CONTENTS

Foreword...... 02

Smash and Grab Adjudications...... 03 S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448...... 03 M Davenport Builders Ltd v Greer and another [2019] EWHC 318 (TCC)...... 03

Liquidated and Ascertained Damages (LADs)...... 04 Triple Point Technology Inc v PTT Public Company Ltd [2019] EWCA Civ 230...... 04

Collateral Warranties...... 05 Swansea Stadium Management Company Ltd v City & County of Swansea and another [2018] EWHC 2192 (TCC)...... 05 British Overseas Bank Nominees Ltd and Others v Stewart Milne Group Ltd [2019] CSIH 47...... 06 New York Laser Clinic Ltd v Naturastudios Ltd [2019] EWHC 2892 (QB)...... 06

Practical Completion...... 07 University of Warwick v Balfour Beatty Group [2018] EWHC 3230 (TCC)...... 07

Adjudication...... 08 1) Insolvency...... 08 Bresco Electrical Services Ltd v Lonsdale [2019] EWCA Civ 27...... 08 Meadowside Building Developments Ltd (In Liquidation) v 12-18 Hill Street Management Co Ltd [2019] EWHC 2651 (TCC)...... 08 Cannon Corporate Ltd v Primus Build Ltd [2019] EWCA Civ 27...... 09 Granada Architectural Glazing Ltd v RGB P&C Ltd [2019] EWHC 3296 (TCC)...... 09 2) Dispute Crystalisation...... 09 LJH Paving Ltd v Meeres Civil Engineering Ltd [2019] EWHC 2601 (TCC)...... 09 3) Errors...... 10 Corebuild Ltd v Cleaver and another [2019] EWHC 2170 (TCC)...... 10 Willow Corp Sarl v MTD Contractors Ltd [2019] EWHC 1591 (TCC)...... 10

Payment...... 11 Bennett (Construction) Limited v CIMC MBS Limited (formerly Verbus Systems Limited) [2019] EWCA Civ 1515...... 11 Amey LG Ltd v Aggregate Industries UK Ltd [2019] EWHC 3488 (TCC)...... 11

Concurrent Delay...... 12 North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744...... 12

Relational Contracts and ‘Good Faith’...... 13 Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264...... 13 Bates v Post Office Ltd (No.3) [2019] EWHC 606 (QB)...... 13

Meaning of ‘Default’...... 14 Network Rail Infrastructure Ltd v ABC Electrification Ltd [2019] EWHC 1769 (TCC)...... 14

Value “at any time” Clause...... 14 Everwarm Ltd v BN Rendering Ltd [2019] EWHC 3060 (TCC)...... 14

Electronic Signatures and Acceptance...... 15 Neocleous & Anor v Rees [2019] EWHC 2462...... 15

Release of Funds under a Joint Venture Agreement (JVA)...... 15 Doosan Enpure Limited v Interserve Construction Limited [2019] EWHC 2497...... 15

Updates...... 16 Low-value Adjudication Scheme...... 16 VAT Reverse Charge...... 16

Sharpe Pritchard – Areas of Expertise...... 16 Development and Infrastructure Projects...... 16 Dispute Resolution...... 16

Construction Law Review 2018/2019 01 FOREWORD

Work has continued apace for Sharpe Pritchard’s Construction Law team. We have completed contracts for several exciting and high-profile projects with a number of others in the pipeline. Our specialist adjudication unit, SP Adjudication, continues to enjoy success both defending and bringing adjudications.

With significant construction cases occurring every month, all of which have practical implications for both lawyers and their clients, it can be difficult to stay in the loop. This review takes a look back at some of the most important rulings of the last 18 months and anticipates potential future developments in the industry.

There have been several landmark cases since our last review. Payment notices and ‘smash and grab’ adjudications continue to occupy the court’s time, while much attention has been paid to, now infamous, Grove Developments.

Case law on liquidated and ascertained damages also saw a major update in the landmark ruling in Triple Point.

The continuing high levels of contractor insolvency has regularly appeared as an issue for courts to resolve following adjudications. This is particularly true in light of the judgment in Bresco.

Since last time, we have also seen several other important cases such as Swansea Stadium Management Company Ltd, University of Warwick and North Midland Building.

This review considers these cases and more, as well as providing updates and comments on further developments in the construction industry.

