approach taken to the whole of s107 of the Act. For example, s102(2)(c) of the Act confirms there is an agreement in writing if the agreement is evidenced in writing. Following the thought process of Judge Bowsher, does this mean that all terms central to the dispute must be clearly recorded in writing?
The effect of this decision will be to place a narrower interpretation on s107 than originally thought. In many ways this is unfortunate. Smaller organisations that carry out work on the basis of an oral contract are often the type of organisation for whom adjudication can offer an effective and affordable means of getting their payment problems resolved…
On 26 October 1999, the Claimant issued proceedings in the High Wycombe County Court seeking payment of two invoices, which had been submitted for stage payments. On 8 December 1999, the Claimant obtained judgment in default of defence. On 7 January 2000, the Defendant succeeded in its application to have the judgment set aside. The Claimant's appeal is due to be heard on 24 May 2000.
In the interim, the Claimant referred the same dispute to adjudication. The Defendant refused to participate in the adjudication claiming that by starting proceedings in the County Court, the Defendant had waived its right to adjudicate. The adjudicator, having invited the Defendant to participate in the adjudication on two occasions, duly made her decision in favour of the Claimant. The Defendant did not pay. On 23 March 2000, the Claimant issued an application to enforce the adjudicator's decision.
Issues and Findings
Is a party, having issued proceedings in the County Court (or any other Tribunal), still entitled to issue a notice to seek to refer the matter in dispute to adjudication?
Yes. The wording of s108(2) of the HGCRA is clear, entitling a party to refer a dispute to adjudication at any time.
By commencing proceedings, had the Claimant waived or repudiated the benefit of the adjudication provisions contained within the contract?
Will a court always enforce a decision of an adjudicator in circumstances where proceedings in another forum have been commenced?
This depends on the facts. A court will exercise common sense and is likely to order a stay where final judgment is close at hand.
This case thus raises interesting tactical issues. If a party is caught up in the midst of a complex court battle, should thought be given to referring a part of that case to adjudication and thereby obtaining an interim decision, which might have a significant impact on the course of the case as a whole? Some care must be taken since common sense suggests that a court would not enforce a decision if the final hearing itself were imminent. Nevertheless it must be something to consider.
In an obiter comment at the end of his judgment, Mr Justice Dyson makes a comment, which will no doubt be seized on by those resisting enforcement applications. If a Defendant to such proceedings can produce evidence that there is a real doubt over the financial status of the Claimant such that it will not be able to repay the sum claimed should the ultimate final decision go against them, then it is likely that the court will order a Stay. No doubt this will be a cue for a series of security for costs style defences. It should be noted that Mr Justice Dyson's comments about the relevance of the financial position of the Claimant are not necessarily shared by all his colleagues. HHJ Wilcox has recently given judgment in Absolute Rentals Ltd -v- Gencor Enterprises Ltd and he declined to consider the financial status of the Claimant saying that to do so was undesirable in the context of an application to enforce an adjudicator's decision.
…The adjudicator issued a decision ordering the Defenders to pay the Pursuers £284,046.98. The Defenders refused to pay arguing that the primary activity on their site concerned the processing and production of pharmaceuticals and since a very high proportion of the works carried out by the Pursuers constituted the assembly or installation of plant on that site the works fell within the exception created by s105(2)(c)(ii) of the Act. In such circumstances the Defenders argued that the Adjudicator had no jurisdiction. In the Pursuer's enforcement proceedings the matter came to be considered by the Outer House of the Court of Session.
Issues and Findings
Where an adjudicator makes an error of law as to the scope of his jurisdiction is it open to the court to set aside the adjudicator's decision?
Did the adjudicator fall into error in his construction of the expression "plant" in s105(2)(c) of the Act?
Does the word "plant" in s105(2)(c) of the Act include pipework linking various pieces of equipment?
Lord Macfadyen confirms that a court does have power to review an adjudicator's decision as to his own jurisdiction, and draws a distinction between a decision on the merits under s23(2) of the Scheme, which is binding pending subsequent proceedings, and an adjudicator's decision on an issue as to jurisdiction which is in effect a preliminary issue and not binding. However, there are some important distinctions between the approach in Scotland to this question and the approach in England and Wales. Both Mr Justice Dyson in The Project Consultancy Group, and HHJ Thornton in Sherwood -v- Casson stress that the occasions when a court will consider a jurisdiction defence to enforcement proceedings will be rare and the scope of the courts investigation should be limited.
Here, Lord Macfadyen has carried out a wider investigation of the decision-making process of the adjudicator and in drawing analogies between the position of an adjudicator and that of a statutory decision maker confirms that the fact that jurisdiction disputes might be quite common does not justify the enforcement of ultra vires decisions. Further, Lord Macfadyen expressly leaves open the position as to whether or not the court could interfere with an error of fact on the part of an adjudicator which resulted in him making a decision on a matter outside his jurisdiction. This was the very argument put forward by Counsel for Bouygues in Bouygues -v- Dahl-Jensen. However, in deciding that issue Mr Justice Dyson held that an error of fact in the circumstances of that case did not raise an issue of jurisdiction.
… The subcontract contained no compliant adjudication provisions and accordingly the Scheme applied. Disputes arose between the parties over delays to the subcontract works and the standard of workmanship. On 13 July 1999, JJ made an application for payment. On 29 July, NDL issued a notice of intention to withhold payment complaining of defective works and delays on the part of JJ. NDL refused payment claiming that money was in fact due to them because the set-off overtopped the sum claimed. On 6 August, JJ withdrew from the site. NDL treated this action as a repudiatory breach of contract, accepted the repudiation and appointed an alternative contractor to complete the subcontract works.
On 18 November 1999, JJ served a notice of adjudication. In their response in the adjudication NDL contended that JJ's claim should be reduced to take account not only of defective work and delays but also damages arising out of JJ's repudiation of the contract. The adjudicator decided that he could not address the issue of repudiation as this was not a matter arising under the contract.
By his decision the Adjudicator found that the notice of intention to withhold payments was invalid and ordered payment to JJ. NDL sought a declaration that the decision was null and void and ought not to be enforced on the basis that the refusal to consider the repudiatory breach issue was a wrongful denial of jurisdiction. JJ sought enforcement of the decision…
Issues and Findings
As a matter of law was the adjudicator right to reject the issues arising under repudiatory breach on the ground that those matters did not arise under the contract?
No, the acceptance of repudiation brings performance of a contract to an end but the contract still exists and rights arising under the contract remain to be enforced under the contract.
In the circumstances of this case, did the adjudicator have jurisdiction to progress the issues arising under repudiatory breach?
No, the adjudicator had no jurisdiction to consider the repudiation claim because it was not mentioned in the notice to withhold payment and arose after the due date for the making of the interim payment.
Does either the HGCRA or the Scheme give an implied statutory power to an Adjudicator to award costs?
No, John Cothliff Ltd - v- Allen Build (North West) Ltd (1999) CILL 1530 was wrongly decided.
Can the parties to an adjudication agree to give an adjudicator jurisdiction to award costs?
On the facts of this case was there an implied agreement between the parties that the adjudicator should have jurisdiction to award costs?
Yes, both parties asked in writing for their costs and neither submitted to the adjudicator that he had no jurisdiction to award costs.
