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July to September 2017 case review for construction practitioners

Euripides, The Children of Heracles:

“In case of dissension, never dare to judge till you’ve heard the other side.”

A selection of the more interesting decisions affecting construction and engineering practitioners during the third quarter of 2017.

Adjudication

In Bernhard Sports Surfaces Ltd v Astrosoccer 4 U Ltd (unreported), the TCC allowed enforcement proceedings to continue, even though there was an interim moratorium (under Schedule B1 of the Insolvency Act 1986), and enforced the adjudicator’s decision. Tom Owen discussed.

In Christopher Linnett Ltd v Harding (t/a M J Harding Contractors), Alexander Nissen QC (sitting as a deputy High Court judge), held that the defendant had entered into the adjudicator’s agreement by conduct with the adjudicator as an individual. Matt Molloy discussed.

In Enviroflow Management Ltd v Redhill Works (Nottingham) Ltd (2017), O’Farrell J severed an adjudicator’s decision, finding that the adjudicator did not have jurisdiction to award the unpaid party its adjudication costs under the Late Payment of Commercial Debts (Interest) Act 1998. Matt Molloy discussed.

In Jonjohnson Construction Ltd v Eagle Building Services Ltd, Jefford J enforced an adjudicator’s decision, rejecting all of the defendant’s arguments, including that the same or substantially the same dispute had been referred to adjudication previously.

In Vinci Construction UK Ltd v Beumer Group UK Ltd, O’Farrell J granted declaratory relief, finding that the adjudicator’s decision on the interpretation of the parties’ contract was wrong. Matt Molloy discussed.

Arbitration

In Autoridad del Canal de Panama v Sacyr SA and others, the Commercial Court refused an application for a stay of proceedings under section 9 of the Arbitration Act 1996. The court noted that this may lead to the possibility of inconsistent decisions in arbitration and litigation. It then refused to stay the court proceedings pending an appeal against its earlier refusal to grant a stay.

In Maurice J Bushell & Co v Graham Irving Born, the High Court allowed an appeal against an arbitral award on a point of law under section 69 of the Arbitration Act 1996 and remitted it to the tribunal. In doing so, it rejected the claimant’s argument that the court should set aside the award and determine the relevant issue itself. Jonathan Cope discussed.

In Wilfried Guemiand Bony v Gilbert Francis Kacou and others, the High Court refused an application for a stay of proceedings under section 9 of the Arbitration Act 1996, finding that there was no implied contract incorporating an arbitration agreement.

Collateral warranties and third party rights

In Chudley v Clydesdale Bank plc (t/a Yorkshire Bank), the High Court set out its approach to identifying third parties who can enforce contract terms under the Contracts (Rights of Third Parties) Act 1999 where they are not named in the contract.

Construction claims

In 125 OBS (Nominees1) and another v Lend Lease Construction (Europe) Ltd and another, Stuart-Smith J found a design and build contractor liable for defective glass panes on a redevelopment in the City of London.

In Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd, Fraser J made a number of findings in a liability-only trial, including that the employer was in repudiatory breach of the contract when it dismissed the contractor alleging widespread defects in its work. The court also strongly criticised ICI’s expert witnesses, which Jonathan Cope discussed.

In Paul Robert White and another v PSM Residential Finance Ltd, O’Farrell J gave the claimants permission to have their application to set aside a settlement agreement heard, finding that their case that a certificate of practical completion was deceptive and induced a settlement agreement was weak but that a full hearing was necessary.

In Stewart Milne Group Ltd v Anderson and another, Lord Tyre in the Outer House of the Court of Session held that a claim for the cost of completing works using an alternative contractor following termination of the original contractor’s engagement required certification in accordance with the building contract.

In Trant Engineering Ltd v Mott MacDonald Ltd, O’Farrell J granted an interim injunction allowing access to a building information model (BIM).

Contract formation

In Blue v Ashley, the High Court held that an informal conversation between businessmen in a public house was not intended to establish a contractual relationship between them, and is a useful reminder of the applicable principles concerning the intention to create legal relations.

In Irvine v General Medical Council, the High Court held that a medical practitioner practised without a valid contract of professional indemnity insurance. A binding contract was not concluded at the time the application form was submitted and a signed direct debit mandate given.

