KC LEGAL UPDATE

Summer 2020

In this issue...

“It’s Complicated” Deciphering the English Government’s Response to SARS-COV-2 and its Impact on Contracts By Sean Wilken QC

Group Loyalty A Company v X and Others By Jennie Wild

Coronavirus, Adjudication and Injunctions By James Frampton WELCOME to the Summer 2020 Edition of KC LEGAL UPDATE

CONTENTS

“It’s Complicated”: Deciphering the 04 English Government’s Response to Sars- Cov-2 and its Impact on Contracts By Sean Wilken QC

A Critical Look at Broseley London v Prime 10 Asset: Would Permitting a Final Account Much has changed since the last edition As our families adapted to home schooling, no travel unless Adjudication have been a “Remarkable essential and one daily outing for exercise; on the work front Intrusion” of KC Legal Update (Winter 2019/20). Technology and Construction Court hearings and arbitrations By Harry Smith turned into remote hearings and applications, with new rules, We have adapted to remote hearings, protocols and guidance being rapidly drawn up by the courts and institutional bodies. We got to grips with Teams, Zoom, BlueJeans, Keating Cases home working, virtual meetings Skype and Starleaf (amongst others). 14 A selection of reported cases involving members of Keating Chambers and live webinars. The speed of the A need for social connection has remained. A Keating Strava running group was set up which incorporated several of our Group Loyalty – A Company v X transformation is something that none children when we were restricted to exercising once a day. We and Others of us could have imagined just a few have had virtual chambers drinks and ‘lunch’. An internal social 16 networking site was set up. We have walked 10,000 Steps for Justice By Jennie Wild months ago. (separately this year) for the London Legal Support Trust and ran 2.6km each to make up the 26 miles of the cancelled London Coronavirus, Adjudication and Injunctions Keating Chambers, in common with all organisations in the UK Marathon for ‘Kids Out’ and Oxfam. 20 By James Frampton and internationally, had to respond rapidly to the changes required Many of our barristers have now done live webinars from their back in March of this year. The impact was being felt even before Whose Risk is it Anyway? Performance homes with audiences in the hundreds, some have sat as Deputy then, particularly through the work and clients we have around the High Court Judges, arbitrators and mediators from their studies. 22 Security Revisited world and as we tried to respond responsibly. We have fully embraced digital marketing and learnt to hold virtual By Sean Wilken QC In March, our chambers moved all staff to working from home catch ups with our clients so we can stay in touch. We are adapting in line with government guidance. We sent a letter to our clients our building for those who need to work in it to respond to in person Brief Encounters explaining our move to working on a fully remote basis and how hearings as physical courts continue to re-open. 25 By John McMillan we could all stay in touch and continue to operate. Unprecedented We have produced this Summer edition of KC Legal Update in very times. different circumstances to the last edition.

We hope you and your families are well and safe and have been able to adapt as we will keep doing.

– 2 – – 3 – “IT’S COMPLICATED”: “Trying to advise parties DECIPHERING THE ENGLISH to a contract, one has the GOVERNMENT’S RESPONSE immediate problem, that the law is not clearly accessible” TO SARS-COV-2 AND ITS IMPACT ON CONTRACTS¹ By Sean Wilken QC

On 11 May 2020, the Government issued eight items of Covid-Secure guidance The English² Government’s response to for particular sectors11 including the construction industry.12 These pieces of SARS-CoV-2 is legally and factually complicated. guidance emphasise two things. First, that the reaction to SARS-CoV-2 is to be one of employers making their own assessments In this article I try to unpack the elements of it of risk. Two, based on that assessment, Then on 10 May 2020, the position there are no hard actions, other than the and then attempt to see how those elements may changed again. Via a speech not given assessment, that must be taken. There are to Parliament and not in guidance or instead a series of possible actions that impact on the contracts that people may have. regulation or legislation, a new approach might be considered or “might be needed”. was announced. This speech was the new foundation of the Government’s position – On 12 May 2020, the Government amended indeed if on 11 May 2020 one accessed the the Regulations using emergency powers Government portal on SARS-CoV-2 one was to permit people to leave the house told that the current position was as set out indefinitely for exercise, to visit parks, in the speech. outdoor sports areas and garden centres.

On the back of that, four new pieces At the same time as the Government of guidance emerged: the “Our Plan to was introducing and amending the Rebuild”;7 the “Staying Alert”;8 the “Staying Regulations, the devolved administrations Safe”;9 and the “FAQs”.10 There is no attempt were also introducing and amending their to link these pieces of guidance back to regulations – in rather different ways. In so doing, there are (currently) four elements: The Act4 revoked SI 2020/129. In so doing and despite Throughout this period the Government either the Act or the Regulations. Further, Thus, in Scotland, construction sites were • The Coronavirus Act 2020 (“the Act”); that revocation, the Act grandfathered the previous was also releasing various items of the speech and Our Plan to Rebuild referred “locked down” from the outset but not in declaration made in and by those regulations (SI guidance as well as stating its policy to further additional guidance – Covid- England. As time has progressed, however, • Various regulations; 2020/129) as if it were made under the Act.5 So far, this is position – as it altered – in relation to Secure guidance which would apply to the differences between Scotland, Wales • Numerous items of guidance; and perfectly orthodox and consistent with the Government’s SARS-CoV-2. The only legislation in play, various work-places. and Northern Ireland and England have • Political statements. response to SARS-CoV-2 being within the four walls of however, remained the Regulations. become more stark. As at time of writing, the Act. Then, after the new pieces of Guidance Scotland, Wales and Northern Ireland Together, I call this the “quadripartite approach” or “the That remained the position until 7 May were issued, a speech was given (this time maintain the position as it had been in puzzle”. In this article I focus solely on the contractual Yet, on the same day as the Act came into force revoking 2020. Then, the Government issued to Parliament) which may or may not be a England before 10 May 2020 and their aspects, I do not seek to address in detail any public law those regulations (SI 2020/129), the Government further guidance: Guidance on responsible source of new alleged obligations. regulations therefore significantly diverge arguments as to the overall validity of the puzzle. introduced the Health Protection (Coronavirus, contractual behaviour in the performance from those applicable in England.13 Restrictions) (England) Regulations 2020 (SI 2020/350) and enforcement of contracts impacted by The Pieces of the Puzzle (“the Regulations”). The Regulations were not, however, the Covid-19 emergency.6 introduced under the Act but under sections 45C(1), (3) Before the Coronavirus Act (“the Act”) came into force, (c), (4)(d), 45F(2) and 45P of the Public Health (Control of the Government’s response to SARS-CoV-2 was set out Disease) Act 1984. in The Health Protection (Coronavirus) Regulations 2020 (SI 2020/129). The Act in the main came into force on 25 March 20203 which is, of course, after the “lockdown” had been announced as a matter of policy. 6 Currently at this locale but that may obviously change:vhttps://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/883737/_Covid-19_and_ Responsible_Contractual_Behaviour__web_final___7_May_.pdf. 7 https://www.gov.uk/government/publications/our-plan-to-rebuild-the-uk-governments-covid-19-recovery-strategy. 8 https://www.gov.uk/government/publications/staying-alert-and-safe-social-distancing/staying-alert-and-safe-social-distancing. 1 This article has benefitted from discussions with Tom de la Mare QC at Blackstone Chambers. Any mistakes are obviously my own. 9 https://www.gov.uk/government/publications/staying-safe-outside-your-home/staying-safe-outside-your-home. 2 Reaction to the coronavirus is a health question devolved to the Welsh; Scottish and Northern Irish administrations – a fact which has become increasingly important. For ease, where 10 https://www.gov.uk/government/publications/coronavirus-outbreak-faqs-what-you-can-and-cant-do/coronavirus-outbreak-faqs-what-you-can-and-cant-do. I refer to the Government in this article, I mean the English Government. 11 All eight can be found here - https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19. Section 87(1). 3 12 https://assets.publishing.service.gov.uk/media/5eb961bfe90e070834b6675f/working-safely-during-covid-19-construction-outdoors-110520.pdf. Schedule 21 para 24(1). 4 13 For the extent of the divergence – see https://gov.wales/sites/default/files/publications/2020-05/the-health-protection-coronavirus-restrictions-wales-regulations-2020-as- 5 See Sch 21 para 24(2). amended.pdf.