John Cothliff -v- Allen Build (1999) CILL 1530 was thought by many practitioners to have been wrongly decided…In any event HHJ Bowsher was in no doubt that had Parliament intended that adjudicators should have the power to award costs it would have said so. Therefore in the absence of an express or implied agreement between the parties an adjudicator does not have the power to award costs. Any party wishing to be certain that an adjudicator does not address costs should simply remind him that he does not have jurisdiction to award costs in their submissions.
Further confirmation is provided of the fact that parties wishing to raise set-offs by way of a reduction in monies due for payment or by way of a defence in adjudication proceeding must ensure that the issue in question is included in a compliant notice to withhold payment in accordance with s111 of the Act. As to set-off against adjudicators' decisions generally, interestingly the judge suggests that where there are two conflicting adjudication decisions it may be possible to set one off against the other in enforcement proceedings.
The Claimant was engaged by the Defendant to undertake scaffolding services in connection with the Defendant's own contract at the Esso Fawley Cogeneration Project. The Defendant's work involved the assembly and erection of the heat recovery steam generator boiler. Scaffolding was being used by the Defendant to enable it to erect the boiler and associated pipe-work at the project. Disputes arose between the Defendant and the Claimant. The Defendant alleged that the Claimant failed to provide an adequate number of appropriately qualified personnel leading to delays, and exposing the Defendant to liquidated damages for delay. The Defendant sought to set off such claims against sums due to the Claimant.
…Palmers served a notice stating its intention to suspend performance and commence adjudication. No adjudication procedure was specified in the contract and accordingly the Scheme applied.
The Defendant contended that the scaffolding was not a "construction operation" nor a "construction contract" as defined by the HGCRA. The Claimant immediately issued a claim in the TCC seeking answers to certain questions of law.
Issues and Findings
Is the contract between the Claimant and the Defendant an agreement for the carrying out of construction operations described in section 105(1)(e) of the HGCRA?
Is the contract a construction contract for the purposes of Part 2 of the HGCRA?
Do the Defendant's letter to the Claimant of 5 July 1999 and that dated 8 July 1999 provide effective notice of an intention to withhold payment pursuant to the requirements of section 111 of the HGCRA and is the Claimant entitled to immediate payment of the sum of £172,572.25?
The Defendant's letters were not effective notices of an intention to withhold payment, therefore the Claimant is entitled to immediate payment.
Can the court use its discretion to grant a declaration of law as to the jurisdiction of the adjudicator?
Yes, it is clearly appropriate for the court to intervene since only when it has declared that the relevant contract is a construction contract will an effective adjudication be possible.
Immediately upon the Defendant raising an issue as to the jurisdiction of the adjudicator, the Claimant sought a declaration from the court to resolve the issue. The matter was dealt with by the parties and the court with commendable speed and HHJ Thornton QC makes it clear that where cases arise as to an adjudicator's jurisdiction it is open to the parties to seek a declaration from the court to determine the relevant jurisdictional issue.
This represents one solution to problems that may arise with adjudicators' jurisdiction. However, this solution is only really practical where a court can determine the matter within days rather than weeks and the cost of such a declaration is proportionate to the amount in dispute. Both those factors were present in this case but this will not necessarily always be the case.
HHJ Thornton QC was prepared to give a declaration to the effect that no effective notice of withholding under section 111 of the Act had been given by the Defendant and had the Claimant actually made a monetary claim in respect of the sum in question, they would have obtained judgment. Accordingly, there is no reason why a party should not in certain circumstances make an application under CPR 24 for summary judgment where it is clear that no effective notice to withhold payment has been given and there is no arbitration provisions.
The Claimant entered into a contract with the Defendant involving the provision of steelwork and cladding for a grandstand. Practical completion was achieved on 27 November 1998 and on 18 December 1998 the Claimant submitted an application for an interim payment which was not paid by the Defendant. The Claimant commenced adjudication proceedings under the Scheme for payment. The adjudicator reached a decision that the Defendant should pay the Claimant £6,631.30. The Claimant then prepared a Final Account document including claims for variations that had been addressed by the previous adjudication and the addition of a claim for loss and expense. This led to a second referral to adjudication under the Scheme in respect of the sum payable pursuant to the Final Account. During the course of the adjudication the Defendant argued that this dispute was substantially the same as that with which the first adjudication had been concerned and that under s9(2) of the Scheme the adjudicator should resign. The adjudicator, Mr J E Price, rejected this argument and published a decision that the Defendant should pay the Claimant the sum of £12,586.39. The Defendant refused to comply with the adjudicator's decision…
Issues and Findings
Should the court embark on its own enquiry as to whether or not there was a substantial overlap between the two adjudicators' respective adjudications and decisions?
The challenge mounted by the Defendant was as to the jurisdiction of the adjudicator and, accordingly, the court should determine the issue.
What is the nature of the enquiry that the court should conduct?
The enquiry should be conducted for the limited purpose of ascertaining whether or not the two disputes are substantially the same. The court is not concerned to investigate the merits of the disputes.
For the purposes of s9(2) of the Scheme did the claim arising from the disputed Final Account application raise substantially the same dispute as the claim arising from the disputed interim application where a number of elements of the Final Account formed part of the interim application in question?
No, on the facts of this case.
In considering the question of the Adjudicator's jurisdiction, HHJ Thornton QC takes the opportunity to summarise previous decisions concerning enforcement of adjudicators' decisions in five succinct propositions. On the basis of his fifth proposition in following the decision of Mr Justice Dyson in Project Consultancy Group -v- The Trustees of the Gray Trust  CILL September 1999 1531, HHJ Thornton QC reiterates that the issue of a challenge to the jurisdiction of an adjudicator can be addressed by the court. Here, unlike the position in Project Consultancy Group, the adjudicator had an express power under the Scheme to determine the jurisdictional issue raised. Even where such a power exists the court will still consider whether or not the decision of the adjudicator on the issue was correct. However, Judge Thornton is at pains to stress that courts will give considerable weight to the decisions of adjudicators on jurisdictional issues and will only embark upon jurisdictional enquiries where there are substantial grounds suggesting that an adjudicator may have erred.
Of further interest, the case considers the situation which often arises in practice where an adjudication or adjudications have taken place concerning interim applications for payment and the same variations are raised in a subsequent adjudication addressing the Final Account. On the facts of this case and with particular reference to the payment provisions of clause 30 of JCT 80, HHJ Thornton QC held that, notwithstanding claims for the same variations as part of the interim application and the Final Account, the disputes were in fact different. This was in the main because the variations had to be remeasured and revalued on a consideration of the Final Account. Further, consideration of the variations formed a necessary part of the valuation of the claim for loss and expense. Accordingly, where an adjudication is concerned with an application for an interim payment the unsuccessful party may get another bite at the cherry in respect of elements of that application by way of a claim at the Final Account stage.
The parties entered into a contract for the construction of a showroom, office block and workshop at the Newhailes Industrial Estate in East Lothian. The contract was a construction contract within the meaning of section 104 of the HGCRA 1996.
The Pursuer brought an action against the Defendant for payment for work carried out, which was resisted by the Defender with an application that the claim be sisted (or stayed) to arbitration. In the course of resolving this, questions arose as to the meaning of section 111 of the HGCRA 1996.