Justin Mendelle Head of Construction

020 7061 5948 [email protected]

Construction Law Review 2018/2019 02 SMASH AND GRAB ADJUDICATIONS

S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448

The Court of Appeal upheld This meant that issue 2) was not amending to “the notified sum”) is Coulson J’s (as he then was) an academic question but one “a helpful one”. “The mechanism significant decision in the TCC that of considerable interest. It sets a is simply intended to generate a the unsuccessful party to a ‘smash precedent as to whether a party provisional figure for immediate and grab’ adjudication could bring a can pursue a concurrent valuation payment” – a figure somewhere subsequent ‘true value adjudication’. adjudication claim where they have “in the right ball park”. This means not complied with the payment the “payment bargain” sum under The case concerned a dispute over provisions in s.111 of the Act. Both the s.111 regime is conceptually whether Grove had issued a valid Pay parties therefore requested that it was distinct from “the valuation Less Notice and whether a valuation decided in any event. The Court of bargain” where the true sum can adjudication on the ‘true value’ of Appeal agreed with Coulson J. be reviewed afterwards. The s.111 the works done could be brought regime “is not the philosopher’s alongside the original adjudication In reaching this conclusion, it stone” in that it does not transmute on the payment scheme under the considered the following matters: the sum stated in the IA into a true Construction Act 1996 (‘the Act’). valuation by statute. This is why Coulson J had held as such in • In Beaufort Developments (NI) Ltd under the contract, arbitration the TCC. v Gilbert-Ash (NI) Ltd, the courts or litigation is available if either were held to have the same wide party is dissatisfied with the There were three issues before powers as the adjudicator to “open adjudicator’s decision. the Court of Appeal: up, revise and review” payment • The Employer can recover certificates. This is because the overpayments in the interim 1) Whether the Pay Less Notice courts do not need to make use of payment regime where he failed served by Grove complied with the contract machinery to review to serve a Payment Notice or Pay the Contractual requirements but can rather use their ordinary Less Notice through adjusting surrounding its service; powers to examine facts and the next interim payment. award sums. 2) Whether Grove was entitled to request a Valuation Adjudication; • The law had settled that All of this suggested to the Court of and the absence of a Certificate of Appeal that, although the Act does Completion did not bar the right create “a hierarchy of obligations”, 3) Whether Grove deducted for payment under the IA (Henry “the immediate statutory obligation” liquidated and ascertained Boot Construction Ltd v Alstom is to pay the sum stated as due damages (LADs) in accordance Combined Cycles Ltd). and comply with the s.111 regime. with the contract. However, the Act also allows for the • That the distinction between “the true valuation of work done under the The Court of Appeal decided that the sum due” and “the sum stated as s.108 regime when the immediate Pay Less Notice was valid and the due” (which is the language of the obligation to pay up has been LADs had been validly deducted. s.111 payment scheme prior to its complied with.

M Davenport Builders Ltd v Greer and another [2019] EWHC 318 (TCC)

The judgment in Grove saw its first smash and grab adjudication award. decision in a true value adjudication. application in this case. The claim The court held that the defendants was brought against the defendants were obliged to pay the sum specified There remains confusion about the for summary judgement to enforce an in the first adjudication award, despite timing of the ‘true value’ adjudication. adjudication decision awarding the the result of the second adjudication. While reaffirming that Grove was “clear claimant £106,160.84 plus interest. and unequivocal” that the employer The claimant had commenced Stuart-Smith J reconfirmed the must make payment before it can a successful smash and grab principle that before commencing a commence a ‘true value’ adjudication, adjudication. The defendant refused true value adjudication “the employer by applying Harding v Paice [2015] to pay and commenced a true value must make payment in accordance EWCA Civ 1231, Stuart Smith J held adjudication. This second adjudication with the contract or in accordance with “that does not mean that the court will found that no sum was payable by the section 111 of the Amended Act.” It always restrain the commencement or defendants to the claimant. was held that it should now be deemed progress of a true value adjudication established that an employer must commenced before the employer has The question in issue was whether discharge an order of an adjudicator discharged his immediate obligation.” a true value adjudication can be for immediate payment, based upon its Unfortunately, it is by no means clear commenced and/or relied upon failure to serve either a Payment Notice when and in what circumstances the without immediate payment having or a Pay Less Notice, before they will court would restrain a subsequent been made in respect of a prior be able to rely upon a subsequent ‘true value’ adjudication.

Construction Law Review 2018/2019 03 LIQUIDATED AND ASCERTAINED DAMAGES (LADS)

Triple Point Technology Inc v PTT Public Company Ltd [2019] EWCA Civ 230

This case highlighted the issue of The clause consequently had ‘no application’ owing LADs in relation to non-completion to the contractor’s failure to hand over completed of works. The court identified work. The court therefore decided that PTT lost three ways of dealing with a LADs the right to claim LADs in respect of incomplete clause in instances where a second work and was instead required to prove its contractor is appointed due to the case for general damages. first’s failure to complete the works: This is a particularly important point 1) As in the century-old case of considering the fact that most standard British Glanzstoff Manufacturing form construction contracts are Co. Ltd v General Accident, Fire drafted in this manner. Triple Point and Life Assurance Co. Ltd 1913 therefore serves as a reminder SC (HL) 1, the clause does not regarding the need for clarity apply. when drafting LADs clauses and a requirement to ensure that 2) As has been the approach in amendments to standard a string of more recent cases, form contracts adequately the clause applies up until address this issue. termination of the first contract.

3) The clause applies until completion of the works by the second contractor.