– 4 – – 5 – would be contrary to Reg 6(1). It would by the Regulations which impose criminal practicable”. Therefore, it would follow that therefore be an illegal contract – if entered sanction. To take one example, under Reg the Guidance is relevant to the operation of into after the Regulations came into effect 7: “no person may participate in a gathering the Regulation. If that is right, the Guidance – and would otherwise be frustrated (and/ in a public place of more than two people would be operable in two ways – offensively or if it contained a force majeure provision except… (b) where the gathering is essential (you have not instituted social distancing potentially caught by force majeure). So for work purposes”. Under Reg 8(1): “A at work and therefore there is a potential far, so clear. There is, however, a critical relevant person29 may take such action as offence) or defensively (I have instituted distinction between the Regulations and all is necessary to enforce any requirement social distancing at work and therefore versions of the Guidance. There is nothing imposed by regulation 4, 5 or 7”. Under Reg there is no potential offence). By either in the Regulations which imposes either 8(9): route, however, the Guidance is operating obligations or penalties in relation to social not as guidance but as an indicator of distancing.25 Yet that suggestion26 was Where a relevant person considers that criminality. That means the Guidance is a feature of all previous versions of the three or more people are gathered together operating as hard rather than soft law. Guidance up and until 10 May 2020. in contravention of regulation 7, the relevant person may— A similar conclusion can be reached via It is trite law that guidance, whilst relevant Thus, the question becomes what is the the Health and Safety at Work Act 1974. to the exercise of public law powers status of the Guidance? (a) direct the gathering to disperse; It is well established under section 3 that by public bodies, may have little or no an employer owes various obligations to effect on the purely private law of rights, Taking the guidance specifically issued (b) direct any person in the gathering to employees as to a safe system of work. If obligations and liability. Guidance does not, by Public Health England, this is issued return to the place where they are living; the Health and Safety Executive were to for example and absent particular wording, under section 2A(2)(f) of the National prosecute a failure to adopt the Guidance give one private party to a contract an Health Service Act 2006 which imposes (c) remove any person in the gathering to (as the HSE has indicated that it will),30 ability to sue the private other party.21 Under a statutory duty on the Secretary of State the place where they are living. that can only mean that the Guidance has The Puzzle First, as others have pointed out,19 there is the Act, however, regard must be had to the to issue advice on public health issues. operation as a hard principle of law relevant Under Reg 8(10), the relevant person may some doubt as to whether those sections of Guidance.22 By virtue of the Framework Agreement to section 3.31 If, as per traditional thinking, use force to support the exercise of the Reg Trying to advise parties to a contract, one the Public Health (Control of Disease) Act which underpins Public Health England, the Guidance is purely advisory, failure to 8(9) powers. Under Reg 8(11), the relevant has the immediate problem, that the law grant the requisite vires for the Regulations. Therefore, not locating the Guidance under the Secretary of State has delegated these comply could not found any enforcement. is not clearly accessible – there is no one the Act – irrespective of the terms of the functions to Public Health England.27 Thus person may also issue instructions. Finally, document, one can point to and say “do Second, the Government has chosen, Guidance itself – creates uncertainty. the Public Health for England Guidance is a breach of regulation constitutes an Thus, one gets to the position that the or do not do that which is said here”. In notwithstanding the vires issue, not to use statutory.28 On that basis, a public authority offence under Reg 9(1) – there also being Guidance is by appearance soft law but England alone,14 there are now the thirteen the obvious mechanisms in the Act (which If one then turns to the wording of the would have to have regard to it as a matter corporate liability under Reg 9(5). by operation (and not straightforwardly) items of guidance referred to above (“the it could have done having brought into Guidance itself, the extensive debate over of general public law and by operation of hard law. Therefore, the application of There are oddities in this wording – the Guidance”). place the appropriate mechanisms on that the exercise of police powers under the section 2B of the National Health Service the Guidance could well have private law use of “gathering” rather than assembly; day) but to use the more obscure Public Regulations and Guidance, has shown that Act and also by Schedule 21 para 21 of consequences – in the realm of frustration, 20 the fact that the gathering is “essential As and when one locates the various Health (Control of Disease) Act 1984. the previous iteration of the Guidance was the Act. Thus, a public authority would force majeure, contractual provisions and 23 for work purposes” as opposed to be for elements of the Guidance, one cannot then The rationale for so doing is unknown. unclear. That lack of clarity, at least in have to have regard to the need for social variation by necessity. “essential work purposes” both of which actually say which has precedence. No item terms of criminal liability, falls outwith the distancing. Can a private body, however, render compliance with the provision of guidance is said to be more important Third, the Regulations have been amended scope of this article. This article instead also rely on that need as against another The above would be difficult enough if more complicated. Further, that there is than the others. This is important as the twice. Both times using emergency powers. focuses on the impact of the puzzle on private body? If it could, then there would the Guidance now issued were consistent. 15 an exemption based on “essential for work Guidance is not consistent. Given the most recent amendment was commercial and construction law. be the concomitant potential to claim relief It is not. Thus, paragraph 1 of “Staying Safe” purposes” suggests that one can gather a relaxation of their requirements, it is from contractual obligations by relying on, states: to work. If that was not the case, there Then one has on top of that the difficult to see how the use of emergency As far as commercial law is concerned, as appropriate, frustration, force majeure, would be no need for exemption. Thus, any Regulations and the Act. There is no powers was justified. If that is correct, then the obvious issues arise in relation to contractual change of law provisions or Public Health England recommends trying enterprise with two or more people in one obvious interplay between the Guidance this would constitute a further ground for frustration; force majeure; the operation of even variation by necessity. to keep two metres away from people as a and the Regulations. The FAQs16 and challenging the validity of the Regulations. contract terms and variation by necessity. place would be caught. precaution. However, this is not a rule and Staying Alert make reference to the Common to all of them is what is the legal The orthodox view is that a private body the science is complex. The key thing is to This then moves to the next level of the Regulations, the other two items of Impact of the Puzzle effect of the quadripartite response? could not rely on the Guidance to alter not be too close to people for more than a problem. What is the relationship between guidance do not. In Staying Alert, the contractual relations as the Guidance is short period of time, as much as you can. 17 these provisions and the Guidance? It Regulations are both to be amended and As things currently stand, we are firmly in Here, the distinctions between the merely that – advice which the private 18 is possible that the Guidance is entirely apparently to have effect as is. the realm of guidance. Nothing has been Regulations and the Guidance become body can take or not take. Thus, if a private Further, as indicated above, the Covid- 24 irrelevant to the analysis of the Regulations. done under the Act and the Regulations important. The Regulations, to the extent body chose to follow the Guidance and secure guidance is very weakly worded. Thus, if one is “gathered”, there is potential If one then turns to the Regulations have not been amended to reflect the they are clear and lawful, would obviously as a result make either its performance of Thus, it is, from one perspective, difficult criminality irrespective of social distancing themselves, three points arise. Guidance in any detail. have legal force. Thus, a contract under its obligations more onerous or, perhaps, to see how any form of obligation is as per the Guidance. That, however, would which people agreed to leave the house impossible, that would be a choice imposed by it. Yet, the Government’s be contrary to the aim of the Guidance without possessing a reasonable excuse for the private body to make and the stance is that it will be checking whether – which is to allow working provided that consequences of that choice would be the Guidance is being complied with and people can still work at home or at a work that private body’s risk. On this orthodox action will be taken against those who site if there is social distancing “where approach, the Guidance is archetypal are not complying. 14 Again the position is different in Scotland, Wales and Northern Ireland. I am not sure if anyone has yet to consider how these different regimes can be operated where there are cross border commercial activities. soft law – there to advise as opposed to 15 For example, Cabinet Office does not, necessarily, accept the Public Health for England 2m rule – see para 1 of “Staying Safe”. determine obligations and penalty. 16 See para 1.2. The Guidance is not, however, standard 17 See the preamble. guidance, not least because it is backed 18 See paras 2 and 5. 19 See https://ukhumanrightsblog.com/2020/04/20/is-the-lockdown-lawful-an-overview-of-the-debate/ for a review of the conflicting views as to the legality of the Regulations themselves. 20 There is also the oddity that the government did not rely on the already existing Civil Contingencies Act 1984 which would have enabled all and each of the steps the government has taken but with a much more oversight and control of the breadth of governmental power. 21 If a party to the contract was a public body and possessed a discretion between a range of options, there would be an obvious argument guidance would at least inform the exercise of that discretion – under the implied term that the discretion would not be exercised arbitrarily; irrationally or capriciously (as to the implied term see Abu Dhabi National Tanker Co 25 Compare the position in Wales, where social distancing is in the Regulations and therefore is a legal obligation backed by penalties – see https://www.college.police.uk/What-we-do/ v Product Star Shipping Ltd (“the Product Star”) [1993] 1 Lloyd’s LR 397; Horkulak v Cantor Fitzgerald International [2004] EWCA Civ 1287; Socimer International Bank v Standard Bank COVID-19/understanding-the-law/Documents/Health-Protection-Regulations-Amendments-England-changes-130520.pdf. London [2008] EWCA Civ 116; JML Direct Ltd v Freesat UK Ltd [2010] EWCA Civ 34). Query, however, whether the guidance would be relevant if there was no contractual discretion but a 26 Social distancing was to be observed wherever practicable under the previous Guidance. black and white choice to be made under the contract – see Mid-Essex Hospital Services NHS Trust v Compass Group UK [2013] EWCA Civ 200 at [89 – 95]. 27 See https://www.gov.uk/government/publications/framework-agreement-between-the-department-of-health-and-public-health-england. 22 See Schedule 21 para 21. 28 The basis of the other Guidance issued, for example, by Cabinet Office is less clear. 23 The College of Policing sought to redress this ambiguity by issuing a series of briefings – these are now at: https://www.college.police.uk/What-we-do/COVID-19/understanding-the- law/Pages/default.aspx. 29 A police constable, police support officer or someone designated by the Secretary of State or local authority See https://www.tuc.org.uk/news/employers-staying-open-must-guarantee-safe-working-conditions-including-social-distancing-say. 24 In this discussion, I draw the familiar distinction between hard/bright light law and soft law. The former is a principle or rule with distinct legal consequences eg criminality. The latter 30 is a guiding principle from which subjects may or may not depart. 31 See https://www.hse.gov.uk/pubns/hse41.pdf for the unsurprising policy statement that one can only prosecute where a law has been broken.

