REUTERS | Vasily Fedosenko
September 18, 2019

Assignment and performance bonds: Sumitomo Mitsui v Euler Hermes

REUTERS | Vasily Fedosenko
September 18, 2019

Assignment and performance bonds: Sumitomo Mitsui v Euler Hermes

The courts enjoy a fairly regular diet of cases concerning the validity of calls on performance bonds and similar securities. I have blogged on this before, in early 2017.

Bond issuers who are reluctant to pay out on a bond will raise either:

Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV), heard by Butcher J in the Commercial Court a couple of weeks ago, is a formal defence case, which grapples with the situation where the original beneficiary has tried to assign the benefit of the bond to a third party, and problems with that assignment cause problems for the ultimate beneficiary. Continue reading →

REUTERS | Heinz-Peter Bader
September 17, 2019

Going for gold – FIDIC publishes its golden principles

Another blog, another new FIDIC publication. This time it’s the FIDIC Golden Principles, first edition, 2019 which was officially launched at the FIDIC Asia Pacific Contract Users’ Conference in Hong Kong on 25 June 2019. I touched on FIDIC’s development of the “Golden Principles” (GPs) in a previous blog post, Amending FIDIC contracts: practical issues. In this blog, I look at them in a little more detail.

To start, I should clarify that this is not the first time that we have seen the GPs. They made their first appearance in the guidance notes to the Second Editions of the Rainbow Suite in December 2017 and were also included with the FIDIC Emerald Book published in May this year. However, they were limited to the principles themselves (discussed below). The new stand-alone guide provides context by explaining what the GPs are and the reasons behind them, as well as offering additional guidance on how to draft amendments to FIDIC contracts. The FIDIC GPs document is freely available to download from FIDIC’s online bookshop.  Continue reading →

REUTERS | REUTERS/Eric Gaillard
September 10, 2019

Court of Appeal’s useful guidance on implying isolated payment provisions from the Scheme

For some years now modular construction has been on the increase for new buildings, particularly in the hotel sector where it is now the norm for new hotels to be supplied with bathrooms and bedrooms manufactured off site. Indeed, I suspect that most of us have stayed in such rooms without even realising that more or less everything in the room (except the loose furniture) was installed off site, and sometimes many thousands of miles off-site.

It may be because I only see the projects where things have gone awry and disputes have arisen, but, having decided a few disputes regarding modular building products, it’s clear that this part of the industry remains susceptible to the types of disputes we see with more traditional methods of construction.

I want to talk about one such case this week, namely the Court of Appeal’s decision in Bennett (Construction) Ltd v CIMC MBS Ltd (formerly Verbus Systems Ltd) (which it handed-down at the end of August).  Continue reading →

REUTERS | Toby Melville
September 3, 2019

VAT reverse charge

What is the reverse charge?

Coming into effect on 1 October 2019, the reverse charge in relation to building and construction services is set to bring about a major change in how VAT is handled in the construction sector. All those involved – including developers – need to be aware of when it will apply and how it will work.

The reverse charge will require the recipient of services, rather than the supplier, to account for VAT. This requirement will apply throughout the chain of suppliers, up to the point where the recipient of the services is an “end user”. The “end user” concept is critical and we will look at this in more detail below. Continue reading →

REUTERS | Lisi Niesner
August 28, 2019

Biting off more than you can chew: no oral modification and entire agreement clauses

The Court of Appeal recently considered the application of, and relationship between, no oral modification (NOM) and entire agreement clauses. While this was not a construction case (the appeal in question concerned a contract for the provision of dental services), both types of clause are commonly included in construction contracts.

The judgment also restates a number of rules of contractual interpretation, which serve as a useful reminder, and perhaps a warning, of the potential pitfalls when seeking to administer and vary contracts. Continue reading →

REUTERS | Charles Platiau
August 27, 2019

“The good, the bad and the ugly” expert witnesses

I’m often asked why I rarely blog about what it takes to be a “good” expert witness, instead of focusing all the time on examples of “bad” expert witnesses.

My answer?

Because the cases containing examples of “bad” behaviour are far more bloggable than those brief sentences where the judge applauds a witness for their behaviour, whether that is in the witness box or prior to that, in their conduct throughout the dispute, including in writing their expert report. That is clear from the good, the bad and the ugly that follows. Continue reading →

REUTERS | Rebecca Naden
August 23, 2019

Mediation update: TCC issues guidance on ADR clauses

When a problem surfaces, many turn to mediation to help them solve it.

A mediation may lead a party to review its risks and what lies ahead if it continues the dispute. The mediator may be able to facilitate a conversation that clears the air, corrects an impression or allows an appreciation of another perspective. Within a short space of time (usually four or eight hours), all parties may be able to leave with a deal that puts an end to their dispute and lets everyone move on.

Mediators are most often called in after parties have fallen into dispute. Those parties may already have parted company or, as is also commonplace, may still be working together on an ongoing project.

The well-known benefits of mediation have however led some to think of mediation before any dispute has arisen and include an alternative dispute resolution (ADR) clause that refers to mediation in their contract.

This post looks at Ohpen Operations UK Ltd v Invesco Fund Managers Ltd, a recent TCC decision about the enforceability of such ADR clauses. Continue reading →

REUTERS | Ints Kalnins
August 19, 2019

Insolvency proceedings, guarantees and contractual pre-conditions

If you are considering commencing insolvency proceedings against another party, do ensure that they actually owe you a debt before you do so. This point is so obvious that it barely needs stating. However, Martin v McLaren Construction Ltd serves as an example of how things can go badly wrong if it is not double-checked. Continue reading →

REUTERS | Bogdan Cristel
August 14, 2019

Homeowners beware – adjudication can catch you out

I did a quick search to see what the internet could tell me about August. Apart from being the eighth month of the year, and one of seven months with 31 days, the Anglo-Saxons called it Weod monath, which means Weed month, because it is the month when weeds and other plants grow most rapidly. It also used to be the month when we celebrated the harvest (that happens later now, thanks to Henry VIII).

August is also the last of the summer months and it is always notoriously quiet in London, with everyone (it seems) taking holiday before the new school term starts.

For the litigators among you, it is also summer recess in the courts, which means there is often very little new to write about. Therefore, I was quite pleased to see Waksman J’s judgment in ICCT Ltd v Sylvein Pinto, which dates from earlier in the year but only recently became available.

If you are unfamiliar with this judgment, it is certainly a case of “homeowners beware”. Continue reading →

REUTERS | Kai Pfaffenbach
August 7, 2019

Quantum meruit – how much is too much?

A developer client recently called me for advice on a new residential development project. My client was in the process of negotiating building contract terms, including the contract sum, with its preferred contractor. In the meantime, both parties were keen for the contractor to start the works in order to keep to the project programme. My client asked if an initial letter of intent could be put in place, with a limited scope of work. He suggested that works beyond this scope could be valued at a later date or, failing that, on a quantum meruit basis.

We often receive similar queries from clients. While we would always suggest that a building contract should be entered into before construction works are commenced, it is relatively commonplace for a letter of intent to be issued while negotiations on the contract terms continue in the background. In practice, parties should be careful not to allow the works to progress beyond the scope agreed in a letter of intent without finalising the terms of the building contract, including the contract sum. This could lead to a claim for payment being assessed outside the contractual framework, as a restitutionary claim for a quantum meruit. Continue reading →