The court ruled that what happens in the event of non-completion is entirely dependent on the wording of the LADs clause. In Triple Point, as was the case in British Glanzstoff, the clause was concerned with the delay between the completion date in the contract and the date of actual completion.

Construction Law Review 2018/2019 04 COLLATERAL WARRANTIES

Swansea Stadium Management Company Ltd v City & County of Swansea and another [2018] EWHC 2192 (TCC)

The second defendant, Interserve, brought a claim against Swansea This decision: Stadium Management Company Ltd (SSMC) in respect of striking out part of SSMC’s claim on the basis that it had no real prospect • Re-emphasises that a cause of of success, alternatively on the basis that the limitation period for action for contractual breach that part of the claim had expired. arises at completion date in respect of obligations to carry The works commenced in September 2003 and the date of practical out and complete construction st completion was 31 March 2005. Afterwards, the first defendant works, as distinct from further granted SSMC a 50 year lease. Although the collateral warranty breaches that might occur for between the two defendants and the claimant was undated, it failure to rectify defects during had been sealed and delivered by Interserve in April 2005. the defects liability period.

SSMC brought a claim in April 2017 for defective works against both • Confirms that collateral defendants. SSMC alleged Interserve had breached its collateral warranties can have warranty as the works were defective and they had failed to rectify retrospective application. the defects. This depends upon the parties’ intentions within In its defence, Interserve argued that the original claim was the contract. time-barred. The warranty was executed in April 2005, running with retrospective effect from the date of practical completion. • Suggests that the commercial As the claim was filed in April 2017, the 12 year limitation purpose of a “no greater period had lapsed. liability” clause is to put the beneficiary in the same O’Farrell J held that the parties intended the collateral warranty position as if it were a joint to be read with retrospective effect. The document itself and the employer under the main factual context indicated this because: building contract.

• The purpose of the collateral warranty was to provide a direct right of action between SSMC and Interserve;

• The collateral warranty explains that SSMC’s interest was to ensure that Interserve performed the obligations contained in the building contract;

• Clause 1 of the collateral warranty provided that the direct warranties are in respect of the performance of Interserve’s obligations contained in the building contract. This means the warranty covers the full scope of the contract’s works period, regardless of when it is executed, as the obligation to execute a collateral warranty found in Article 10 of the contract did not contain a time limit; and

• Article 10 also stated liability would be no greater than if SSMC had been named as a joint employer under the building contract.

The court also recognised that as a cause of action in a construction case arises on the date of practical completion, Interserve’s breach of the collateral warranty occurred on 31st March 2005. Consequently, there was no real prospect of success for this particular head of SSMC’s claim and the court could think of no other compelling reason why this claim should go to trial. O’Farrell J therefore struck out SSMC’s original claim due to it being statute barred as of 31st March 2017.

Construction Law Review 2018/2019 05 British Overseas Bank Nominees Ltd and Others v Stewart Milne Group Ltd [2019] CSIH 47

This case, in which the Inner House of completion). The judge at first On appeal, however, the principle of the Court of Session brought Scottish instance, however, ruled that BOBN’s “equivalence” was used to overturn law into closer alignment with the right to claim under the warranty had the initial decision and eradicate English position, involved retail units only begun on the date the warranty inconsistencies between the two and a car park built by Stewart Milne was entered into and, as such, BOBN’s jurisdictions. The court stated that a (SM) in 2009. When the development claim had in fact been brought in time. collateral warranty was intended to was sold to British Overseas Bank put the beneficiary in an equivalent Nominees (BOBN) in 2013, SM This judgment bemused position to the employer under entered into a collateral warranty with commentators because it seemed the original contract. As such, the the new owner. Just under five years to directly contradict the ruling in beneficiary should be subject to later, BOBN brought a claim against Swansea Stadium (discussed above). the same limitations as the original SM under the warranty alleging that Whereas in Swansea Stadium the employer, meaning the prescriptive flooding in the car park had been court ruled that a “no greater liability” period under the contract was caused by defective design and clause bound the parties to the applicable. construction. limitation period under the contract, the Scottish judge refuted the contractual Following this secondary judgement, SM argued that the “prescriptive significance of a similar clause, instead Scottish law and English law are period” (the Scottish equivalent of ruling that the prescription period broadly aligned in respect of how no the limitation period) had ended in began on the date that the collateral greater liability clauses in collateral June 2014 (five years after practical warranty was entered into. warranties work.

New York Laser Clinic Ltd v Naturastudios Ltd [2019] EWHC 2892 (QB)

In New York Laser Clinic, a case Rather, the warranty in this case was Cavanagh J awarded damages for involving the hire purchase of laser ‘tripartite’, meaning it was given to the claimant which, importantly, hair removal machines, Cavanagh J a third party to induce another party included damages for loss of considered the award of damages to enter into the main contract. The profits. Whether or not such for loss of profits for breach of a court listed the requirements for a damages could be awarded collateral warranty. claim in a tripartite case as follows: was previously unclear.