– 6 – – 7 – The immediate practical issue is against Thus, parties do not know whether to a matter of legal and not factual analysis – It will be a very rare case, however, where say differently. Thus, the OED has plague Variation by Necessity what benchmark is compliance with what comply with the Guidance or their contract. that is I do not consider the potential issues the Guidance will form grounds for defined as: Any infectious disease which appear to be suggestions to be tested? This in turn creates uncertainty as to where raised by the ambiguous wording of the frustration: performance of the contract spreads rapidly and has a high mortality Again, one has recourse to some very Further, absent a benchmark, does this the risks and liabilities ultimately lie. Where quadripartite wording as they may or may with social distancing is highly likely to be a rate; an epidemic of such a disease. old law. impose any form of legal obligation? At there are multiple parties in the contractual not arise on the facts. What I am looking at possibility. Further, although performance Further, if one were to look at the original least as far as the health and safety and chain and/or layered transactions (e.g. a is the ways in which this new, private sector will be more onerous and more costly, plague cases – for example Plague in In Lawrence v Twentiman, the Court said:52 employment law perspective, it apparently supply of goods chain backed by finance risk may manifest or be managed.36 neither of those constitute frustration. London & Westminster49 or Anonymous50 does.32 Further, if the Government is going and insurance obligations or a large scale – one would see that “plague” was not “If a man covenant to build a house to be checking compliance and penalising project with multiple parties also backed by Frustration Force majeure used in the sense of a specific bacillus before such a day, and then the plague non-compliance there must be some form finance and insurance obligations), there but of some general disease – a fact is there before the day and continues of obligation being imposed here. will be concerns as to whom is the ultimate For frustration to occur, the contract must There is no independent doctrine of force which is hardly surprising given the state there till after the day, this excuses payor and whether that entity has assets be incapable of performance. The fact that majeure in English law.44 Force majeure can of medical knowledge at the time. Thus, him from the breach of the covenant The above then leads to two questions: to cover the eventual liability. These basic performance has suddenly become more therefore only be invoked where there is the perhaps it may well be that recourse to for not doing it before the day; for the what does it mean for commercial dealing risks are then compounded by the fact that onerous or impracticable for one party appropriate clause and all will turn on the seventeenth century learning may assist law does not wish to compel him to and in each of the realms of frustration, the Guidance wording varies and contains does not suffice.37 provisions of the particular clause.45 a twenty first century commercial entity venture his life for this, but he must do force majeure, contractual provisions and caveats such as practicability or essential. to resolve its SARS-CoV-2 issues created it afterwards” variation by necessity? These add additional uncertainty. Finally, If one has a contract for personal service, I focus here on what the parties may do by the quadripartite scheme. as the risks cannot lie with Government the illness of the person may amount in relation to the risk that the puzzle has Or one has recourse to some very One could, of course, refer to Guidance on (this is guidance supposedly advisory to frustration.38 Further, although the placed onto the private sector. Assuming, however, that an individual complicated law. There are a series of responsible contractual behaviour in the only), intentionally or not, all risk has been contract may not be frustrated, the case can fall within the wording, there still very complicated cases relating to performance and enforcement of contracts transferred to the private sector. affected party may be discharged from Looking at some of the standardised remains the test of causation. As the court Mississippi soya bean cargoes afloat impacted by the Covid-19 emergency.33 Yet, future performance. In Atwal v Rochester39 wording: emphasised in Seadrill Ghana Operations from 1973. These were described by the this is once again guidance and in its own Thus, the effect of the puzzle is not only a builder who had become ill was Ltd v Tullow Ghana Ltd,51 the alleged event courts at the time as an ‘unattractive terms is non-binding.34 If the Government to transfer risk away from Government discharged from future performance due - A simple reference to force majeure must be the sole cause of the failure to piece of forensic history’53 with those were to interpolate a whole series of terms but also to do so in a doubly uncertain to the relationship of trust the builder would require reference to the general perform. Whilst it is easy to see how a involved being the ‘cognoscenti in this into contracts, one would expect that to fashion – namely, uncertainty as to what had with the client.40 Similarly, in Condor caselaw. That, unsurprisingly, does full lockdown could amount to the sole recondite field’.54 be done by primary legislation. Further, as the risk is and whose risk is it? This is, in v The Barron Knights41 the claimant was suggest that a pandemic would be cause of the failure to perform, proving tangible contractual rights are choses in commercial and legal terms, unfortunate. discharged from further performance force majeure. It is more difficult to maintaining social distancing, a far more The two combined above can enable action, they would be possessions within Not only is there no legal certainty (which of the contract due to a fear of further suggest, however, that social distancing nebulous concept, is the sole cause of the private sector parties to have recourse Article 1, First Protocol of the European is of importance in commercial law and the mental illness. constitutes force majeure – this may be failure to perform will be far more difficult. to the idea of variation by necessity – Convention on Human Rights. Wholesale absence of which generates litigation) but relevant to causation as discussed below. namely that the obligation to perform intervention into contractual arrangements also parties cannot hedge against risk. What is common to all these cases is the Contractual Terms may, in extreme circumstances, be varied would therefore inevitably attract a human concept of particular, individual service. - One could see that a lockdown could by events beyond the parties’ control. rights based scrutiny. Therefore, this With those general comments in mind, Thus, at that level, individual circumstances permit a party to rely on a “restraint of The other area which private sector parties In Lawrence, being permitted to suspect guidance, I would suggest, takes one no I turn to the possible relevance of the would discharge any further obligation to princes” wording by analogy with the will be forced to examine is whether their performance, and in the soya bean cargo 46 further forward. quadripartite approach to each of perform. In terms of a company, however, blockade cases. contracts contain change in law provisions. cases, to supply amounts others than those frustration, force majeure, contractual unless as per Atwal the company can This are common in finance contracts, PFI stipulated by the contract without being - Obviously, any clause which included 55 The Government’s approach of having terms and variation by necessity. In my only perform the contract via a particular contracts and in the JCT model for building in breach. “epidemic” as force majeure would be of Guidance which is not guidance but is approach to each of the areas, I assume, employee, the company will not be contracts. some form of chimera inevitably creates however, that legal uncertainty is not discharged, it can always perform via simple application. Conclusions commercial uncertainty: parties do a factor and one can assume that the another employee (assuming employees Common to all of them is a requirement - “Act of God” – given that an Act of God not know whether there is a private law Guidance has some legal effect.35 I also are available).42 that there be a change in the hard law There are undoubtedly legal mechanisms is described as “events which involved obligation to socially distance and, if so, approach the application to each issue as provisions relevant to the contract. As I which would theoretically assist private no human agency and which it was not what role that plays in their arrangements. Further, It is possible that a contract could have discussed above, the quadripartite sector entities affected by SARS- realistically possible for a human to guard in theory be frustrated by lockdowns arrangement straddles the hard/soft CoV-2. In each case, however, there is against: an accident which the defendant resulting from SARS-CoV-2 – for example law divide. An orthodox analysis would considerable uncertainty as to whether can show was due to natural causes, a contract to travel to an area under say there is no change in law – but the those mechanisms will in fact assist directly and exclusively without human total lockdown would be incapable of quadripartite approach might suggest private sector parties. While it is possible intervention”47. The pandemic would be performance as would a contract for the otherwise. Whilst again, care must now to see that a particular set of facts – the an Act of God. The Guidance, however, supply of goods from an area where all be taken with the wording of the latest collapse of a supply chain or a significant would not be. the factories had been closed. Neither of Guidance, in theory it is arguable that and irreplaceable portion of the workforce those factual scenarios would apply within because the Guidance is being treated as falling ill – might well trigger all or any of - More difficulty would be had if the clause England as there is no such lockdown, having force of law, then there could be a the above mechanisms, it is very difficult to referred to plague.48 At first blush, it therefore this possibility would arise in change of law. see how either the Guidance per se or the could be thought that this would refer relation to international contracts.43 fact that commercial life is more difficult, solely to the result of Yersinia pestis more complicated and more expensive (the bacterium that causes bubonic will aid private sector parties in relieving plague) but dictionaries and case law themselves from such burdens.

32 See https://www.hse.gov.uk/news/assets/docs/working-safely-guide.pdf. 33 Supra. 44 Ralli Bros v Compania Naviera Sota y Aznar [1920] 2 KB 287 . 34 Prof Ewan McKendrick QC has suggested in a COMBAR lecture dated 12 May 2020 that the guidance should inform parties’ relations but accepted that a court would not be able For a useful general summary – see https://www.fountaincourt.co.uk/wp-content/uploads/Force-Majeure-and-Frustration-April-2020.pdf. There is further a lecture by Prof Ewan to take the guidance into account to refashion parties’ relations. 45 McKendrick QC given 12 May 2020 which should be soon uploaded to the COMBAR website. 35 Though as the Guidance becomes ever more dilute – the Covid-Secure Guidance for the Construction industry is hortatory at best and really only requires a work place Geipel v Smith (1872) LR 7 QB 404. The lockdown would have to be actual not anticipated – see Watts, Watts & Co v Mitsui & Co [1917] AC 227. assessment, the likelihood of the Guidance on its wording actually imposing any concrete obligations is becoming increasingly remote. 46 Transco v Stockport MBC [2003] 3 WLR 1467 at [59] 36 I have not considered the extent to which a private sector party, realising that they could not find any relieve in private law, might simply challenge the quadripartite structure 47 either by way of judicial review or a collateral challenge 48 The plague reference also occurs in some Business Interruption Insurance policies as well as the charters of schools and universities. 37 See discussion in Treitel Frustration and Force Majeure 3rd Ed at 6-021. 49 (1665) 82 ER 1103. 38 Hall v Wright (1858) E.B. & E 746 at 749; Taylor v Coldwell (1863) 3 B & S 826 at 836. 50 (1562) 73 ER 498. 39 [2010] EWHC 2338 (TCC). 51 [2019] 1 All ER (Comm) 34. 40 At [26; 28]. 52 1 Rolle’s Abridgement Condition G. pl. 10 (p.450). 41 [1966] 1 WLR 87. 53 Andre & Cie SA v Tradax Export SA [1983] 1 Lloyd’s Rep 254 at 258 cols 1–2 per Kerr LJ. 42 This raises another issue. The corporate entity may have a choice – comply with a contract or face either the risks of a dispute or the risks of infecting employees. Once again, 54 Tradax Export SA v Cook Industries Inc [1982] 1 Lloyd’s Rep 385 at 387 col 2 per Kerr LJ. whatever the intention, de facto, a set of risks has passed to the private sector. 55 See most recently Sean Wilken QC “Contractual Performance in times of Peril” to be found at https://www.keatingchambers.com/contractual-performance-in-times-of-peril-2/. 43 Which would in turn raise questions of conflicts of law and what the applicable law made of acts constituting lockdown in terms of frustrating events. See also the original text as modified for the article – Wilken & Ghaly The Law of Waiver, Variation and Estoppel 3rd Ed OUP Ch 2 passim.

– 8 – – 9 – A CRITICAL LOOK AT BROSELEY LONDON v PRIME ASSET: WOULD PERMITTING A FINAL ACCOUNT ADJUDICATION HAVE BEEN A “REMARKABLE INTRUSION”