Issues and Findings
For a notice to be effective under section 111, does it have to be in writing?
The provisions of section 111 are the same in Scotland and England. Therefore this case provides useful guidance as to judicial interpretation of the clause. Whilst the comment that a withholding notice should be in writing is unsurprising, Lord Hamilton's rejection of the idea that a paying party can allege that a withholding notice was in fact given before a particular application for payment was made, might, if adopted in England and Wales, come as a disappointment to the more imaginative of practitioners.
Dispute arose between the Claimant and the Defendant, which were referred to adjudication...there was a dispute as to the date on which the relevant contract was entered into and, in particular, whether the contract was entered prior to 1 May 1998…
The works started in January 1998 pursuant to a letter of intent which stated as follows:
The Defendant argued that because the contract had retrospective effect this meant it was entered into prior to 1 May 1998. It was accepted by both parties that on 3 April 1998, DOM/1 form of contract was signed by representatives of both parties. However, it was the Claimant's position that in fact no contract came into existence then as material matters needed to be concluded and the contract was only signed because for funding reasons the Defendant needed evidence of the existence of a subcontract. On the facts the judge found that the parties lacked the necessary contractual intent to enter into contract on 3 April 1998, and in fact the contract only came into existence a year later in April 1999.
Issues and Findings
Where a contract has retrospective effect so works carried out prior to 1 May 1998 are subject to the conditions of a contract entered into after 1 May 1998 for the purpose of the HGCRA 1996, was the contract in question entered into prior to 1 May 1998?
No, the fact a contract has retrospective effect does not alter the date on which the contract was entered into.
Some commentators have stated that where parties work under a letter of intent which predates the Act and then a formal contract is entered into after 1 May 1998, because that contract has retrospective effect this means that in effect the contract was entered into prior to 1 May 1998. This is wrong as confirmed by HHJ Thornton QC. In such circumstances whilst the contract will have retrospective effect for the purposes of the Act the date that contract was entered into will be the date after 1 May 1998.
The facts are complex. In short, RBSTB engaged VHE as contractor on the JCT With Contractors Design, 1981 edition as amended for ground remediation works.
On 10 June 1999 VHE submitted Application No. 4 for £1,037,898.05 inclusive of VAT. In relation to that Application RBSTB served no withholding notices. On 20 August 1999 VHE commenced an adjudication in respect of Application No. 4. The Adjudicator, Mr Linnett, gave a decision to the effect that in the absence of notice under clause 30.3.3 VHE would be entitled to the amount applied for within 28 days of the issue of a VAT invoice.
The adjudicator found that the referral to him was not wide enough to empower him to revise the Application. On 12 October 1999, Mr Standinger was appointed to act as adjudicator to a second adjudication initiated by RBSTB seeking a review of the amount payable under Application 4.
On 9 November 1999, Mr Standinger issued his decision to the effect that the proper sum payable under Application 4 was £254,831.83 and that therefore any sum payable under Application 4 be reduced to that amount or upon payment in respect of Application 4 in accordance with Mr Linnett's previous decision immediately VHE shall be liable repay to RBSTB the difference between the sum paid and the revised sums.
On 11 November 1999, RBSTB wrote informing VHE of RBSTB's intention to deduct Liquidated and Ascertained Damages of £207,857.14.
On 19 November 1999, VHE's solicitors wrote to RBSTB demanding payment of £254,831.83. On the same day RBSTB's solicitors confirmed payment of £46,974.69 had been made following deduction of £207,857.14 for Liquidated Damages.
On 24 November 1999, VHE issued proceedings claiming the enforcement of the decisions of both adjudicators consisting of a claim for the sum of £207,857.14 and interest, with interest on the sum of £883,317.41 (the full amount of Application 4, net of VAT) from 4 November to 8 November inclusive.
Issues and Findings
Does s111 (1) of the HGCRA exclude the right to deduct money in exercise of a right of set-off in the absence of an effective notice of intention to withhold payment?
Did the effect of the first adjudicator's decision amount to a declaratory construction of the contract or did it require payment?
The effect of the decision was to require RBSTB to pay the sum of £1,037,898.05 to VHE within 28 days after receipt of the appropriate VAT invoice.
Were RBSTB entitled to exercise a right of set-off of liquidated damages from monies due under the adjudicator's decision?
This case provides judicial confirmation of the position concerning set-off in the absence of an effective notice of intention to withhold payment under s111 of the HGCRA. The position is simple; absence of a compliant notice served in accordance with the appropriate time limits will prevent a party asserting any right of set-off in relation to the sum that has fallen due for payment.
On the particular wording of the interim payment provisions of the contract and in particular clause 30.3.5, Mr Linnett found that in this case the absence of a notice of payment under s110 of the HGCRA meant that the sum applied for became due for payment in full. Ordinarily, failure to serve an adequate s110 notice will not mean that the sum applied for becomes automatically payable. The purpose of a s110 notice is to identify disputed items in an application for payment thus giving the party dissatisfied with the amount to be paid the option to take the matter forward to adjudication.
In practice it appears that some adjudicators do place some sanction upon the absence of a compliant s110 notice by putting the onus upon the offending party to demonstrate why the sum applied for is unreasonable and allowing payment in full in the absence of adequate provisions to the contrary. Parties reducing applications for payment are therefore advised not to overlook s110 notices.
RBSTB's residual argument was that they were entitled to set-off their claim for liquidated and ascertained damages not forming part of the adjudication against the monies due under the adjudicator's decision. This argument was roundly rejected by the judge thus confirming the position that it is not possible to raise a set-off against an adjudicator's decision.
In John Mowlem & Co plc -v Hydra-Tight Ltd, 6 June 2000, HHJ Toulmin CMG QC agreed that the Claimant had the right to include in its standard form of contract a provision providing for the appointment by the Claimant of an adjudicator from its chosen list, here, the barristers at Atkin Chambers.
The Defendant, who had already commenced an adjudication but who had not complied with the contractual provisions for choosing the adjudicator, suggested that the attempt by one party to reserve for itself the nomination of the adjudicator created the potential for bias. It also suggested that the list had to physically exist. Both of these objections were dismissed. The latter on the basis that identification was clearly possible from the description and that it was possible for the other party to object to a proposed adjudicator on the basis of perceived conflict of interest.
The judge also noted that if only some of the adjudication provisions within a contract are compliant with the Scheme then that is not enough. You cannot cherry pick clauses. Either the contract is compliant or the Scheme applies.
Under the Scheme, the key question on appointing is whether anyone is specified in the contract to act as the adjudicator. Here, the Claimant's proposed list did provide that identification. The person specified in the contract was the member of Atkin Chambers selected by the contractor when the dispute arose.
In addition, both parties agreed that the contract provisions, which required the service of a Notice of Dissatisfaction prior to the commencement of an adjudication, were unlawful since they contradicted the statutory requirement that adjudication can be commenced at any time.
In Bridgeway Construction -v- Tolent Construction, Mackay J upheld a contractual provision which provided that the referring party would be responsible for all the costs of any adjudication. Although it was contended that such a provision might inhibit smaller parties from pursuing adjudication, the judge noted that here the contract had been freely negotiated by the parties and that further, the HGCRA is silent as to costs.