The defendant – a vendor of the • The warranty (i.e. a statement) aforementioned machines – made was given to a third party by one various representations in respect of the parties to the main contract, of the quality of the lasers in an in advance of the main contract attempt to sell them to the claimant. being entered into; Relying on these representations, the • The warranty was not a mere claimant bought the machines from representation but was intended a third party hire company. When the to have contractual force; claimant discovered that the lasers • The third party provided were defective, they brought a claim consideration to the party for breach of collateral warranty as which gave the warranty; they were not party to a contract • In reliance upon the warranty, the with the defendant. third party caused another party to enter into the main contract with The collateral warranty in New York the party who gave the warranty; Laser Clinic was not identical to • The warranty was inaccurate; those warranties most frequently • The third party suffered financial found appended to construction loss as a result; and contracts, for instance those used • There are no relevant exclusion in the cases discussed above. clauses.

Construction Law Review 2018/2019 06 PRACTICAL COMPLETION

University of Warwick v Balfour Beatty Group [2018] EWHC 3230 (TCC)

The claimant contracted the The TCC disagreed and made a declaration defendant to design and construct that the adjudicator’s decision was wrong. the National Automotive Innovation They followed the principles of contract Centre. The works were split into interpretation from Chartbrook Ltd v 4 sections, with dates for sectional Persimmon Homes Ltd; the approach completion. The claimant was entitled taken should be to “identify the intention to recover LADs when Practical of the parties” at the time that the Completion was not achieved, as contract was entered into. This occurred here. In a subsequent should be done using commercial adjudication, the defendant argued common sense, such that “a that only completion of the works reasonable person having all the as a whole constituted Practical background knowledge which Completion of the contract as the would have been available definition of the same was “a stage to the parties would have of completeness of the Works or a understood them to be Section which allows the Property using the language in the to be occupied or used.” This contract to mean.” The definition was uncertain because court concluded this “Property” itself was defined as “the illustrated the parties property comprised of the completed intended to operate Works.” If there could be no with sectional sectional completion, then the LADs completion. provision relating to each section was inoperable, because it was not possible to separately achieve Practical Completion of a section prior to Practical Completion of the whole of the Works.

The adjudicator agreed that Practical Completion could not be sectional because the only time that the Centre could be occupied and used was when all 4 sections had achieved Practical Completion.

Construction Law Review 2018/2019 07 ADJUDICATION

1) Insolvency

Bresco Electrical Services Ltd v Lonsdale [2019] EWCA Civ 27

In 2014, Lonsdale subcontracted At the Court of Appeal, Lonsdale that one of the few cases where some electrical works to conceded that Bresco would the courts will decline to enforce Bresco. However, by March have been entitled to bring an adjudicator’s decision is where 2015 Bresco had entered their adjudication claim in court the responding party had no liquidation and, some three proceedings, and the court chance of getting its money back, years later, Bresco’s liquidator decided that if a court could even if it was subsequently proved started an adjudication against hear a claim from a company in right in a second adjudication Lonsdale, claiming some liquidation, then an adjudicator or in court, because that money £220,000. Lonsdale sought an must be able to as well. would have disappeared into injunction at court to prevent the liquidation. the adjudication going ahead However, although a company in and this was granted. Bresco liquidation could, in theory, start The Court of Appeal held that then appealed against the a claim in adjudication, it was not doing so would be an “exercise injunction, arguing that a clear what good it would do them. in futility” and the injunction company in liquidation still Lonsdale had a clear counterclaim, preventing the adjudication had the right to adjudicate. and it has long been established was upheld.

Meadowside Building Developments Ltd (In Liquidation) v 12-18 Hill Street Management Co Ltd [2019] EWHC 2651 (TCC)

This case considered the To address the concerns raised • Satisfactory security is provided possibility of exception to the in Bresco, the agency offered to both in respect of any sum rule in Bresco. The claimant ring-fence the adjudication award awarded in the adjudication undertook various internal and and to guarantee any liability and in respect of any adverse external repair works for the the claimant might incur to the costs order made against the defendant under a JCT MW 2011 defendant in the event that it did insolvent company; Contract, which was subject to not succeed in the enforcement • It will be a question of fact various disputes. proceedings. The defendant what “satisfactory security” is, disputed the adequacy of but it may involve a liquidator The claimant then underwent that guarantee. undertaking to ring-fence the a voluntary winding up and adjudication sum so that it liquidators appointed an agency Mr Adam Constable QC said a cannot be distributed, a third to pursue sums alleged to case “is likely to be an exception” party providing a guarantee be owed to the claimant by to the rule in Bresco where four or bond or after the event way of set-off under the final factors are satisfied: (ATE) insurance; and account. The agency operated • Any funding agreement by funding the recovery of • The adjudication deals with or security put in place is sums owed to the claimant in a final net position between not an abuse of process. return for a percentage of the the parties under the relevant sum recovered. The defendant contract (i.e. mirroring rule Here, the claimant failed instead claimed to a creditor 14.25 of the Insolvency to convince the court it held under the final account. In (England and Wales) Rules satisfactory security as it failed the adjudication, the claimant 2016 (SI 2016/1024)). This to disclose the exact nature was awarded a net balance effectively excludes “smash and structure of its funding of £26,629. and grab” adjudications; arrangement.