By Harry Smith

as to Valuation 19 prior to paying the sum neither could there be said to be a real risk has created both the prompt payment Harry Smith examines the recent judgment in found to be due in the first adjudication. of Broseley dissipating or disposing of the regime and the adjudication regime. The parties disagreed, however, as to judgment sum. The Act cannot sensibly be construed whether Prime Asset was, by extension, as permitting the adjudication regime Broseley London Ltd v Prime Asset Management Ltd precluded from adjudicating the true value Was the court right to say that to trump the prompt payment regime. of the post-termination final account. permitting a final account Therefore, both the Act and the contract (Trustee of the Mashel Family Trust)¹, in which the must be construed as prohibiting the Mr Roger ter Haar QC, sitting as a Deputy adjudication would have been a employer from embarking upon an TCC declined to stay the execution of a judgment High Court Judge, decided that Prime “remarkable intrusion” into the adjudication to obtain a re-valuation of Asset was so precluded. He said: principle established in S&T v the work before he has complied with his enforcing an adjudicator’s decision in order to allow immediate payment obligation.” “Whilst the S & T decision does not Grove? expressly concern the present situation, In S&T v Grove, the Court of Appeal upheld This passage, which was technically obiter, a “true value” adjudication to take place in respect of where what is suggested as the the decision of Coulson J at first instance has proved controversial. The kernel of the possible subject of an as yet unstarted that S&T was not entitled to adjudicate the controversy is the judge’s use of the phrase the final account. adjudication is the determination of a true value of an interim payment due to “embarking upon” in the final sentence. A notional final account where the amount Grove until it had paid the notified sum. The rule that an employer cannot refer a “true of that final account would be dependant principal justification for that conclusion value” dispute to adjudication without on the validity of Decision No. 1, the ability How did the question of a In early 2020 Broseley applied to enforce was expressed by Sir Rupert Jackson as first paying the notified sum is difficult to to mount such an adjudication following “true value” adjudication arise? the decision in the first adjudication. Prime follows: reconcile with the wording of s. 108(2)(a) Asset accepted that Broseley was entitled upon Decision No. 3 attacking the validity of the Housing Grants, Construction and On 11 July 2019, Broseley issued a payment to summary judgment but argued that it of that Decision without prior payment “Both the HGCRA and the Amended Regeneration Act 1996: application (“Valuation 19”) for £485,216.17 was entitled to a stay on the basis of the of the amount awarded in Decision No. 1 Act create a hierarchy of obligations, plus VAT. Prime Asset failed to give a well-known principles set out in Wimbledon would be a remarkable intrusion into the as discussed earlier. The immediate “The contract shall include provision in 2 payment notice or pay less notice, and v Vago . Prime Asset’s case was not that the principle established in S & T: it would statutory obligation is to pay the notified writing so as to – (a) enable a party to give refused to pay the sum due. Broseley stay should continue indefinitely, but that permit the adjudication system to trump sum as set out in section 111. As required notice at any time of his intention to refer therefore sought, and on 12 September it should be limited to about two months to the prompt payment regime, which is by section 108 of the Amended Act, the a dispute to adjudication”. (Emphasis 2019 obtained, an adjudicator’s decision allow a further adjudication to take place exactly what the Court of Appeal said in contract also contains an adjudication supplied) to the effect that it was entitled to be to determine the true value of the final paragraph [107] of that case would not be regime for the resolution of all disputes, The meaning of the words “at any time” paid the sum set out in Valuation 19. account post-termination. permitted to happen.” including any disputes about the true might be thought to need no elucidation, Two further adjudications took place value of work done under clause 4.7. As He went on to find that no stay should but for the avoidance of any doubt the thereafter in September and November What did the court decide? a matter of statutory construction and be granted on the grounds that (a) Prime Court of Appeal confirmed in 2005 that 2019 respectively, the latter of which under the terms of this contract, the Asset had failed to take any steps to the phrase “means exactly what it says”4. resulted in a declaration that Broseley It was common ground that the effect of adjudication provisions are subordinate challenge the first adjudicator’s decision The court also noted that it was apparent had lawfully terminated the contract on the decision of the Court of Appeal in S&T to the payment provisions in section 3 in the period since 12 September 2019; (b) from Hansard that Parliament had 29 September 2019. v Grove was to preclude Prime Asset from 111. Section 111 (unlike the adjudication it could not be said to be probable that considered the time for referring a dispute commencing a “true value” adjudication provisions of the Act) is of direct effect. Broseley would be unable to repay the to adjudication and had “decided not to It requires payment of a specific sum judgment sum if ordered to do so; and (c) provide any time limit”. within a short period of time. The Act

1 [2020] EWHC 1057 (TCC) 2 [2005] EWHC 1086 (TCC) 3 [2018] EWCA Civ 2448 4 Connex SE v Building Services Group [2005] 1 WLR 3323 at [38]

– 10 – – 11 – In Davenport v Greer5, both a “smash and He went on to say this: notified sum in particular circumstances. (3) In principle, it is not obvious why merely grab” adjudication and a “true value” The “prohibition” on such adjudications allowing a “true value” adjudication to adjudication had already taken place by “The decisions of Coulson J and the laid down, obiter, by S&T v Grove is not, proceed should in itself, as the judge “Insofar as there is a tension between the time of the enforcement hearing. The Court of Appeal in Grove are clear and therefore, absolute; and so cannot be a put it in Broseley v Prime Asset, “permit defendant argued that it was entitled to unequivocal in stating that the employer matter of jurisdiction. It can convincingly the adjudication system to trump the rely on the “true value” decision to resist must make payment in accordance be argued that this analysis must be right prompt payment regime”, given that Broseley v Prime Asset and Davenport v enforcement of the “smash and grab” with the contract or in accordance with in view of the clear wording of s. 108(2)(a) it is clear from both S&T v Grove and decision. In a carefully reasoned judgment, section 111 of the Amended Act before it and Connex SE v Building Services Group, Davenport v Greer that an employer Greer, the latter is surely to be preferred for Stuart-Smith J considered S&T v Grove, and can commence a ‘true value’ adjudication. quoted above. will not, in any event, be permitted to concluded: That does not mean that the Court will “rely upon” the result of a “true value” the depth and quality of its reasoning” always restrain the commencement or With this background in mind, the view of adjudication to avoid payment of the “it should now be taken as established progress of a true value adjudication the judge in Broseley v Prime Asset that notified sum. that an employer who is subject to an commenced before the employer has permitting the commencement of a post- immediate obligation to discharge the discharged his immediate obligation: termination final account adjudication What is the impact of this order of an adjudicator based upon see the decision of the Court of Appeal would represent a “remarkable intrusion” The weight which future courts place the facts, granting a stay would have the failure of the employer to serve in Harding. It is not necessary for me to into the principle laid down by S&T v Grove judgment likely to be in upon this aspect of the judgment may, deprived Broseley of its right to prompt either a Payment Notice or a Pay Less decide whether or in what circumstances was, arguably, an overstatement, for several practice? however, prove to be limited, for a number payment of the notified sum; rather Notice must discharge that immediate the Court may restrain the subsequent reasons: of reasons: than any broader point about the obligation before he will be entitled to true value adjudication and, in these On the face of it, the judgment in Broseley relationship between adjudication and rely upon a subsequent decision in a circumstances, it would be positively (1) As the judge acknowledged, the facts v Prime Asset supports the proposition (1) It is not clear whether the judge was payment. true value adjudication. Both policy and unhelpful for me to suggest examples of S&T v Grove were different to the that S&T v Grove lays down an absolute referred to Davenport v Greer. At authority support this conclusion and or criteria and I do not do so.” (Emphasis facts of Broseley v Prime Asset. In S&T prohibition on the commencement of a all events, the judgment does not (3) Insofar as there is a tension between that it should apply equally to interim and supplied) v Grove, the proposed adjudication “true value” adjudication by an employer acknowledge, or grapple with, the Broseley v Prime Asset and Davenport final applications for payment.” concerned the true value of an interim absent payment of the notified sum; and extent of the court’s discretion to v Greer, the latter is surely to be These passages are important because payment for which no valid payment suggests that that prohibition extends permit a “true value” adjudication preferred for the depth and quality they make clear that, notwithstanding S&T notice or pay less notice had been not only to attempts to adjudicate the true to proceed prior to payment of the of its reasoning, and in particular for v Grove, the court has a discretion to permit given. In Broseley v Prime Asset, the value of the particular payment concerned, notified sum. its recognition of the availability of a employers to commence and progress “true proposed adjudication concerned the but to adjudications which might cut discretion on the part of the court to value” adjudications without paying the true value of the final account following across the employer’s liability to pay the (2) The judge’s reasoning has to be permit a “true value” adjudication to the termination of the contract. notified sum more generally. It is likely to understood in the context of the proceed before payment of the notified be cited by parties seeking an injunction to slightly unusual way in which the issue sum in certain circumstances. Unless (2)  Further, as Davenport v Greer made restrain the progress or continuation of an arose, namely as part of an application and until S&T v Grove is revisited by an clear, the court has a discretion to adjudication on analogous facts. for a stay of execution. The theoretical appellate court, the existence of such a permit “true value” adjudications availability or non-availability of a “true discretion is, it is submitted, necessary without payment of the notified sum to value” adjudication as a route by which in order to enable the courts to proceed. to contest the decision in the first recognise and give effect to employers’ adjudication could only ever have been statutory right to adjudicate “at any a factor of incidental relevance to the time”. merits of this application6. Moreover, the judge may well, in suggesting This article was first published by that permitting the proposed Lexis®PSL on 5 May 2020 adjudication to proceed would “permit the adjudication system to trump the prompt payment regime”, have had in mind the practical reality that, on

5 [2019] EWHC 318 (TCC) 6 The principally relevant factors being those set out in Wimbledon v Vago [2005] EWHC 1086 (TCC).

– 12 – – 13 – KEATING

Resistant Building Products PBS Energo AS v Bester Broseley London Ltd v Prime J&B Hopkins Ltd v Trant Ltd v National House Building Generacion UK Ltd [2020] EWCA Asset Management Ltd [2020] Engineering Ltd [2020] EWHC CASES Council [2020] NICh 6 Civ 404 (TCC) EWHC 944 (TCC) 1305 (TCC)