Mr Justice Dyson in Nottingham Community Housing Association Ltd v Powerminster Ltd ruled that the providing of an annual service on the gas appliances at properties owned by the Claimant and the supply of a responsive repair and breakdown service constituted "construction operations" in accordance with section 105 of the HGCRA and that accordingly the Defendant was entitled to give notice of Adjudication in respect of the alleged non-payment of invoices.
HHJ LLoyd QC in KNS Industrial Services (Birmingham) Ltd v Sindall Ltd refused the Claimant's application for summary judgement and gave summary judgement in favour of the Defendant and dismissed the claim.
Here he confirmed that an Adjudicator did have jurisdiction to make a deduction for incomplete and non-compliant works provided that the dispute referred by the Notice of Adjudication included any ground open to Sindall which would justify not paying KNS. Even if the sums in question had required an effective notice of withholding and that had not been given, allowing the deduction would have been an error but that decision would not be without jurisdiction.
The judge also rejected the attempt by KNS to sever parts of the decision that KNS said was wrong and enforce the balance of the decision saying that a party cannot pick among the reasons for a decision so as to characterise parts as unjustified and therefore made without jurisdiction.
Under the contract the parties were required to comply with decisions of the Adjudicator "without prejudice to their other rights under the Contract". Therefore those other rights that were not the subject of the decision remained available.
This conclusion, albeit obiter, to the effect that rights under a contract which were not within the matters decided may afford a defence to the enforcement of an Adjudicator's decision. The Judge reasoned that the mere fact of reference of a dispute to adjudication should not alter the parties' other rights under the contract falling outside of the dispute referred.
Finally, in Christiani and Neilson -v- The Lowry Centre Development Company Ltd, HHJ Thornton QC said that the adjudicator did not have ad hoc jurisdiction to decide his own jurisdiction but his decision that he had jurisdiction to decide the particular dispute referred to him was correct.
Further even if the claimant was potentially estopped by its pre-agreement understanding that the HGCRA was not to apply to the deed: the respondent had waived its entitlement to rely on that estoppel; and parties could not in any event, by estoppel, prevent the claimant from relying on the HGCRA since its terms are mandatory and they cannot be contracted out of.
The adjudicator had jurisdiction to decide the dispute in question even though the decision involved considering whether the respondent was entitled to claim rectification of a deed.
The Plaintiffs carried out building works for the Defendants on the terms of the JCT Minor Works Contract.
The work to be done under that contract excluded work described as "the second fix and finishes". There were conversations and discussions between the parties relating to the second fix works and the Plaintiffs contended a separate oral contract came into effect in relation to such work which was not the subject of an arbitration clause. The Plaintiff issued proceedings in relation to the second fix works. The Defendant issued an application for a stay of such proceedings on the basis that the work was subject to an arbitration agreement. HHJ Bowsher QC found that it was sufficient for the Defendant to show there was a dispute concerning the scope of the agreement in order for the matter to be stayed. The Plaintiffs appealed.
Issues and Findings
Should the Plaintiffs' claim be stayed to arbitration?
Yes. However, on the facts of this case the matter should have been resolved by the court at the first instance rather than referred to the arbitrator.
This appeal raises a point of general interest as to the proper approach of the court to an application under section 9 of the 1996 Arbitration Act for a stay of proceedings.
Here the Court of Appeal rejected the approach of Judge Bowsher at first instance, reported in 1998 CILL 1443, saying he was wrong to refer the question of whether or not there was a separate oral contract to the arbitrator. The Court of Appeal endorsed the approach of Judge LLoyd in Birse Construction Ltd -v- St David Limited (1999) CILL 1494 where he considers the approach the court should adopt to applications for stays under s9 of the Arbitration Act 1996. Here, as in that case, the Court of Appeal was keen to emphasize the importance of a court looking for the most economic and pragmatic way to resolve what at the end of the day is only a dispute as to the forum for the resolution of a wider dispute.
The Appellant was engaged by the Respondent in respect of flood defence works under ICE conditions of contract, (6th edition) dated January 1991, incorporating the corrigenda dated August 1993 as amended.
On 6 April 1998, the Appellant sought an engineer's decision in respect of five separate claims. The engineer gave his decision accepting in principle some of the claims, subject to quantification, and rejecting others on the 29 June 1998. On 23 September 1998, the Appellant gave the Respondent notice to refer disputes concerning the engineer's decision to conciliation under the ICE Conciliation Procedure. Before the Court of Appeal it was argued that that notice was an administrative error in referring the disputes to conciliation rather than arbitration.
Under clause 66(5) of the contract the Appellant was obliged to give any notice commencing conciliation proceedings within one month of the engineer's decision. Therefore the notice of conciliation was almost two months out of time. On 28 September 1998, the engineer issued a final payment certificate based upon his decision of 29 June.
The contract allowed the Respondent to proceed directly to arbitration by serving a notice to refer within three months of the engineer's decision. On 6 October 1998, eight days after the time for commencement of arbitration had expired, the Appellant served a notice to refer the dispute to arbitration. The Appellant subsequently applied to the Court for a declaration that no extension of time was required to commence arbitration or alternatively for an order under section 12 of the Arbitration Act extending time in which to begin arbitral proceedings. Mr Justice Colman rejected both applications and the Appellant appealed the judgment.
Issues and Findings
Does overlooking a time bar due to administrative oversight constitute circumstances outside the reasonable contemplation of the parties when they agreed the provision in question within the meaning of section 12 of the Arbitration Act 1996?
No. A negligent omission to serve notice within time was not outside the reasonable contemplation of the parties.
The engineer having left quantification to be determined at a later date, had the engineer in effect failed to give a decision?
No. Both the disputes referred and the engineer's decisions in relation to each dispute were sufficiently specific to constitute a decision.
Do engineers' decisions given in accordance with clause 66(4) provide "temporary finality" only until the issue of the final payment certificate?
No. The words "final and binding" in Clause 66(4) should be given their natural and ordinary meaning.
Does Rule 5.2 of the ICE arbitration procedure, which enables the arbitrator to decide any issue connected with and necessary to the determination of any dispute, enable the arbitrator to decide connected issues the subject matter of previous engineers' decisions?
No, clause 5.2 does not give an arbitrator jurisdiction over any issue determined by a decision of the engineer, which is final and binding.
This decision of the Court of Appeal confirms that the circumstances in which a party can claim an extension of time in which to commence arbitration proceedings are considerably more restricted under section 12 of the Arbitration Act 1996 than formerly, under section 27 of the Arbitration Act 1950. Under the previous Act undue hardship was grounds for an extension of time. But this case confirms that under the 1996 Act the courts no longer have this supervisory type of jurisdiction.
The Appellant also raised a number of other arguments that, if successful, would have deprived the engineer's decisions given in accordance with clause 66(4) of their final and binding effect. These arguments found little favour with the Court of Appeal who gave effect to the clear wording of the contract.
…During the course of the contract Lindner's works were delayed and disrupted and Lindner pursued its claims against How by way of arbitration proceedings. The arbitrator made a series of awards as to the documents comprising the contract between Lindner and How and their contractual effect and awarded loss and expense in Lindner's favour. How appealed under section 1.2 of the 1979 Arbitration Act on the grounds that the Awards contained errors of law and under section 23(2) of the Arbitration Act on the grounds of the arbitrator's misconduct.