Construction Law Review 2018/2019 08 Cannon Corporate Ltd v Primus Build Ltd [2019] EWCA Civ 27

This case was heard together (“CVA”), in part as a result of similar arguments to those used with Bresco as part of a conjoined Cannon’s failure to pay the in Bresco. appeal. Cannon had employed adjudication awards. Primus to design and build a hotel. As in Bresco, the court found that The contract was subject to various The CVA was intended to allow an adjudicator did have jurisdiction disputes and Cannon tried to Primus to trade its way out of its to decide a claim brought by a terminate the contract and throw problems rather than falling into company in a CVA, but here the Primus off the site. liquidation, and under the CVA it court found that the adjudication aimed to pay its creditors all they decision should be enforced, both Adjudications followed, in which were due, rather than the virtually because a significant cause of Cannon was found to have nothing that they would receive Primus’ problems was Cannon’s repudiated the contract and was in the event of a liquidation. repudiation of the contract and ordered to pay Primus around failure to pay the adjudication £2.1m. In the middle of these Primus sought enforcement of the awards, and also because under adjudications, Primus entered a adjudication decisions at court, a CVA (unlike with a liquidation) company voluntary arrangement and Cannon appealed, running a company continued trading.

Granada Architectural Glazing Ltd v RGB P&C Ltd [2019] EWHC 3296 (TCC)

The court enforced an applicant is unable from any Granada was balance sheet adjudicator’s decision and reason to pay the money.” They insolvent at the contract declined to grant a stay of are generally ordered in limited and supported by inter- execution as being balance circumstances and the principles company loans, a position sheet insolvent was not a to apply come from Wimbledon not changed by the time of basis for such a stay under the Construction Co 2000 Ltd v Vago the adjudication enforcement Wimbledon v Vago principles. [2005] EWHC 1086 (TCC). A proceedings. Despite viewing key consideration is whether the Granada as likely to fail to A stay can be granted under claimant’s position “is the same repay RGB, their financial CPR 83.7(4) if there are “special or similar to its financial position position was “materially circumstances which render at the time the relevant contract similar” to when the contract it inexpedient to enforce the was made.” If so, a stay would was made and therefore judgment or order” or “the not usually be justified. a stay was refused.

2) Dispute Crystalisation

LJH Paving Ltd v Meeres Civil Engineering Ltd [2019] EWHC 2601 (TCC)

Adam Constable QC, acting 1) As highlighted by Meeres’ 3) Meeres’ failure to raise the as a deputy High Court judge, requests for specific multiple contracts point as a heard an application by LJH, the information, the claim was not substantive defence – they sub-sub-contractor, to enforce nebulous or ill-defined. Meeres raised it as a jurisdictional four adjudicator’s decisions. evidently understood the scope defence – meant that it did Meeres, the sub-contractor, of the claim, meaning that not pass to Adam Constable only disputed one of the four there was “unarguably a clear QC’s jurisdiction. Only the decisions, relating to a final dispute between the parties.” adjudicator was able to rule account dispute, arguing that 2) Meeres’ failure to raise the on this point. the dispute had not crystallised crystallisation point as a and the decision regarded jurisdictional defence during This ruling provides a further multiple contracts. The court the course of the adjudication reminder to parties to set their rejected these arguments meant that they could not do position in a clear, timely and on three grounds: so at the enforcement stage. appropriate fashion.

Construction Law Review 2018/2019 09 3) Errors

Corebuild Ltd v Cleaver and another [2019] EWHC 2170 (TCC)

The claimant undertook building the following principles from e) It is only if the adjudicator goes works to a residential property Cantillon Ltd v Urvasco Ltd off on a frolic of his own, i.e. under a contract which was concerning an adjudicator’s wishing to decide a factual or terminated by the defendant. alleged breach of natural justice: legal basis that has not been The claimant commenced a argued by either side, that the successful adjudication, claiming a) It must be established that breach of natural justice would that the contract was incorrectly the adjudicator breached the put the adjudicator’s decision terminated and the defendant principles of natural justice; in doubt. was therefore in repudiatory breach. The defendant refused to b) Any breach must be material; It was held that the adjudicator pay the award and the claimant had breached natural justice in sought summary judgment of c) Breaches will be material determining his decision on a enforcement proceedings. if the adjudicator has failed point not argued by the claimant to bring a decisive point, or or canvassed by the adjudicator The defendant argued that the one of potential considerable and summary judgment was adjudicator had breached the importance, to the attention refused. Mr Constable did principles of natural justice in of the parties; not, however, agree that the reaching his decision, namely adjudicator had asked himself that he asked himself the wrong d) Whether the point is decisive the wrong questions as he had questions and considered points or of potential importance is a generally endeavoured to ask not canvassed by either party. Mr question that must be judged questions that were central to Adam Constable QC considered on a case-by-case basis; and the matter in question.