A SELECTION OF REPORTED CASES INVOLVING This case concerned an application The Appellant sub-contractor appealed This was an application for a stay of The Defendant had engaged the Claimant MEMBERS OF KEATING CHAMBERS by the Plaintiff manufacturer for an against a refusal to grant summary execution of summary judgment in relation sub-contractor to carry out mechanical interim injunction to restrain NHBC from judgment to enforce an adjudicator’s to a “cash flow” adjudication decision, and electrical works at a recycling plant. refusing to cover new-build homes which decision. the novel element being an extension of The sub-contract provided for interim incorporated the Plaintiff’s Magnesium reasoning of the Court of Appeal in S&T v payments. A dispute arose in relation to Oxide (MgO) boards. The Respondent had been contracted to Grove. interim Application No. 26, in the sum design and build an energy plant and had of £812,484.94, which was referred to The application related to a claim of engaged the Appellant as a subcontractor. It arose from a dispute between the adjudication. The Adjudicator held that malicious falsehood made by the Plaintiff The main contract had been terminated parties in relation to refurbishment because the Defendant had not served a against NHBC – which issued 10 year and there were adjudication proceedings works at a grade II listed building which valid payment notice or pay less notice, the warranties and guarantees covering newly under the sub-contract. An adjudicator the Defendant had contracted with the sum was due and payable together with built dwellings in the UK – after it had decided that the Appellant had validly Claimant construction company for it Yuanda (UK) Company Ltd interest and that the Defendant should pay proposed to issue guidance to the effect terminated the sub-contract and a second to carry out. The dispute centred on a the Adjudicator’s fees and expenses. v (1) Multiplex Construction of precluding the use of MgO boards in adjudicator found that amount owed by payment application made by the Claimant Europe Ltd (formerly known construction. This proposed guidance the Respondent to the Appellant was £1.7 to the Defendant which stated the sum it When the Defendant failed to pay, the as Brookfield Multiplex and some subsequent correspondence is million. The Appellant applied for summary considered due as £482,216.17 plus VAT and Claimant applied for summary judgment what the Plaintiff contended constituted judgment to enforce the second decision. which had not been paid. to enforce the adjudicator’s decision. Construction Europe Ltd), & a malicious falsehood, its argument being The Defendant resisted enforcement, Ryhurst Ltd v Whittington Health (2) Australia and New Zealand that the only inference or innuendo that At the hearing of this application in the On 9 August 2019, the Claimant contending that the Claimant’s entitlement NHS Trust [2020] EWHC 448 Banking Group Ltd [2020] EWHC can reasonably be drawn from it is that TCC, the Respondent contended that commenced an adjudication to obtain a to the sum stated in Application No. 26 468 (TCC) RPB’s boards are unfit for purpose in the the adjudicator’s decision should not decision confirming that the sum should had been superseded by subsequent The Claimant had been awarded a contract building trade. be enforced as there was a reasonably have been, and should be, paid to it. The payment cycles which had corrected the under a procurement exercise which was The case decided a new point on the arguable case of fraud as the adjudicator adjudicator confirmed that the Defendant sum payable under the sub-contract. The later abandoned by the Defendant NHS wording of an ABI-type performance In his decision, the Recorder of Belfast, HHJ had proceeded on the basis that large should have paid the Claimant the sum Defendant applied for a stay of execution Trust. The Claimant contended that the guarantee – in particular what was meant McFarland sitting as High Court Judge, items of plant manufactured by the plus VAT by and awarded contractual of the Adjudicator’s decision. Trust was in breach of its duties under the by “established and ascertained” and the reviewed the case-law in this unusual area Appellant for the project would be available interest. Public Contract Regulations as it had, in need to take into account “sums due or to of law, identifying that to grant an interim to the Respondent. However, documents Fraser J granted the Claimant’s application, the Claimant’s contention, abandoned become due” to the Sub-Contractor. injunction for this tort (which has analogies disclosed in separate TCC proceedings The Claimant applied for summary applying the principle that the Court will the exercise due to public pressure it was with defamation) the test was an extremely involving the parties indicated that the judgment to enforce the Adjudicator’s enforce an adjudicator’s decision, whether facing over the Claimant’s connection Yuanda had sought an injunction against high one: the court has to be satisfied that items had been sold or otherwise disposed decision. The Defendant did not oppose it was right or wrong, unless they had to a company that had been responsible Multiplex and ANZ restraining a call on the no tribunal of fact (be it judge or jury) could of. Pepperall J found that there was thus this application, but sought a stay of made the decision without jurisdiction or for supply and installation of cladding at guarantee contending that no call on the reasonably conclude that the statements, a reasonably arguable case of fraud and execution for the entire judgment sum there had been a breach of natural justice. Grenfell Tower. It sought compensation for guarantee could be made until the Final or any of the innuendos reasonably drawn summary judgment should not be granted. as the Claimant had served a notice of Hutton Construction Ltd v Wilson Properties its losses relating to the abandonment. Account and all issues relating to the Final from the statements, were and are true. adjudication shortly prior to the hearing (London) Ltd [2017] EWHC 517 (TCC) and Account had been resolved – including Here, the Appellant argued that the judge mounting a post-termination final account PBS Energo AS v Bester Generacion UK HHJ Stephen Davies dismissed the all and any adjudication, arbitration and He was not of such a view: there was clearly should have found that allegations of fraud “true value” adjudication. The Defendant’s Ltd [2018] EWHC 1127 (TCC) applied. The Claimant’s claim, holding that it was not litigation relating to that Final Account. a problem with MgO boards in the industry; were not open to the Respondent because case was that the judgment should be Defendant had not raised any arguments open to a claimant in a public procurement much would depend on the quality of it had not included such allegations in its stayed pending the conclusion of this relating to jurisdiction or natural justice. case to argue that a decision was subject Multiplex contended that the guarantee a product and there was no approved defence; and that the judge should have adjudication. At the hearing the Claimant The Defendant was also incorrect to say to challenge simply because a legally should respond when Multiplex operated standard for such quality; ongoing research granted summary judgment, but then notified that it was withdrawing the that awarding summary judgment would irrelevant and hence impermissible the indemnity provisions under the indicated that there were no problems with stayed some or all of that judgment. further adjudication reference, “pulling undermine the principle that an amount consideration had been taken into account Contract between it and Yuanda the Plaintiff’s boards, but that research the rug” from under the Defendant’s case. stated in an interim application which had by the decision-maker. alternatively if, as and when Multiplex was not yet finished; the decision of Coulson LJ, with whom Rose LJ and Sir The Defendant, therefore, argued that it fallen due as a result of a party’s failure obtained an adjudication decision in its whether or not to award a guarantee was Timothy Lloyd agreed, dismissed the would immediately commence its own to issue the required notice could be The Trust had not been obliged to put out favour. a commercial one based on evidence; that appeal. Coulson LJ drew a distinction final account true value adjudication and corrected on a later payment cycle. of its mind the fact that there was a lack of evidence included the unfinished research, between an adjudication where allegations sought a stay of execution on that basis. stakeholder support simply because one of The judge rejected the first argument on but also evidence of actual detrimental of fraud had been considered, and an Fraser J then rejected the Defendant’s the reasons, or even the principal reason, was the terms of the particular contract as performance of the product within a adjudication where the decision had been Mr Roger Ter Haar QC sitting as a High application for a stay of execution as it had the Grenfell connection, R. (on the application there was no certification procedure under building. The cause of action was a blunt procured by fraud. He felt the latter applied Court Judge decided that approach was failed to show that a stay was necessary to of Lumsdon) v Legal Services Board [2015] the contract. The judge therefore appeared and, potentially, inapplicable instrument for here and such allegations were a proper not possible, and that the Defendant prevent manifest injustice. UKSC 41 applied. The need for approval from to believe that the guarantee might well the aim which the Plaintiffs had. ground for resisting enforcement. could not mount a true value final account NHS Improvements had also been a genuine respond if there were a certification adjudication because it had not paid the Tom Owen represented the Claimant. and a proper and rational reason. procedure. The judge went on to hold, The application for interim relief was On the issue of whether the Respondent sum awarded in the first adjudication. He however, that the guarantee would respond therefore dismissed. should have pleaded fraud in its defence, went on to apply the principles laid down He also held that the Trust's decision if, as and when Multiplex obtained an Coulson LJ applied CPR Rule 24.4(2) and by HHJ Coulson QC (as he then was) in to abandon the procurement had Adjudication decision in Multiplex’s favour. Samuel Townend represented the held that whilst pleading allegations of Wimbledon Construction Co Ltd v Vago not breached its obligations of equal Defendant. fraud may be advised, it was not required. [2005] BLR 374, as supplemented by his treatment, proportionality or avoiding Sean Wilken QC represented the First The Appellant had also not been prejudiced later decision in Gosvenor London Ltd v manifest error. There had been no breach Respondent. as the allegations had been clearly made Aygun Aluminium UK Ltd [2018] EWCA Civ of the transparency obligation in respect in the Respondent’s evidence and skeleton 2695, and concluded that the Defendant’s of the reasons for the decision, and there argument. application for stay should not be awarded. had been no change of real significance before the decision to abandon the Because of these findings, the question of Samuel Townend represented the procurement of which the claimant ought a stay did not arise. Defendant. to have been notified. Tom Owen represented the Respondent. Sarah Hannaford QC and Tom Coulson represented the Claimant. – 14 – – 15 – GROUP LOYALTY – “The circumstances in which an expert A COMPANY V X AND OTHERS witness is retained By Jennie Wild could give rise to a relationship of trust and confidence, such “The distinguishing obligation of a fiduciary is the that the obligation 1 obligation of loyalty” of loyalty arose”.

It is well-known that barristers and b. there is an inherent relationship (i) two agreements with the Third Party The Claimant contended that the provision solicitors owe fiduciary duties to their of trust and confidence between for engineering, procurement and of services by the Defendants to the clients (the core duty being that of loyalty) the parties (described by the Law construction management services Third Party in connection with the EPCM such that they must not act for a second Commission as a test of “discretion, (‘EPCM Contracts’); Arbitration was a breach of the Defendants’ client if that would put them in conflict power to act and vulnerability”³). fiduciary duty of loyalty to the Claimant. with the interests of the first. But what (ii) two agreements with a contractor (‘the The Defendants contended they didn’t 2. The core fiduciary duty is that of Contractor’) for the construction of about expert witnesses? And what about owe any fiduciary duties – such a duty was 3. an expert has a paramount duty to the loyalty⁴. “Loyalty” encompasses a facilities. multi-national groups of expert witness excluded by the expert’s overriding duty to Court (much like a barrister), which may number of obligations, including that companies, who offer expertise in a variety the tribunal – and there was no conflict of require the expert to act in a way which a fiduciary must not put themselves Two ICC arbitrations ensued. of specialisms? Are such companies interest. does not advance their client’s case different to barristers’ chambers whose in a position where their duty towards (Jones v Kaney⁸), members routinely act for opposing sides? one client conflicts with a duty they First, the Works Package Arbitration was A Company v X and Others: owe to another⁵. A client may consent brought by the Contractor against the Claimant, seeking additional costs due to Judgment but none of these rules were determinative The TCC has recently grappled with these to conflicts of interest, but the consent as to whether fiduciary duties were owed. issues in A Company v X and Others², must be fully informed (as to which, delays to the Project, including the late release of drawings produced by the Third Does an expert witness owe a fiduciary 3. had been engaged to provide extensive granting an injunction to restrain a read on). Therefore, the Court concluded, as a matter Party pursuant to the EPCM Contracts. obligation of loyalty? advice and support for the Claimant group of expert witness companies from of principle, the circumstances in which an The Claimant engaged the First Defendant throughout the arbitration proceedings. providing both delay and quantum expert A Company v X and Others: The Defendants contended that an expert expert witness is retained (as to which, read (in particular “K” of the First Defendant) to services, despite setting up different teams, witness does not owe a fiduciary obligation on) could give rise to a relationship of trust I discuss what parties might make of this The Facts provide delay expert services. in different countries and putting in place of loyalty because such a duty would be and confidence, such that the obligation of finding, below. measures to protect confidentiality. It is a This was an application by the Claimant, for inconsistent with the independent role of loyalty arose. case of some significance. The Claimant contended that it would pass a continuation of an injunction restraining on any additional costs it was required to the expert. Did all the Defendants owe a fiduciary the Defendants (a group of related pay due to late release of the drawings, to Did the First Defendant owe a fiduciary obligation of loyalty? The Court considered the cited authorities Fiduciary Duties (short form) companies) from acting as experts for a the Third Party. obligation of loyalty? third party (‘the Third Party’) in arbitration established no more than: The Court noted that where a duty of loyalty Consideration of when and, if so, what The Court held that a clear relationship of arises, it is not limited to the individual proceedings against the Claimant (‘the Second, the EPCM Arbitration was brought fiduciary duties arise fills entire textbooks. 1. there is no property in an expert witness trust and confidence had arisen (imparting concerned, but extends to the firm or EPCM Arbitration’), in circumstances where by the Third Party against the Claimant, There is not time for great analysis here. (Harmony Shipping Co SA v Davis⁶); a fiduciary duty of loyalty), because the company they are employed by (Bolkiah; the Defendants were also acting for the seeking sums due and owing under the In short: First Defendant: Marks & Spencer Group Plc v Freshfields Claimant in another, related, arbitration EPCM Contracts. The Claimant brought 2. where no fiduciary duty arises, the Bruckhaus Deringer ; Georgian American (‘the Works Package Arbitration’) counterclaims in respect of delay and ⁹ 1. A company or individual may owe obligation to preserve privileged and 1. was engaged to provide expert services Alloys Inc v White & Case LLP ). disruption and passing on any additional ¹⁰ fiduciary duties where: The Claimant was the developer of a confidential information (pursuant to the for the Claimant in connection with the sums payable by the Claimant to the “Bolkiah” test) does not prevent an expert Works Package Arbitration; Yet here, the duty extended further – to the petrochemical plant (‘the Project’) and Contractor caused by the Third Party’s a. a relationship falls under a previously entered into agreements in respect of the witness from acting or giving evidence group of defendant companies. This was accepted category (eg a solicitor and failures under the EPCM Contracts. The for another party (Meat Corporation of 2. had been instructed to provide an because: Project including: Third Party engaged the Defendants (in client); or Nambia Ltd v Dawn Meats (UK) Ltd⁷). independent report and to comply with particular “M”) to provide quantum expert the duties set out in the CIArb Expert services. Witness Protocol; and