Issues and Findings
Was the allegation of an error in law justified?
No. There was evidence on the basis of which it was open to the arbitrator to make the finding he did. In any event the making of a finding of fact without evidence to support it does not constitute an error of law. The Baleares  LLR 215 followed.
In ascertaining loss and expense should an arbitrator find out for certain the loss and expense suffered?
In ascertaining loss or expense, an arbitrator may, and indeed should, exercise judgment where the facts are not sufficiently clear.
Did the holding of a without prejudice meeting of experts with the arbitrator but without the parties and their advisers amount to misconduct?
Dealing with How's allegations that the arbitrator had made an error of law, the judge followed to the House of Lords' decision in The Baleares  LLR 215 which highlights the difficulties under the 1979 Arbitration Act of challenging an arbitrators' award in circumstances where the question at issue is anything other than a pure question of law. In particular, Lord Justice Steyn in The Baleares confirms that where there is no evidence to support a finding of fact this is not an error of law.
This case provides important guidance as to the ascertainment of loss and expense and for those preparing cases on a global basis. Considering Alfred McAlpine Homes North Ltd -v- Property and Land Contractors Ltd CILL February 1996, the judge confirms that he does not consider that case as saying that there is no room for the exercise of judgment in the process of ascertainment. In assessing loss and expense an arbitrator should exercise judgment where the facts are not sufficiently clear.
Although the headline nature of this decision in respect of without prejudice meetings of experts is striking, consideration of Mr Justice Dyson's judgment is recommended. There are often excellent reasons for an arbitrator to meet with parties' experts. However, care needs to be taken over any decision to exclude parties and their representatives. Particularly if there is any suggestion that the meeting is to be in any way a form of hearing.
On 17 April 1991 Durtnell & Sons Limited (Durtnells) entered into a contract with the Secretary of State for Trade and Industry (DTI). The contract was subject to the General Conditions of Government Contracts for Building and Civil Engineering Works, form GC/Works/1 (Edition 2).
The date for completion of the works was 10 January 1992, although practical completion occurred on 6 April 1992. Durtnells made an application for additional costs arising from a 12-week overrun and for general disruption throughout the contract. A formal claim was made on 8 October 1993.
DTI's project managers rejected the claim on 1 December 1993. Further discussions between the parties failed to settle the claim. On 5 April 1995, Durtnells forwarded a letter before action to DTI. It failed to move DTI from its earlier position. Durtnells did not respond immediately. On 3 July 1997, Durtnells sent a formal request for arbitration. On 9 December 1997, DTI rejected the claim for arbitration on the grounds that there had been inordinate and inexcusable delay in making a request. DTI went on to say that this position was subject to the advice of Counsel. DTI did not give its considered reply until 26 November 1998. Again, it rejected Durtnells' claim for arbitration. Finally, on 26 February 1999, a letter before action was sent to the Treasury Solicitor. The application starting these proceedings was made in April 1999.
Issues and Findings
Should the court implement the parties' agreement as to how their dispute is to be resolved subject only to such safeguards as are necessary in the public interest and set out in the 1996 Act?
Is there a residual discretion of the court to refuse to grant a remedy to someone who has for so long neglected his right to seek it?
Yes. The exercise of this discretion will depend on the circumstances of the particular case. The discretion was not exercised in this case.
The courts will interfere when the contractual machinery governing an arbitration has broken down. However, they prefer not to do so. In this case, HHJ Toulmin QC decided that it was possible for him to give directions because section 61(1) of GC/Works/1 is silent as to the period within which the notice of arbitration must be given and the arbitrator must be appointed. If the condition contained a time limit then it is highly unlikely that the court would not have interfered. This approach is clear when considering other cases such as Harbour and General Works Limited -v- Environment Agency (formerly NRA) (2000). If a party wishes to avoid costly legal arguments before the court on issues such as discretion and inordinate and inexcusable delays then it is advised to include a time bar within its arbitration clause. It will then be difficult to persuade the courts to interfere with the agreed contractual arrangement. Also, in the Durtnells case, it may be worth bearing in mind that HHJ Toulmin QC felt that the DTI's delay in providing Durtnells with a substantive response was "deplorable". Therefore, any party wishing to oppose an application under section 18 ought to ensure that it too has not delayed the arbitration in any way.
Northumbrian Water employed Dredging as main contractor for works under a contract based upon the ICE form 6th Edition. Dredging engaged Delta as subcontractor under a contract based upon the FCEC form of subcontract 1991 Edition.
On 20 March 1998, Delta gave Notice of Dispute to Dredging accompanied by Notices to Refer and to Concur in the appointment of an arbitrator, pursuant to clause 18 of the subcontract. On 24 March 1998, Dredging gave Notice of Dispute to Northumbrian Water in accordance with clause 66 of the main contract. On the same date, Dredging gave Delta notice under clause 18(8) of the subcontract requiring the subcontract disputes to be dealt with jointly with the main contract disputes.
Following the appointment of an arbitrator to hear the subcontract disputes a declaration was sought and obtained confirming that he had jurisdiction in the subcontract disputes notwithstanding Dredging's notice under clause 18(8) of the subcontract, on the ground that the main contract disputes referred to in the notice had not at that stage been referred to conciliation or arbitration.
Subsequently, Dredging issued to Northumbrian Water a Notice to Refer the main contract disputes to arbitration and at the same time served a further Notice under clause 18(8) of the subcontract, giving rise to a second challenge to the arbitrator's jurisdiction and a further declaration in which the arbitrator determined that:
Both parties appealed.
Issues and Findings
Was it a condition precedent for the effective operation of clause 18(8) that the main contract dispute must have been referred to arbitration prior to any attempt by the subcontractor to refer subcontract disputes to arbitration?
Is an arbitrator entitled to reconsider issues of jurisdiction following a prior determination either under Section 57 of the 1996 Arbitration Act or at all?
Consistent with the purpose of clause 18(8), that is to prevent multiplicity of proceedings over similar issues, the judge rejected the construction for which Delta contended that would have created a "reference race" between the main and subcontracts, while recognising that in giving effect to that purpose the subcontractor would be subject to delay in having its claims heard. The judge reasoned that such delays are a risk, which the informed subcontractor takes on board when entering into the subcontract.
That risk of delay is also subject to some safeguards imposed by the Courts. In Redlands Aggregates Ltd -v- Shepherd Hill Engineering Limited (see the February 1999 edition of CILL, page 1457) the Court of Appeal imposed an obligation of expedition upon the main contractor under the ICE Form who requires subcontract disputes to be heard with disputes under the main contract. In Harbour and General Works Limited -v- The Environment Agency (see above) the Court of Appeal reiterated the importance of the main contract reference being commenced within the three-month time limit imposed by the ICE Conditions. Both of these decisions will provide some comfort for the subcontractor concerned that a clause 18(8) notice will result in subcontract claims becoming interminably delayed in the doldrums of main contract disputes.
BONDS AND GUARANTEES
The Claimant successfully tendered for the supply and fitting of the Millennium Dome roof and was instructed by a letter of intent to commence works. This letter was to be superseded by a contract to be entered into between the parties. The works commenced and the parties entered into that contract. However, the Defendant subsequently changed its mind about the material to be used for the roof to the Dome. It therefore terminated the contract of the Claimant.