Willow Corp Sarl v MTD Contractors Ltd [2019] EWHC 1591 (TCC)

The claimant subcontracted the claimant’s argument that there or difference will not undermine defendant for works relating to had been significant breaches the validity and enforceability the design and build of a hotel. of natural justice, meaning the of the other parts. Time for completion overran adjudicator’s decision was d) The same in logic must apply significantly, and the parties only partially incorrect. to the case where there is entered into a side agreement to a non-compliance with the help retain the hotel’s opening The question then arose as rules of natural justice which date. Practical Completion was to whether the adjudicator’s only affects one dispute or certified after the opening date decision could be severed. In difference. and the defendant claimed determining this point, Peperall e) There is a proviso that, if additional sums as part of the J set out the principles from the decision is simply not final account. The claimant Cantillon Ltd v. Urvasco Ltd: severable in practice, or if refused, claiming there were the breach of the rules of significant defects and that it a) Whether in fact or in effect natural justice is so severe was instead entitled to liquidated there is in substance only one or all-pervading, the decision damages. The defendant brought dispute or two and what any will not be enforced. a successful adjudication as the such dispute comprises. f) In all cases where there is a adjudicator found that the side b) The adjudicator will have to decision on one dispute or agreement had amended the resolve all referred disputes difference, and the adjudicator contractual provisions of Practical and differences. If there is acts, materially, in excess of Completion to the benefit of objection, the adjudicator can jurisdiction or in breach of the defendant. The claimant only proceed with resolving natural justice, the court will commenced Part 8 proceedings more than one dispute or not enforce the decision. and sought a declaration difference if the contract confirming a different permits him to do so. Peperall J held that the contractual interpretation. c) If the decision properly adjudicator’s decision only addresses more than one affected the issue of liquidated Peperall J held that the dispute or difference, a damages so this part of the adjudicator’s interpretation successful challenge on that decision could be severed from of the contract was incorrect. part of the decision which the rest of the decision, which However, he rejected the deals with one such dispute was upheld.

Construction Law Review 2018/2019 10 PAYMENT

Bennett (Construction) Limited v CIMC MBS Limited (formerly Verbus Systems Limited) [2019] EWCA Civ 1515

In a contract relating to the declaration that two of the five rather than its entirety. He noted design, supply and installation of Milestone payments were contrary that the Act’s intention, in relation to prefabricated bedroom units for a to the requirements of s.110(a) of the payment, was to provide minimum hotel, standard form JCT payment Construction Act. At first instance, it mandatory standards to achieve provisions were deleted and replaced was held that the Milestone payments certainty and regular cash flow. Bar five “Milestone payments”, to be in question were not compliant with exceptional circumstances, it was not triggered by certain contractual the Act and that all five of them intended to delete a workable and events. Following a dispute about should be deleted entirely. agreed payment regime. Exceptional alleged defects in the units, there circumstances would be when the was an adjudication about the The Court of Appeal agreed that the agreed regime was so deficient in validity of the Milestone payments two Milestone payments were not part that wholesale replacement which was decided in Bennett’s compliant. However, Coulson LJ was the only viable solution. This favour. CIMC consequently began held that the Act’s payment scheme was not the case here and the Part 8 proceedings, seeking a needed only to be partially implied appeal was allowed.

Amey LG Ltd v Aggregate Industries UK Ltd [2019] EWHC 3488 (TCC)

The court granted two declarations • The parties’ conduct had prevented He also refused a declaration that concerning the deadline for the contractor from invoking the the subcontractor could only open submitting a final statement under a original subcontract during the up, review or revise any interim subcontract and the subcontractor’s additional works; and applications once, to determine right to refer interim payment disputes their “true value.” Whether a to adjudication. • The estoppel ended when the dispute could be referred additional works did, allowing the to adjudication depended The subcontract provided that contractor to rely on the original on the referral and it the subcontractor issued its final subcontractor’s obligation to was a matter for statement to the contractor within submit a final statement within the adjudicator. one month following completion. The one month of completion. subcontractor eventually undertook additional works despite refusing He granted declarations that the to agree to a variation agreement. subcontractor was obliged to submit A dispute arose about the amount its final statement and that it could payable to the subcontractor. not make any further interim payment applications at this stage. He did The judge held that there was no not grant a declaration that the valid variation or agreement of a subcontractor remained in breach as new subcontract. On the facts, the the subcontract made no provision scenario was akin to an estoppel for failing to submit a final statement and therefore: within one month of completion.