Contract interpretation

In Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd, O’Farrell J considered, as a preliminary issue, the meaning and effect of a limitation of liability clause in the parties’ contract.

In MT Højgaard A/S v E.On Climate and Renewables UK Robin Rigg East Ltd and another, Lord Neuberger in the Supreme Court allowed E.ON’s appeal and restored the first instance decision. The court held that the “fitness for purpose” obligation in the contract’s technical requirements was to be given its natural meaning and that it was not inconsistent with other terms of the contract. Both John Hughes-D’Aeth and Matthew Finn discussed the case.

Damages

In Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd, O’Farrell J considered whether a claim for wasted expenditure amounted to a claim for loss of profit,
which Helen Armstrong discussed.

Indemnities, guarantees and bonds

In Autoridad del Canal de Panama v Sacyr SA and others, as part of an application under section 9 of the Arbitration Act 1996, the Commercial Court accepted that, because the guarantees in question were “true” guarantees rather than demand guarantees, defences to liability would potentially overlap with defences raised in the arbitration under the main contract.

In Fife Council v The Royal and Sun Alliance Insurance plc, the Outer House of the Scottish Court of Session held that the beneficiary’s demand for payment under an on demand “restoration bond” was valid. In doing so, the court considered the underlying commercial purpose of the bond and indicated that it was appropriate to construe the bond in its factual context.

Insurance

In BAE Systems Pension Funds Trustees Ltd v Royal & Sun Alliance Insurance plc, O’Farrell J ordered insurers (RSA) to be joined to proceedings under the Third Parties (Rights against Insurers) Act 2010 (Third Parties Act 2010), notwithstanding their argument that the policy did not cover the insured’s potential liability in the underlying dispute.

In Redman v Zurich Insurance plc and another, the High Court allowed an application to strike out a claim against the defendant liability insurers under the Third Parties Act 2010, on the basis that there were no reasonable grounds for bringing the claim. The court held that, on the proper construction of the transitional provisions of the Third Parties Act 2010, the Act did not apply to the claim.

Litigation

In ADVA Optical Networking Ltd and another v Optron Holding Ltd, Coulson J granted relief from sanctions in circumstances where the failure to file a defence was a serious default, but of minor significance to the proceedings as whole.

In Atlantisrealm Ltd v Intelligent Land Investments (Renewable Energy) Ltd, Jackson LJ in the Court of Appeal allowed an appeal against a refusal to order the deletion of a privileged email that had been inadvertently disclosed by the appellant to the respondent. It gave guidance on the correct approach to inadvertent disclosure under CPR 31.20.

In Hamad M Aldrees & Partners v Rotex Europe Ltd, Carr J granted the defendant’s engineering expert wide access to the claimant’s production process as he said it was necessary to fulfil his duty as an expert.

In Mott and another v Long and another, HHJ Grant granted the defendants’ application for relief from sanctions, even though they filed their costs budget ten days late. The delay was serious or significant but, in all the circumstances, it was just to grant relief. Sarah McCann discussed.

In Russell and another v Stone (t/a PSP Consultants) and others, Coulson J refused to strike out certain claims in a construction dispute against a first and third defendant on the basis that they were statute-barred.

In Vilca and others v Xstrata Ltd and anotherStuart-Smith J held that permission to adduce new expert evidence was not conditional on the disclosure of previous expert evidence.

Negligence

In Osborne v Follett Stock (a firm) and another, the High Court dismissed a professional negligence claim against solicitors as being statute-barred. The judgment highlights some of the limitation issues that can arise in professional negligence claims, particularly in claims involving “historic” alleged professional negligence.

Payment under the Construction Act 1996

In Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd, Fraser J made a number of findings in a liability-only trial, including ICI’s entitlement to recover over-payments from MMT and the fact that it could challenge the value of MMT’s works, which Matt Molloy discussed.

Professional appointments

In Bank of Ireland and another v Watts Group plc, Coulson J rejected a bank’s claim against its project monitoring surveyor and strongly criticised the bank’s expert witness. Jonathan Cope discussed project monitoring surveyors and the expert issues.

Want more?

For details of the year’s previous judgments, see our January to March and April to June case reviews. Public procurement decisions are detailed in the Public procurement case tracker.

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