The Claimant submitted a claim for breach of contract in the sum of £2.22 million. This claim was rejected by the Defendant on the grounds that the Claimant had not provided a performance bond and guarantee as required by the contract which stated that the provision of such documentation was a condition precedent to payment. In reliance on this provision the Defendant claimed that it had no liability whatsoever to the Claimant.
On the Defendant's application to strike out the claim the judge at first instance agreed that the provision of the performance bond and guarantee was indeed a condition precedent to any liability of the Defendant. The Claimant appealed.
Issues and Findings
Had the parties intended that the provision of the performance bond and guarantee was of such importance that the failure to provide them would result in the Claimant being unable to assert its rights to payment under the letter of intent?
Had the parties intended that the provision of the performance bond and guarantee was of such importance that the failure to provide them would result in the Claimant being unable to assert its rights to payment under the contract?
No. To do otherwise would have been a "commercial nonsense".
Did the answer to the issue change because the obligation was expressed in the contract to be a condition precedent.
This case provides an example of the Court of Appeal adopting a commercial approach to the dispute between the parties. The Court felt that given that both parties were aware that the contract was about to be determined, it would have been pointless for the Claimant to continue spending money to procure the bond and guarantee which would have no relevance whatsoever. Despite the fact the contract used the words "condition precedent" the Court of Appeal was still not prepared to apply the wording of the contract in a manner which would have defeated the commercial reality of the situation. Had the contract been terminated for a failure to provide the performance bond and guarantee then the situation would no doubt have been different. Here, the Court felt that by terminating the contract for other reasons, the Defendant effectively waived its right to the benefit of any failure on the part of the Claimant to comply with this particular condition precedent. If such technical points are to be taken, a party should also take them promptly. It is clear that Chadwick LJ was not impressed by the fact that the Defendant's argument was first raised 10 months after the Claimant originally made its claim.
McAlpine was the main contractor for the erection of a five-storey building on a site in the Isle of Man. McAlpine engaged the Plaintiff, Ascon, as reinforced concrete subcontractor for the development. The subcontract period was 27 weeks and practical completion was achieved 10 weeks late. No extension of time was granted to Ascon who claimed an extension of time of 39 days. The main contract works were certified practically complete over ten weeks late after allowing for extensions of time. McAlpine alleged that this delay was as a consequence of Ascon's late completion of its works. Disputes arose between the parties on the question of responsibility for delay and, in particular, Ascon's entitlement to an extension of time due to water ingress and conversely the extent to which Ascon delayed McAlpine.
Issues and Findings
Had Ascon identified and proved a causative link between the matters identified as delaying events and specific periods of consequent delay sufficient to justify an entitlement to an extension of time of 39 days?
No. On the facts of this case.
Did the words "reasonably in accordance with the progress of the works" in the subcontract require Ascon to comply with the main contract programme, including the commencement date of the trade immediately following Ascon?
No. Ascon were not obliged to comply with the detail of the main contractor's programme, either generally or in relation to the work of other subcontractors although Ascon owed more than a negative duty not unreasonably to interfere with the actual carrying out of other works.
Were McAlpine entitled to the benefit of the five-week float in their main contract programme for the purposes of establishing the delay caused by Ascon to the main contract works?
No. Whether the delays to the main contract works are wholly the fault of one subcontractor, wholly that of the main contractor or spread in varying degrees between several subcontractors, the benefit of the float will accrue to the defaulting party or parties.
No. Ascon accelerated in order to meet an existing contractual obligation and therefore were not entitled to the costs of such acceleration.
In the absence of other evidence, is it proper to infer that the causes of delay at one stage has a continuing effect so as to produce the same delay at a later stage?
Yes, but that probability is likely to diminish with the passage of time and the complexity of intervening events.
Having rejected both parties' cases on delay the Judge then adopted a somewhat rough and ready approach to the questions of delay on the basis of the factual evidence. This approach raises some concern in that its adoption by the court represents the approach to extensions of time in the past but rejected in John Barker Construction Limited -v- London Portman Hotel Limited (1996) CILL May 1996 1152. Notwithstanding the court's willingness to reach its own conclusions, the failure of both parties to demonstrate to any real extent their contentions in respect of delay again reinforces the importance when pursuing claims for delay of some form of technical delay analysis adequately demonstrating cause and effect.
This decision adds further clarification to the meaning of clause 11.1 of DOM/1 and 2. Whilst a subcontractor is not obliged to progress its works to comply with the detail of a main contractor's programme, a subcontractor cannot ignore the main contract works. The subcontractor knows the place of the subcontract works in the main contract works and this is relevant in considering a subcontractor's obligations under clause 11. Accordingly, in the opinion of HHJ Hicks a subcontractor's duty is somewhat wider than the negative duty not to interfere with the main contract works found to be the position in Pigott Foundations Ltd -v- Shepherd Construction Ltd (1994) CILL June 947.
The judge's comments concerning acceleration are of interest, in particular, the confirmation that there is no duty to mitigate excusable delay. Finally, the judgment provides welcome guidance on the question of who owns the float of a contractor's programme when considering the extent of the parties' culpability for delay to the main contract works. The judge confirms that in relation to any claim against a subcontractor the issues remain breach, loss and causation, and therefore the float will accrue to the benefit of any defaulting party and not to the benefit of the contractor.
DUTY TO WARN
Plant had contracted with Ford Motor Company Limited to construct pits to take engine-mount rigs at Ford's research and engineering centre in Essex. JMH were subcontracted to excavate the pits. One pit involved the removal of part of the concrete base of a stanchion supporting the roof of the centre. Therefore, the stanchion required underpinning which in turn required the provision of temporary support for the stanchion and roof.
It was not in dispute that under the original terms of the subcontract JMH was responsible for the design of the temporary support. However, an in-house engineer representing Ford, one Mr Furley, issued instructions dictating, amongst other things, the manner of support to be adopted, effectively vetoing JMH's design. In these circumstances the judge held, and it was not disputed on appeal, that there was a contractually binding variation of the terms of the subcontract to the effect that Mr Furley's instructions must be complied with. Accordingly, the judge found that JMH were not contractually responsible to Plant for the design of the temporary support. In the event, the support instructed by Ford, acrow props, proved inadequate and the roof collapsed.
None of the above facts were questioned on appeal. The appeal concerned the duty which JMH may have had to warn that the system which Mr Furley had instructed was inadequate and the steps which they should have taken in the face of Mr Furley's instructions to proceed with an inadequate system. The judge found that JMH recognised the inadequacy of the propping and did warn Plant that it was inadequate. The question on appeal was whether that was sufficient to discharge their responsibility.
Issues and Findings
Did JMH have a duty to warn Plant that the system of propping instructed by the client was inadequate?
Yes. JMH had, with others, a duty to guard against the risk of injury as part of its implied contractual duty of skill and care.
Did JMH discharge that duty?
No. JMH should have protested more vigorously.
This decision of the Court of Appeal generally accords with the reasoning of Judge Newey in Lindenberg -v- Canning  62 BLR 147. However, their Lordships expressly reserved for future consideration circumstances where either the contractor did not know, but merely ought to have known, that a design was dangerous or the relevant design defect was not dangerous.