Construction Law Review 2018/2019 11 CONCURRENT DELAY

North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744

Here, the court was asked to As is par for the course in construction projects, delay consider whether a clause dealing occurred, precipitating an extension of time claim with concurrent delay offended from North Midland. Cyden Homes – mindful of the prevention principle. The court the aforementioned clause – refused to grant ruled in the negative, thus giving the an extension of time anywhere near the length green light to contracting parties to requested by North Midland, arguing that the include clauses allocating the risk delay for which they were responsible was of concurrent delay. concurrent to delay caused by the Contractor.

Cyden Homes employed North North Midland brought a claim against Midland under the JCT D&B 2005 Cyden Homes asking the court to standard form contract. The parties consider whether the concurrent agreed various amendments to the delay clause offended the prevention standard form, including clause principle, arguing that, if it did, time 2.25.1.3: ought to have been at large.

“(b) any delay caused by a Relevant Both the TCC and the Court Event which is concurrent with of Appeal reached the another delay for which the same verdict in relation to Contractor is responsible shall this question; parties to not be taken into account;” construction contracts can include clauses One such Relevant Event was an allocating the risk of act of prevention by the Employer, concurrent delay. meaning that the Contractor would not be able to claim an extension of time in the event of concurrent delay.

Construction Law Review 2018/2019 12 RELATIONAL CONTRACTS AND ‘GOOD FAITH’

Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264

In issue was a private finance obligations extended to the road to be of considerable length and initiative contract for the network as a whole, details of contain “many infelicities and rehabilitation, maintenance, which had to reflect the actual oddities.” If so, the parties should management and operation of extent and state of the network. adopt a reasonable approach; in Birmingham’s road network for Amey successfully sought a accordance with the contract’s a 25 year period. The Council declaration from the court that long-term purpose and not became aware that some roads the adjudicator’s decision was seek to disrupt the project to had been left unrepaired as wrong. maximise gains. As the contract Amey believed its contractual was of that nature, and Amey’s obligations extended only to Central to the Court of Appeal’s contract interpretation disrupted those roads in a database consideration was whether the the project to maximise its gains, provided by the Council. 60% contract was a relational one and the court held that there was a of that database was based therefore there was an implied relational contract and that Amey on hypothetical details. An duty on the parties to act in good had not acted in accordance with adjudicator decided in favour faith. Jackson LJ held that a its long-term purpose. The appeal of the Council that Amey’s relational contract was likely was accordingly allowed.

Bates v Post Office Ltd (No.3) [2019] EWHC 606 (QB)

550 claimants had been and consequently whether there another, but of a different contracted under the Post Office’s was an implied duty of good faith: kind to that involved in standard terms as, by and large, fiduciary relationships. subpostmasters. The Post Office 1 There must be no specific introduced a new accounting express terms preventing 7 The contract in question system in 2000, which the a duty of good faith being will involve a high degree claimants claimed had significant implied. of communication, co- defects that caused significant operation and predictable 2 The contract will be a long- performance based on accounting discrepancies. term one, with the mutual Under the standard terms, the mutual trust and confidence, intention of a long-term and expectations of loyalty. subpostmaster was fully liable for relationship. any loss however incurred and There may be a degree of The parties must intend that 8 any shortfall had to be paid by 3 significant investment by their roles be performed with them in full. These terms were one party (or both) in the integrity with fidelity to their firmly enforced by the Post Office. venture. Some claimants had disputed bargain. this and their contracts were Exclusivity of the relationship 4 The parties are committed 9 subsequently terminated and to collaboration in the may also be present. indeed others were prosecuted contract’s performance. and convicted. Fraser J determined the contract The spirits and objectives 5 with the subpostmaster was a of their venture may not be Fraser J held that the following relational one and therefore there capable of being expressed were potentially relevant factors was an implied duty of good faith. exhaustively in a written in determining whether there He also held that this implied contract. was a relational contract (he duty extended beyond merely emphasised that this was not to 6 They will each repose trust not acting dishonestly and found be considered an exhaustive list) and confidence in one in favour of the claimants.

Construction Law Review 2018/2019 13 MEANING OF ‘DEFAULT’

Network Rail Infrastructure Ltd v ABC Electrification Ltd [2019] EWHC 1769 (TCC)

Network Rail was granted amended the Disallowed Cost The court concluded that: declarations regarding the meaning to include sums arising from of “default” in one of its standard the contractor’s ‘default’. • Clause headings were irrelevant amendments to the ICE Conditions because the contract expressly of Contract, Target Cost version, Network Rail sought to exclude excluded them as interpretative aids; first edition. £13 million from the Total Cost on • The NR12 amendments might that basis. It argued that “default” render some standard terms The contract provided that the meant any failure by the contractor redundant, but this was not amount payable to the contractor to comply with its obligations. The sufficient for preferring the was determined by taking the court agreed and rejected the contractor’s interpretation; and contractor’s Total Cost and contractor’s argument that default • The “target cost” nature of deducting the Disallowed Cost. required “wilful and deliberate” the contract did not affect the The amendments to the ICE breaches. approach to its interpretation.