1 Per Lord Millet in Bristol and West Building Society v Mothew [1998] Ch 1 at 18A 6 [1979] 3 All ER 177 at 180-181 and 183 per Lord Denning 2 [2020] EWHC 809 (TCC) 7 [2011] EWHC 474 (Ch) 3 (1992) Consultation Paper No 124 para 2.4.6; (2013) Consultation Paper No 215 para 5.7 8 (2011) 135 ConLR 1 4 Mothew at 18 9 [2004] EWCA Civ 741 5 Mothew at 18-19 10 [2014] EWHC 94 (Comm)

– 16 – – 17 – 1. There was a common financial interest in It was plainly a conflict of interest for the Whilst not raised in the application, policy must consider what the relationship is 3. In recognition of the vulnerability the Defendants; Defendants to act for the Claimant in the considerations may also come into play. between the two transactions concerned” inherent in a relationship that gives Works Package Arbitration and against In my view (unsurprisingly), a party’s and that “It is important … to analyse the rise to fiduciary duties, the Courts 2. The Defendants were managed and the Claimant in the EPCM Arbitration. The freedom to choose the advocate of their facts of the particular case”.¹⁵ impose a high test. For example, it is not marketed as one global firm; arbitrations were concerned with the same choice ought to be paramount. This right is enough to: delays, and there was a significant overlap preserved by the cab rank rule¹² (perhaps Taking what we can from the judgment 3. There was a common approach to in the issues. alluded to by O’Farrell J’s comment set (necessarily limited by the confidentiality a. merely disclose that the fiduciary identification and management of out above) and, for example, in rules of a issues that arose in the context of on-going has an interest (Cobbetts LLP v conflicts. As a result, the injunction was granted. number of arbitral institutions¹³. arbitrations) I suggest that a relationship Hodge²¹; FHR European Ventures LLP of trust and confidence may not arise, for v Mankarious²²), Was the duty breached? Analysis Do all expert witnesses owe a fiduciary example, where an expert is retained to obligation of loyalty? report on a discrete issue, without more b. or to say something that ought to The Defendants contended that, even if One rule for some? – the degree of similarity between the cause the principal to make enquiries they did owe a duty of loyalty, it had not So, what does the Court’s finding in A retainer in question and that considered (Novoship (UK) Ltd v Mikhaylyuk²³), been breached because of the physical and It is not unusual for self-employed Company mean for expert witnesses? Will in A Company ought to be considered. ethical barriers that had been put in place barristers from the same set of Chambers they always owe a fiduciary duty of loyalty? Further, the facts and circumstances of c. or to establish that if permission had to separate the Defendants as commercial to act on opposite sides of a dispute, or the relevant cases will need to be carefully been asked for it would have been entities. This, the Court held, was not even as barrister and arbitrator. Why, you I suggest not. It is necessary to consider analysed to determine the degree of given (Murad v al-Saraj²⁴; Gidman v enough. The fiduciary obligation of loyalty might ask, are they able to do so, if expert the detailed nature of the relationship overlap. And, where expertise is split Barron²⁵; FHR European Ventures LLP is not satisfied by simply putting in place witness firms are not? between the expert and their client. Clues between group companies, the commercial v Mankarious²⁶). measures to preserve confidentiality and as to when a relationship of trust and relationship between those companies privilege. Such a fiduciary must not place As O’Farrell J explained in A Company (at confidence arises outside of established is likely to be instructive. However, the Therefore, a boiler-plate clause added to a himself in a position where his duty and [58]) it is because: categories are few and far between. Here, position is far from certain. retainer before the second case is taken on interest may conflict. whilst not stated expressly in the judgment, may not be sufficient. More fundamentally, “…First, unlike the defendant companies, in my view it seems that the third reason Contracts and consent I question whether a client who is owed a barristers do not share profits and (engaged to provide extensive advice and duty of loyalty and who is fully informed of therefore do not have a financial interest support) held sway. The Court noted that, If fiduciary duties arise, can expert the nature of the second case and services in the performance of their colleagues. in all the cases it was taken to, no fiduciary witnesses contract out of them? Yes, but the expert wishes to provide would consent Secondly, barristers are frequently obligation of loyalty arose because “either with care. As one author notes ‘a short – it seemingly not being in their interests to required to represent unpopular clients because there was no retainer, or on the sighted assumption that all relevant agree to anything that assists an opponent. or causes. They do not have the luxury particular facts of any retainer did not give duties are prescribed in a contract can More safely, expert witness firms may wish of considering a case and then deciding rise to such a relationship, or any retainer be, and has been responsible for, serious to consider company policy with respect to not to accept instructions because the had been terminated”¹⁴, such that it was the misbehaviour’¹⁶. acting for two opposing clients. client or case does not fit their corporate nature of the retainer which appeared to I suggest that a relationship of image. Thirdly, and perhaps most guide the Court’s finding. In a nutshell, the principles with respect to importantly in the context of this case, contracting out are as follows: This article first appeared on the PLC it is common knowledge that barristers It will also be necessary to consider Construction Blog in June 2020. trust and confidence may not are self-employed individuals working the degree of overlap between the two 1. Fiduciary duties may be modified by Jennie will be discussing this topic on from sets of chambers and that different (or more) cases in question and the fully-informed consent (Boardman v Thursday, 9 July 2020 as part of our arise, for example, where an barristers from a set of chambers may act relationship between the group companies. Phipps¹⁷; New Zealand Netherlands webinar programme. Please contact on opposing sides …” On the facts of A Company the overlap Society “Oranje” Inc v Kuys¹⁸; Kelly v [email protected] expert is retained to report on a between the disputes was obvious and Cooper¹⁹. for further information. (see also Laker Airways v FLS Aerospace & needed little analysis. But it may not always discrete issue, without more Another)¹¹ be so. As the Court of Appeal noted in 2. The fiduciary bears the burden of Marks and Spencer (re solicitors acting in proving full and proper disclosure respect of two transactions ): “The court (Hurstanger v Wilson²⁰).

12 Conduct Rules, rC29 13 (see Article 26(4) ICC Rules 2017, Article 18.1 LCIA Rules (2014) 14 at [50] 15 at [11 – 12] 16 “Bowstead & Reynolds on Agency” (Sweet & Maxwell, 2010, 19th edition) para 6-034. 17 [1964] 1 WLR 993, affirmed [1967] 2 AC 46 18 [1973] 2 All ER 1222 at 1227 19 [1993] AC 205) 20 [2007] EWCA Civ 299 at [35] 21 [2009] EWHC 786 (Ch) at [110] 22 [2011] EWHC 2308 (Ch) at [78] 23 [2012] EWHC 3586 (Comm) at [83] 24 [2005] EWCA Civ 959 25 [2003] EWHC 153 (Ch) at [126] 11 [2000] 1 WLR 113 per Rix J 26 [2011] EWHC 2308 (Ch) at [79]