Unfortunately, their Lordships were not prepared to specify the steps that JMH should have taken to discharge their duty to warn, except to say they should have protested more vigorously…
The case therefore came back before HHJ Hicks QC this year.
Issues and Findings
What should JMH have done to fulfil its duty of care?
Point out the design faults as vigorously as possible to the extent of walking off site if necessary.
This was a case where the judge had already determined that Plant's share of the responsibility for the damage was the predominant one and had reduced the damages recoverable from JMH by 80 per cent. This had not been challenged on appeal. However, the judge made it clear that where there are two operative causes, a wrongdoer cannot excuse himself by pointing to that other cause.
The other interesting point from the judgment is the emphasis given by HHJ Hicks QC to the safety element. JMH, the roofing contractor, owed a duty of care to point out design faults to the contractor. This should have been a key concern of JMH. On safety grounds alone, JMH should have pressed its objections to the system which was being constructed. In particular, as a last resort, JMH could and should have refused to continue the work if the safety of the workmen was at risk. Had they done so, the temporary works would not have collapsed and a revised safe design would have been produced.
…In 1997 a Mr Isaac was instructed as expert witness on behalf of the Defendant. Subsequent to a meeting of experts a memorandum of agreement was sent by the other experts to a Mr Isaac who failed to respond satisfactorily to the drawing up of the memorandum of agreement.
On 10 March 1999 there was an application to the judge which resulted in an order that Mr Isaac do comply with the requirement of the Practice Directions to Part 35 of CPR. Mr Isaac failed to comply with the order and accordingly, the Defendant was debarred from calling Mr Isaac as an expert witness unless the court otherwise ordered. The matter came back before the judge on 4 May 1999 and the judge confirmed that Mr Isaac had not complied with the previous order and that relief against default should not in the interests of the administration of justice be granted under CPR Part 3.8. Having debarred Mr Isaac from acting as an expert the judge accordingly found that the Defendant had no expert evidence available in the proceedings against the architect and those proceedings should be dismissed. The Defendant appealed.
Whilst recognising the potentially draconian consequences for the Defendant, Lord Woolf had little doubt that HHJ Moseley QC was right to debar the Defendant from calling the evidence of their expert as a result of that expert's flagrant breaches of the Practice Directions to CPR Part 35.
Clearly Mr Isaac had no understanding of his duties as an expert and Lord Woolf concurring with HHJ Moseley QC agreed that it could not be in the interests of the administration of justice that Mr Isaac should give evidence in this case. This decision emphasises, if any such further emphasis was needed, that it is crucial that experts fully understand their duties as set out in the Practice Direction to Part 35 CPR.
Whilst the Defendant and Claimant agreed by consent to give Mr Isaac a second chance Lord Woolf was having none of this confirming that it would be quite wrong for the Court of Appeal, even by consent, to effectively overturn the Judges decision that Mr Isaac was not an appropriate person to give expert evidence at the trial over which he would be presiding.
The Claimant, now aged 17, had suffered serious injuries when he was struck by a car being driven by the Defendant. Liability was admitted; the only issue was quantum. The real issue was the nature of the care that needed to be provided to the Claimant. The parties agreed to the instruction of a joint expert specialising in occupational therapy. However, the Defendant's solicitors disagreed with the care regime proposed for the Claimant in that report. Accordingly, the Defendant's solicitors stated that they wished to instruct an expert of their own and sought confirmation that the Claimant would be prepared to be interviewed by that expert. At first instance, the judge decided not to allow further expert evidence but agreed that the Defendant should be invited to put written questions to the joint expert.
The Defendant appealed.
Issues and Findings
What should be done if the parties could not agree joint instructions?
It is entirely proper for both parties to instruct the jointly appointed expert separately.
Where parties to an action have agreed to instruct an expert jointly, did that prevent one of those parties being allowed to obtain a report from another expert if it was dissatisfied with that joint expert's report?
Would that party be able to rely on that expert evidence at trial?
Did the amount of money at stake have any bearing on this?
Yes. Where a modest amount is involved, it might well be disproportionate to have a second report. Here, the potential quantum was significant.
This case is an important one insofar as the instruction of a joint expert is concerned. The Court of Appeal took the opportunity to remind parties that if joint instructions cannot be agreed then the appropriate course is for the parties to provide their own instructions.
Equally, the Court of Appeal gave a clear indication that in cases where (as here) the quantum was significant, a party would not be prevented from instructing its own expert. The Court also gave its approval to the appointment of shadow experts in certain instances by saying that a party which is not satisfied with the report prepared by the joint expert can instruct its own expert to make enquiries prior to questioning the joint expert and, if it proves necessary, can apply to call its own expert evidence. The court will have regard to proportionality when considering whether or not to allow a party to obtain a further expert's report and Lord Woolf does refer in his judgment to the benefits of a single joint expert. However, the mere fact that the court may allow a party to obtain its own expert report does not necessarily mean that, that expert will be allowed to give oral evidence. No decision about that is to be taken until after a meeting of the experts and then it would only be a matter of last resort before permission is given to allow oral evidence.
Finally, although the Defendant's appeal succeeded, costs did not follow the event. Lord Woolf was firmly of the view that this matter, had it been approached by the Defendant correctly, should have been resolved in the court below and penalised the Defendant accordingly.
The Applicants, Burrells Wharf, made an application for pre-action discovery under Civil Procedure Rule ("CPR") 31.16. On behalf of the Respondent, Galliard, it was argued that Article 5 of the Order was ultra vires. The matter came before the Honourable Mr Justice Dyson who rejected the contention that Article 5 of the Order was ultra vires and then went on to consider the application under CPR 31.16.
The nature of Burrells' allegations concerned breaches of building regulations on the part of Galliard. Burrells' expert provided affidavit evidence to the effect that to properly investigate the allegation he needed to consider the documents, which showed what was required or allowed by the building control authorities. Burrells' expert made efforts to examine the relevant documents from the local authority and the local authority denied him access to the documents. Burrells' expert then went on to say that with the relevant documents forming the subject matter of the application his firm's costs would be in the region of £75,000-£100,000 to prepare a detailed schedule of complaint, but without the documents the figure could well rise to £150,000.
The availability of pre-action discovery in all actions could be an extremely effective tool for potential Claimants. This is the first decision of the TCC considering CPR 31.16 and its application in the context of a construction case. Galliard argued that pre-action discovery should only be ordered in exceptional cases. The judge did not consider this submission to be helpful finding that provided the criteria of CPR 31.16 were satisfied then pre-action discovery should be ordered. CPR 31.16 requires the following:
In the circumstances of this case the Judge was satisfied that the requirements for CPR 31.16 were satisfied.
Serck carried out design and installation work on a control system as part of the construction of a facility for British Nuclear Fuels Ltd for Drake & Scull who were responsible for the mechanical and electrical works. …the parties had no formal contract beyond a letter of intent, having reached agreement as to price and a scope of works, but not as to programme or terms and conditions.
It was common ground, therefore, that Serck was entitled to be paid for the works on a quantum meruit basis. This trial was concerned with the formulation of a reasonable sum.