VALUE “AT ANY TIME” CLAUSE

Everwarm Ltd v BN Rendering Ltd [2019] EWHC 3060 (TCC)

Everwarm engaged BN to perform The court did rule, however, that the insulation works under 38 separate clause contained “an implied term subcontracts. The relationship that any Assessment carried out between the parties was described pursuant to Clause 4.9 would not be by the court as “remarkably informal”, undertaken in an arbitrary, capricious typified by the oral nature of some or irrational manner.” Everwarm of the agreements. was deemed to have breached the implied term by virtue of their arbitrary The court’s main finding, however, method of valuation. relates to the written subcontracts entered into by the parties, in This case therefore established that particular in respect of clause 4.9: the power to value works “at any time whatsoever” was valid but subject to a significant safeguard. “…[Everwarm] may at any time whatsoever (including without limitation between Valuation Dates) make an assessment of the aggregate of the value of all work properly performed and all other sums properly incurred and/ or owing in relation to the Sub- Contract Works up to the selected assessment date…”

The purpose of clause 4.9 was therefore to allow Everwarm to assess the value of BN’s work and reclaim any money it had overpaid. Alexander Nissen QC, acting as a deputy High Court judge, accepted the legitimacy of this clause, in doing so rejecting BN’s claims that it offended the Housing Grants, Construction and Regeneration Act 1996 and the Unfair Contract Terms Act 1977.

Construction Law Review 2018/2019 14 ELECTRONIC SIGNATURES AND ACCEPTANCE

Neocleous & Anor v Rees [2019] EWHC 2462

The claimant sought a specific by way of a standard automated sender’s details had been included performance of an alleged contract email ‘signature’ containing his name, as a means of identifying the of compromise which involved a occupation, role and contact details. sender with the email’s contents. disposition of an interest in land. The defendant argued this was not • The email’s sender was aware that The defendant, accepting that adequate to render the document their name was being applied as the contract would otherwise be signed on within the meaning of a footer and the recipient had no enforceable, contended that the section 2(3) of the 1989 Act. reason to think its presence was alleged contract failed to comply with unknown to the sender. the formalities required by section 2 The court held that it was an • The use of the words “Many of the Law of Property (Miscellaneous adequate signature on the basis that: Thanks” showed an intention to Provisions) Act 1989 and therefore connect the name of the sender was not enforceable. • Its inclusion in the email resulted with the email’s contents. from a conscious decision to insert • The name and contact details The alleged contract was contained its contents, albeit resulting from an were in the conventional style in a string of emails, ‘signed’ by the automatic process. The recipient of a signature, at the end solicitor on behalf of the defendant would therefore conclude that the of the document.

RELEASE OF FUNDS UNDER A JOINT VENTURE AGREEMENT (JVA)

Doosan Enpure Limited v Interserve Construction Limited [2019] EWHC 2497

Doosan and Interserve entered The court granted summary into a JVA on a project under the judgment. Jefford J held that NEC3 Engineering and Construction Doosan’s interpretation was Contract (ECC), including Option supported by the specific wording C (Target contract with activity of the JVA and that Interserve’s schedule). During the contract, interpretation was contrary to the both parties submitted consolidated main contract, which assessed pain/ interim payment applications for gain share at the project’s end. payment, which set out their costs The court granted declarations that separately. Interim payments went Interserve had breached the JVA into the JVA account. There was no and that Doosan was entitled to the assessment of the ‘pain/gain share’ release of those withheld funds. under Option C made in these interim applications.

During the contract, Interserve refused to release funds from the JVA account on the basis that Doosan would fail to meet its target costs. Doosan sought summary judgment to release funds by arguing that the JVA did not allow that kind of suspension of payment. Interserve argued, among other things, that the JVA required consideration of the ‘pain/gain share’ in each interim payment.

Construction Law Review 2018/2019 15 UPDATES

Low-value Adjudication Scheme

In June last year, TeCSA launched is designed to encourage parties to £2,000 (plus VAT) (for disputes up a low value disputes adjudication commence adjudication proceedings, to £10,000) to £5,000 (plus VAT) (for service pilot for disputes up to who otherwise may not because of the disputes between £75,001-£100,000). £100,000 (excluding VAT and interest). often considerable associated costs. The pilot concluded in November and The scheme only applies to claims TeCSA has since decided to make the For claims under the scheme where a specified sum has been scheme a permanent offering (as of adjudicators’ fees and expenses quantified, not ones where the the 1st of January 2020). The scheme are capped on a sliding scale, from amount of a claim is to be assessed.

VAT Reverse Charge

The much-anticipated introduction prepared for its introduction. the supplier charges and accounts for of the VAT reverse charge for the VAT is modified so that the recipient construction industry has been VAT reverse charge is designed to accounts for it instead. HMRC has delayed until October 2020. eliminate “missing trader” fraud from published detailed guidance on its This was owing to fears that the construction industry. Under the operation and the various exclusions the industry was not sufficiently reverse charge, the normal rule that and exceptions to the rule.

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