– 18 – – 19 – The adjudication specific guidance from 3. Adjudicators and the parties can adopt This reasoning is open for question. Lonsdale v Bresco² in applying this three a flexible and bespoke timetable or stage test is that the court will only grant approach. First, as a matter of public and personal an injunction in respect of an ongoing safety, a site visit during the height of the adjudication “very rarely and in very 4. Any adjudicator’s decision is interim. lockdown period in April 2020 arguably should have been discouraged, particularly clear cut cases”. (The Court of Appeal, in Points 1 to 3 mean that in many affirming the first instance decision which a visit to someone’s home in a claim only adjudications, minimal if any changes are valued at £45,000. is of wider significance for insolvency and required because of the Coronavirus to the adjudication, did not comment on this typical procedure and approach, save for Second, the risk of unfairness, even if CORONAVIRUS, ADJUDICATION part of the judgment. The appeal to the the likely absence of hardcopy bundles. unintended, from an adjudicator and one Supreme Court in Bresco was heard in April party being alone together, particularly at 2020, with the judgment expected later this Point 4 means that even if a party feels the location relevant to the substantive year.) aggrieved by a decision, it still has the dispute, is significant. While not giving AND INJUNCTIONS opportunity to contest the adjudicator’s rise to an unavoidable breach of natural On the first limb, MD’s argument was decision in court or arbitration once we justice, this situation should be avoided, that there was a serious issue to be tried have returned to normal. The possible because the adjudication, if pursued, would particularly where the absence of one party prejudice faced by a party having a remote is enforced. By James Frampton be in breach of the principles of natural electronic trial in court because of the justice and thus unenforceable. lockdown is arguably greater than the In other cases, where the site is not to one prejudice to a party in an adjudication. of the parties’ home, site visits no doubt Coronavirus, or Covid-19, has impacted and continues to impact all parts Decision The latter retains the ability to bring new can and should proceed where necessary. of our lives. The focus in the construction industry has rightly been on Unsurprisingly, Jefford J made short shrift proceedings once the Coronavirus and The best solutions for such visits, to avoid of this argument in declining to grant an lockdown measures have ended (or at least the risk of unfairness or challenges on that the safety of workers still attending sites. No doubt the future will see injunction on the first stage of the test. ceased having such a significant impact on ground, would be for the adjudicator to our lives), the former does not. attend alone and show both parties his or litigation on whether the coronavirus gives rise to extensions of time, As a matter of principle, the court did not her visit by a live video on Zoom, Skype or force majeure, frustration or other legal rights or remedies. At present, completely shut the door on the argument Overall, adjudication can and should similar, or for a non-party representative that an adjudication could be injuncted continue to play a vital role in allowing to provide a video tour under the direction the main impact on construction litigation has been the procedural on grounds of an unavoidable breach those in the construction industry to of the adjudicator. If sensible and fair impact of the Coronavirus. of natural justice. However, it made it resolve disputes and secure cashflow, measures cannot be adopted, then it is clear that such an argument would only particularly important during this difficult important to remember that the timing of succeed in exceptional circumstances, the period. So long as parties and adjudicators an adjudication is a matter for the Referring example given by Jefford J being where an are flexible and reasonable in making Party. If a claim is brought where a site adjudicator indicated that he would only allowances for the unique working visit or meeting to examine witnesses is By the middle of April 2020, within 1 It is a sign of the difficulties of remote On 26 March 2020, MD wrote to the consider submissions from one party. environment, and any particular difficulties not possible or reasonable, despite a visit month of the start of lockdown, there working, that the transcript of the adjudicator stating that it would not it may pose, there is no reason why or oral evidence being essential to the On the facts, Jefford J rightfully does not were already 15 High Court judgments judgment only became available two be able to comply with this timetable adjudication should be restrained. determination of the claim, then fairness appear to have had much sympathy for referring to Coronavirus. These months later on 1 June 2020. and also suggesting that the case was might dictate that the claim should fail for MD’s explanations as to why it could not Site Visit included judgments on procedural not suitable for adjudication given its want of proof. participate. Plainly, allowances need to issues, such as the refusal of an nature and complexity. MD concluded The Facts be made for remote working, but it should However, one aspect of the court’s application to adjourn a 5-week trial in by stating that W should withdraw the have been possible for MD to obtain reasoning could merit criticism. The court’s a £250 million claim in the Insolvency MD had carried out building works to adjudication as it would inevitably lead documents and provide submissions in response to MD’s argument that it could and Companies List of the Business W’s property. The works commenced to a breach of natural justice. the adjudication. As the Court noted, MD not be present at the site visit was to the and Property due to start in June in December 2017, albeit the contract, had been able to prepare for the injunction state that: 2020. The TCC has since published a in the form of the JCT Homeowner The adjudicator rightly ignored the hearing. template remote hearing order and Contract, was only executed on 2 suggestion that a £45,000 final (a) Par ties do not have an absolute right March 2018. The contract contained a account claim was not suitable for to be present at a site visit, so an hearings by Zoom, Skype or similar Analysis video conferencing software have provision for adjudication and required adjudication. However, on timetable, he adjudicator could conduct it alone. a decision to be made within 21 days. recognised the difficulties caused by quickly become the norm. Overall, the clear indication from the court (b) While W would likely be present as the Coronavirus and proposed a 2 week is that natural justice challenges based on It appears that the works were it was her home, the visit could be In litigation and arbitration, it has, extension. the Coronavirus to ongoing adjudications completed in 2019 and there was a final recorded or MD could provide a list of therefore, been all change. What about or adjudicator’s decisions are very unlikely the impact of the Coronavirus on account meeting on 19 August 2019. W agreed to this extension. However, points for the adjudicator to consider in MD was still dissatisfied and applied to succeed. advance. adjudication? In November 2019, MD ceased trading to the court for an interim injunction This decision is unsurprising and to (although it remains an active company to stop the adjudication until the be welcomed. In fact, far from being Millchris Developments Ltd v on Companies House) as a result of its Coronavirus crisis, and the lockdown discouraged or unfair, adjudication is poor financial state. Overall, the clear Waters measures imposed by the Government eminently suited to resolving disputes The question of adjudication and After MD has finished the works, as a result, were over. during the current remote working indication from the Coronavirus was always likely to W had engaged a second surveyor environment: court is that natural arise given the short-timescales in who advised her that she had been Injunction: Principles and 1. Adjudication is typically conducted on adjudication and the complications substantially overcharged. Argument justice challenges based paper without live evidence. and delays caused by remote working On 23 March 2020, W commenced a The principles applied by the court on an on the Coronavirus to and the furloughing of employees at 2. Procedural issues are typically dealt with true value adjudication contending interim injunction are well established. ongoing adjudications many contractors during the lockdown. by email rather than hearings. that she had overpaid MD by £45,000 Following American Cyanamid¹, the The surprise is how quickly it did so. and that there were defects in its questions to be asked are: or adjudicator’s On 2 April 2020, Jefford J heard an works. That evening the Government 1. Is there is a serious issue to be tried? decisions are very application by Millchris Developments announced the “lockdown” measures. 2. Would damages be an adequate unlikely to succeed. (“MD”), a building contractor, for an An adjudicator was appointed who remedy? interim injunction to prohibit a home initially proposed a timetable for owner (“W”) for whom it had carried out 3. Where does the balance of submissions to be completed by 3 building works in 2017 from continuing convenience lie? April 2020. This timetable was rather with an adjudication. condensed but was necessary in order to meet the 21 day timescale in the contract (as opposed to the standard 28 days under the Scheme).

2 [2018] EWHC 2043 (TCC)

1 [1975] AC 396

– 20 – This article was first published by Practical Law in April 2020. WHOSE RISK IS IT ANYWAY? PERFORMANCE SECURITY REVISITED

a third party certifier, such certifications would suffice.

The Judge did, however, find that an adjudication would serve to ascertain and establish loss12– pointing out that given an adjudication could found an application for summary judgment, it would be strange as set out above, the demand is presented if the instrument did not respond.13 This By Sean Wilken QC in contradiction to the underlying sufficed for Multiplex’s purposes, having arrangements; or b) the instrument had an adjudication in train. explicitly makes reference to those underlying instruments. That then, however, led to a discussion about what would happen should the The most obvious example of the latter is Adjudication be delayed. This was relevant him and the bank’s customer in relation Bank/Guarantor is.7 Allied to that is a Mention financial security to most contentious projects and the ABI Performance Guarantee wording because the instrument had an expiry to the performance or indeed existence further principle, however, which perhaps which requires (at clause 1) the amounts date of 4 April 2020; the hearings were infrastructure lawyers and the chances are that they will roll of the underlying contract, the bank is even less appreciated. At least where to be paid under the instrument to be on 20; 27 January and 19 February with is personally undertaking to pay him one is dealing with an on-demand bond or their eyes. Mention performance bonds and with the eye roll “established and ascertained” as per judgment (the court accelerating its provided that the specified conditions letter of credit, absent fraud or potentially the underlying contract. This expressly processes to permit such) on 28 February. there will be an additional muttering about “obscure wording”, are met. In requesting his bank to issue a demand in breach of the underlying therefore requires reference to the The Adjudicator was due to provide a such a letter, bond or guarantee, the contract,8 there can be no injunction to “gibberish”, “who really ever relies on them”. Mention letters underlying contract. decision on 6 March 2020. Slippage could customer is seeking to take advantage restrain the Beneficiary from calling on therefore take completion of the process of of credit or the UCP 600 (Uniform Customs and Practice of this unique characteristic. If, save in the instrument – for that would violate the What this entails was recently considered a decision, failure to pay and the making of the most exceptional cases, he is to be principle of autonomy.9 for Documentary Credits) or the URDG (Uniform Rules for in Yuanda v Multiplex Europe & ANZ a claim past 4 April 2020. This discussion allowed to derogate from the bank’s (“Yuanda”)10. Here, Yuanda (the Obligor) Thus, the risk of failure lies with the banks. centred on clause 4 of the instrument. Demand Guarantees) and the reaction may be even more personal and irrevocable undertaking, sought to injunct Multiplex (the given be it again noted at his request, by derogatory. The reaction to the question of whose risk it is has Yet, whilst it is true that that instrument Beneficiary) and ANZ (the Bank/Guarantor) Clause 4 (as the Judge found) was not obtaining an injunction restraining the 14 is legally autonomous, it is rarely from paying out on a modified ABI-type a standard ABI wording. As a result, been, being crude and argumentative, therefore, no-one’s. bank from honouring that undertaking, Performance Guarantee. Yuanda had two Yuanda’s argument based on the standard he will undermine what is the bank’s commercially autonomous as the Bank/ Guarantor will almost inevitably have arguments: the Beneficiary had called on ABI wording and the commentary to that greatest asset, however large and rich it 15 underlying security ultimately biting the Guarantee as if it were an on-demand wording could not succeed. The Judge Yet, as the global financial system moves fraud). Not equivalent to cash: all forms may be, namely its reputation for financial guarantee and that the Performance went onto find that the wording of this and contractual probity. Furthermore, if against the Obligor’s assets. That into a time of considerable stress and of guarantee. These are not negotiable underlying security will, in all likelihood, Guarantee would only ever respond after instrument was, in essence, there to allow uncertainty, when so many major projects and require a process of claim and proof this happens at all frequently, the value there had been a resolved Final Account the mechanical process of a claim to of all irrevocable letters of credit and immediately bite as soon as there is any are on foot, it is worthwhile revisiting the as per their conditions. Put crudely, which call on the instrument. This is, of course, including any adjudication, arbitration or be gone through – bearing in mind the basic principle which underlies these type of financial security is provided by performance bonds and guarantees will litigation. Yuanda succeeded, as a matter of international nature of the underlying 3 why Obligors seek to block payments on be undermined.” 16 securities and some recent cases on point. the instrument is a matter of contractual the instrument. Thus, and unsurprisingly, fact, on the first and failed on the second. securities. It goes without saying that After all, if the global financial system has construction applying the standard this is a narrower approach to the expiry This is often stated a as truism – but there what is packaged, legally, as the Bank/ 1 The underlying contract in Yuanda was a been based on various assumptions as to applicable tools. Guarantor’s risk of payment is in fact the of ABI instruments than had previously are three important consequences which JCT Design and Build (2011). Under this risk and liability, and if those assumptions Obligor’s risk of the underlying security been suspected to be the correct one. The That said, it is worthwhile recalling what are often ignored. contract, the employer/main contractor are being tested to breaking point, the being called. approach did, however, turn on the wording these securities have in common – which – rather than some third party – issues allocation of risk is worth consideration. As the instrument is autonomous, anyone of this instrument. It remains to be seen stems from the principle that all these notices as to what payments are due and seeking to restrain the Bank/Guarantor4 Thus, the risk of failure lies with the Obligor. whether a narrower approach would also be Ultimately, financial security (if one is not securities are autonomous instruments. when. The Judge rejected an argument that will need both to have an independent adopted to the ABI wording. talking about charges, debentures and the those notices were sufficient to sums being cause of action and grounds for impugning It is as a result of that risk, that Obligors like) comes in two forms: equivalent to cash As Donaldson MR put it in Bolivinter Oil SA established and ascertained11 – leaving Yuanda dealt with one further issue. The payment under the instrument as against seek to undermine the autonomy principle. and not equivalent to cash. Equivalent to v Chase Manhattan Bank NA2: open whether, where the contract did have nature of the financial security provided the Bank/Guarantor. This is usually That can only be done, absent fraud, if: a) cash: letters of credit (standby and others) expressed as a fraud exception.5 Yet, and on demand bonds. They are equivalent “The unique value of such a letter, bond even with the fraud exception, where the to cash because they are negotiable as or guarantee is that the beneficiary can Bank/Guarantor is not the obligor’s own cash and the banks are required to respond be completely satisfied that whatever bank,6 it is difficult to see what the cause 7 As the Court of Appeal recognised in United Trading Corp v Allied Arab Bank [1985] 2 Lloyd’s Rep 554 at 561 to them as if they were cash (subject to disputes may thereafter arise between of action the Beneficiary has against the 8 Sirius International Insurance Co v. FAI General Insurance Ltd [2003] EWCA (Civ) 470 at [26 – 7]; MW High Tech Projects UK Ltd v Biffa Waste Services Ltd [2015] EWHC 949 (TCC) at [28 – 34] 9 Group Josi Re v Wallbrook [1996] 1 Lloyd’s Rep 35 casting significant doubt on Themehelp Ltd v West [1996] QB 84 [2020] EWHC 468 (TCC) 1 See eg Trafalgar House Constructions (Regions) Ltd v GSGC Ltd [1996] 1 AC 199 10 At [70 – 1] 2 [1984] 1 WLR 392 11 At [83 ff] 3 See also Tetronics (International) Ltd v HSBC Bank Plc [2018] EWHC 201 (TCC) at [26] 12 At [91] 4 In the following discussion, I refer to the party that issued the instrument and will pay against it as the Bank/Guarantor; the party making the claim as the Beneficiary and the party in 13 default triggering the claim against the instrument as the Obligor. 14 At [96]. In fact, it was closer to the URDG wording. 5 Recently reiterated in Alternative Power Solution Ltd v Central Electricity Board [2014] UKPC 31 at [56 ff] but a long standing principle in English law. 15 At [97]. Leaving open, of course, whether the argument was correct on the standard ABI wording. 6 Where the Obligor can rely on the bank mandate between it and the Bank/Guarantor. 16 At [101]