Issues and Findings
Was a reasonable sum the value of the work to Drake & Scull or Serck's reasonable costs of executing it?
Quantum meruit covers a spectrum from cost at one end to value at the other. In this case the reference to "all reasonable costs incurred" in the letter of intent gave an entitlement to reasonable remuneration including an element for profit and overheads.
Was the tender price a determining factor in assessing a reasonable sum?
No. The tender price was relevant only as a check. It would be wrong to treat it as the starting point, adjusted for "variations", because that would be to treat it as contractual, which it is not.
Were such factors as site conditions and the main contract programme relevant?
Yes and No. As the court was concerned with remunerating the work done, the circumstances in which the work was carried out were relevant. But Serck was under no duty to comply with the main contractor's programme.
This decision underlines the difference between payment under a contract and the assessment of a reasonable sum. In addition to rejecting the tender as a determining factor in the valuation of Serck's works, the judge rejected a submission by Drake & Scull that, in the absence of a contract, Serck was under a duty to comply with the main contractor's programme and so could not charge for the cost of out-of-sequence working, which costs were allowed.
The judge did, however, observe that a firm working on a quantum meruit basis on a complex construction site cannot wholly ignore the desirability of co-operation with others at work there. Such a firm will owe duties not unreasonably to interfere with others' works, to be aware of the progress of other trades and to co-operate in efficient working practices and the costs of inefficient working or making good defective works are not recoverable on a quantum meruit. On the facts of this case it was unnecessary to go a step further and decide the issue left open in Crown House Engineering Limited -v- Amec Projects Limited (1989) 48 BLR 32 of whether sums payable under a quantum meruit can be subject to the deduction of cross-claims where such inefficient or defective work leads to claims by others.
The Claimant, Mr Swain, claimed to have been injured due to the negligence of the Defendants, who were builders, when a scaffolding plank that had been propped against a fence fell on to him suddenly without warning. Mr Swain could do no more than allege that the Defendants were in control of the site and the fact of the plank's falling. He was unable to advance any explanation as to why it fell. The Defendants applied, under Part 24 of the CPR, for an order dismissing the claim on the grounds that, in the absence of showing how the plank came to fall when it did, Mr Swain had no real prospect of succeeding on the claim. The application was dismissed at first instance.
Issues and Findings
Did Mr Swain have no real prospect of succeeding on the claim?
No, the Defendants had a responsibility for explaining what had occurred. Summary Disposal under Part 24 was not suitable where there were factual issues, which would need to be investigated at the trial.
For the first time since the introduction of the CPR Lord Woolf provides guidance as to the test to satisfy on an application for the summary disposal of a matter under CPR 24. The test under CPR 24 is for a party to show that either a claim or a defence has no real prospect of success. Here Lord Woolf observes that the word "real" distinguishes "fanciful" prospects of success. Therefore, on the basis of this reasoning it would appear that all a party need do to defend an application under CPR 24 is simply show that their case is not fanciful. If this is right then it would appear that the position under CPR 24 is not appreciably different to the test under the old Order 14 where a party simply had to show a triable issue.
Further, Lord Woolf adds that the disposal of an issue under CPR 24 should not result in a mini-trial. Quite what is meant by a mini-trial is unclear but the implication is that if a party can produce lengthy statements and exhibit voluminous documentation he may be able to obfuscate matters to such an extent that any application has the appearance of a mini-trial. Whilst Lord Woolf expresses the view that courts should not hesitate to use their powers under CPR 24, in appropriate cases this decision would suggest that the cases where the power can be used will still be somewhat limited.
The Claimants, Bovis, were employed by the Defendants, Braehead, to design and construct a shopping and leisure centre. Bovis applied under Part 24 of CPR for payment of two interim applications for the total sum of about £8.8m. Braehead resisted on the grounds that it was entitled to deduct LAD of about £7m and to set off damages for breach of contract in a sum exceeding £16m. As to the LAD Bovis contended that it was entitled to full extensions of time, relying in part on an alleged agreement that an extension of time would be given, and that no valid notices of non-completion had been given. As to the damages claims, Bovis said that the cost overruns concerned were the fault of Braehead.
Issues and Findings
Did Braehead have no real prospect of successfully defending the claim?
No. The claim raised issues, which required the Judge to conduct a "mini-trial", and were therefore not appropriate for summary disposal.
The decision in Swain -v- Hillman may have defined the test for the summary disposal of a matter in a more limited fashion than might have been expected. However, upon any analysis it would appear that in this case the Claimants were taking a somewhat optimistic view of the position under CPR 24. This case provides an example of the court being asked to conduct a mini-trial, which is not appropriate for CPR 24.
VALUATION OF VARIATIONS
Alston engaged Henry Boot for civil engineering works in relation to a new power station to be built for Powergen. The contract incorporated the ICE Standard Conditions of Contract, 6th Edition. The contract included a price of £250,880 in relation to certain sheet piling in the Turbine Hall. This price did not cover the cost of sheet piling in the HRSG area nor in the cooling towers. The valuation of the sheet piling to these areas instructed by way of variation became the subject matter of a dispute between the parties. However, Boot had made an error in the calculation of the figure of £250,880 for the sheet piling in the turbine hall giving Boot a much more favourable rate than would otherwise had been the case. Accordingly, if this rate were to be applied to the sheet piling in the HRSG area and the cooling towers this would have produced a large windfall gain for Boot.
The matter was referred to arbitration and came before Mr John Tackaberry QC who valued the work on a fair and reasonable valuation basis under clause 52 of the contract as opposed to using the rate for the turbine hall as the basis of the valuation. The arbitrator held that in deciding not to use the contract rates it was reasonable to have regard not only to the mistake that was made in specifying those rates but also the difficulties in seeking to extract a rate which could be said with confidence to be directly relevant and applicable to the work in question, there being an absence of detailed information as to how Boot calculated those rates in the first place. Boot appealed to the High Court on the grounds that the arbitrator erred in law in taking those two factors into account. HHJ LLoyd QC held that the arbitrator had so erred and remitted the award to the arbitrator with a direction to the effect that he should base his valuation on the figure of £250,880 for sheet piling work in the turbine hall. Alston then appealed the decision of HHJ LLoyd QC.
Issues and Findings
Is it right not to make a valuation under clause 52(1)(b) of the ICE Conditions, 6th Edition (which would otherwise had been based on a rate or price) on extraneous grounds such as it was not feasible to use such a rate or price because it contained a mistake?
Is it right not to make a valuation under clause 52(1)(b) of the ICE Conditions, 6th Edition (which would otherwise had been based on a rate or price) on extraneous grounds such as it was not feasible on the information provided by the contractor to make a valuation based on the rate or price?
Notwithstanding the windfall gain to be had by the contractor by a majority of two to one, the Court of Appeal agreed with what Judge LLoyd QC described as the fundamental proposition that contract rates and prices are sacrosanct. The fact that the end result of the use of such a rate or price may be unreasonable or lead to absurdity is irrelevant. The possibility of such an end result clearly troubled the arbitrator and LJ Ward. In his dissenting judgment, LJ Ward could not accept that it is impermissible to have regard to the result of using the contract price in judging whether or not that use is reasonable or unreasonable.
BONDS AND GUARANTEES
DUTY TO WARN
VALUATION OF VARIATIONS