– 22 – – 23 – BRIEF Encounters by this type of instrument. In Yuanda, the Judge concluded that the instrument was performance security – that is security which is on-going throughout the project which would respond on default.17 John McMillan discusses his move to The nature of the security provided by instruments of this nature was, however, Keating Chambers and the highlights of specifically considered in another case featuring Multiplex – Multiplex v R&F One his legal career so far. (UK) Ltd (“Multiplex”).18 “Now, it appears, there is beginning to emerge a proper Here, Multiplex was entitled, under its law and practice as to what autonomous financial contract with the developer to financial security to cover the developer’s payment security means and what it can achieve”. obligations to Multiplex. The developer John McMillan joined Keating in defaulted on numerous occasions both in February 2020 following five years payment and provision of the security. As accepted that no bond could be provided Therefore, it [payment into court] does in the international arbitration group a result, a CPR24 application was made. but there were funds in court. Thus, the not provide the same payment security at WilmerHale. He specialises in To settle that, the developer offered once Court considered whether those monies in as would a bank guarantee or bond, “Understanding the successes and high-value, complex arbitration and again to provide security, in default of court could be used. The Court considered pursuant to which the claimant would litigation, with a particular focus on the which Multiplex could suspend works on – but did not set out the scheme – that the have access by way of an appropriate construction, engineering, energy, and disasters that can occur at each stage the Nine Elms development. The developer monies in court could be so used but only demand to immediate payment of cash technology sectors. He has advised on or defaulted again in provision of the security if they were subject to some court devised funds. acted in arbitrations under the ICC, LCIA, but paid sums into court. Multiplex scheme.23 Thus, the Court in Liberty SIAC, UNCITRAL, SCC, NAI and ICSID [of a dispute’s lifespan] is important.” argued that it could still suspend, but the Mercian tacitly accepted that funds into This is clear statement as to how rules, involving common-law, civil-law developer argued that doing so would be court were not equivalent to a bond. autonomous financial securities operate and international-law issues. repudiatory breach due to the monies in in building and infrastructure projects. In court providing sufficient security. In Multiplex, the Court was more explicit the law of international trade, letters of as to the position: Multiplex would be a credit are a one shot security for payment How have you found your first What do you think you have You studied Chinese at Thus, the argument turned on what type secured creditor in respect of the funds in obligations against proof documents. In few months at Keating? learnt from the law firm University; how has this helped the event of insolvency, the payment into financial transactions, letters of credit of security was created by what might be environment that will be of termed a traditional financial security as court being equivalent to an equitable are ultimate recourse documents. In It’s been a strange time to start a new job. in your practice? charge.24 The Court also referred to the infrastructure and projects, the usual I knew a few people at Keating before joining benefit to clients? opposed to payment into court. Having a good grounding in Chinese can payment into court as a procedural pattern has been for law and practice to and had a month in chambers before the save clients time and money in a dispute The developer argued that, relying on security. The former – insolvency security follow these precedents. Now, it appears, lockdown came into force. Since then, At a law firm you get a lot of exposure for or against a Chinese company. I have Halvanon Insurance Co Ltd19 and Re Peak with a secured creditor ranking – will be there is beginning to emerge a proper Chambers has been good at keeping the to clients’ decision-making processes. acted on cases where large volumes of Hotels & Resorts Ltd (In Liquidation); familiar to many. The latter - a procedural law and practice as to what autonomous social side of things ticking over. There is It can be uncomfortable for a lawyer to documents had to be translated before Crumpler & Another v Candey Ltd20 (“Re security – is absolutely consistent with financial security means and what it can a Chambers social network so we can post see a beautiful 30-page opinion reduced they could be reviewed by the legal team Peak”) that money paid into court gave the Court’s abilities to control its own achieve. photos and messages and a Chambers to a few slides to be shown at a board and it’s not ideal to say the least. On one the Beneficiary a “security interest” – as procedures and, for example, to require Strava group so people can race each meeting, but it focuses you on the client’s occasion, a client was gearing up to accuse the Court of Appeal in Re Peak Hotels had payment in to govern against default or Returning to the first or second theme other. Chambers also remains busy and it priorities. There is always a tension between a Chinese counterparty of fraud based, in recognised.21 The question was what sort of as a precondition to continuing to have of this piece – risk. These cases return is relatively straightforward for barristers providing advice that is cautious enough to part, on a mistranslation. Being able to read security interest. access to the court process.25 ultimate risk to the defaulting party. That to work at home. We are all very aware that be accurate, but clear enough to be useful. is undoubtedly correct. Yet, in these times, others in the profession (and outside it) are Getting that balance right is part of giving the original document avoided a potentially Whether a payment into court was the The Court was also clear that a payment another question arises – who is the risk having a far more difficult time. good advice, whether you are at a law firm serious misunderstanding. same as the financial security provided by into court was not the same security taker, or funder, of ultimate default? or the bar. the financial instruments being discussed proffered by the instruments being What have you particularly What has been the highlight of 26 I was also able to see disputes throughout here was considered in Liberty Mercian No discussed here. As the Court said: enjoyed since joining Keating? your career so far? 322 (“Liberty Mercian”). In this case it was their lifespan, from building the case to bringing the claim to enforcing a judgment Perhaps the first time I cross-examined a I’ve been working on a couple of disputes or award if the client is successful. relating to big infrastructure projects as witness. It was in an arbitration about an Sometimes a case turns on a crucial oil concession off West Africa and I was part of a Keating team, as well as working cross-examination (and it’s fun when 17 At [92] cross-examining an expert witness. I told on some commercial disputes and smaller that happens), but sometimes it turns 18 [2019] EWHC 3464 (TCC) myself that he was more afraid of me than construction disputes on my own. I on whether the client finds the right 19 [1988] 1 WLR 1122 wouldn’t be without any of them, but it’s the I was of him. Anyway, it went well and I got documents to support its case, instructs a couple of concessions. A lot of legal life is 20 [2018] EWCA Civ 2256 smaller things that I’ve particularly enjoyed. the right experts, or makes the right slaving away behind a desk, but hearings 21 [2014] EWHC 3584. At [82] There is often a very short distance procedural applications. Understanding and cross-examination are always exciting 22 At [56 ff] between providing advice and that advice the successes and disasters that can occur and throw up surprises. As Mike Tyson said 23 As yet no court has attempted the thought experiment to create the same being put into action, which is satisfying, at each stage is important when you are about disputes, everyone has a plan until 24 At [24] and the stakes for small and medium-sized considering the best way to pursue or they get punched in the mouth. 25 For example, an order that a Defendant have permission to proceed with its defence, conditional on the payment into court. businesses involved in litigation are often defend a claim. 26 At [24] very high.

– 24 – – 25 – Keating Chambers Providing dispute resolution services to the construction, 15 Essex Street engineering, shipbuilding, energy, procurement and technology London WC2R 3AA sectors worldwide. DX: LDE 1045

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