REUTERS | Thomas Peter
October 21, 2020

Assignment of sub-contracts – benefit and burden, risk and reward in the TCC

When a project goes so poorly that an employer feels obliged to terminate its main contractor, the employer will often take an assignment of various sub-contracts. But what exactly does it mean to “assign a sub-contract”?

Of course, the employer may also claim against the main contractor for delay damages, additional costs to complete and so on, and the main contractor may wish to pass down its liability to the sub-contractor(s) whom it blames for the problem. But can it do so?

These questions, and more, were addressed by O’Farrell J in the recent TCC case of Energy Works (Hull) Ltd v MW High Tech Projects UK Ltd.  Continue reading →

REUTERS | Tom Brenner
October 19, 2020

TCC throws a lifeline to paying parties: “manifest injustice” trumps the statutory payment machinery

In 2015, one of the hot topics of the day (at least in construction circles) was the case of Galliford Try Building Ltd v Estura Ltd, where the TCC unusually ordered a partial stay of an adjudicator’s decision on the basis that to enforce the decision in full would result in “manifest injustice” to the paying party. There was a concern that the case would encourage a flurry of cases seeking to test the boundaries of that principle.

Indeed, since Estura, various attempts have been made to seek a stay on grounds of manifest injustice, but rarely have these cases been successful. This was not to be unexpected; the failure to secure a stay on the basis of “manifest injustice” simply emphasised the exceptional nature of the decision in Estura.

However, the recent case of JRT Developments Ltd v TW Dixon (Developments) Ltd is an example of where the TCC decided to buck the trend and follow Estura. In that case, the court ordered a stay of enforcement of a £1.15 million smash and grab adjudication decision obtained by JRT Developments Ltd (JRT) on the basis that in the “exceptional circumstances” of the case, there would be manifest injustice to TW Dixon (Developments) Ltd (TWD) if the judgment was not stayed.

In reaching that conclusion, the court considered “all of the circumstances of the case” and therefore took into account factors beyond those that had been identified in Estura as relevant. These factors included, significantly, the factual context in which JRT had submitted its payment application, which resulted in an adjudicator’s decision in its favour, and the nature of the sums claimed in that application. Continue reading →

REUTERS | REUTERS/Goran Tomasevic
October 16, 2020

A few lessons I have learned from resolving disputes during the pandemic

I appreciate that the title of this blog may have put some people off, partly because they’ve had enough of reading about this frankly horrible pandemic, and partly because much ink has already been spilled on the issues arising from the resolution of disputes during it (including by Matt in earlier blogs). However, for those of you still reading, I want to assure you that this is not intended to be a detailed guide, but rather a summary of a few lessons I have learned, in some cases the hard way.

I’ve intentionally referred to “resolving disputes” as many of these lessons have been learned conducting arbitrations during the pandemic, as well as adjudications. I’ve not yet conducted a mediation during the pandemic, so that will have to wait for another day.  Continue reading →

REUTERS | Jacky Naegelen
October 7, 2020

Retentions under scrutiny and the transferred loss principle

In this challenging economic climate, contractors are striving to keep their businesses afloat. Healthy cash flow is key and a major barrier to achieving this can be the slow release of (or indeed the failure to release) retention.

The idea of a retention in theory is simple: a way of incentivising the contractor to return to site to remedy outstanding defects and/or complete the project. If it fails to do so, the employer is not left high and dry. Provision for retention is routine in a number of standard forms including many in the JCT family and in NEC4 Option X16.

But, as with many good ideas, the problem comes with their operation in practice. The February 2020 summary of responses to the BEIS 2017 consultation on the practice of cash retention under construction contracts makes a sobering read. It highlights unfair practices surrounding retentions in certain corners of the industry. Continue reading →

REUTERS | Michael Dalder
October 1, 2020

Successful adjudication enforcement in favour of an insolvent company

Hot on the heels of the Supreme Court’s decision in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd, in what may be the first summary judgment to enforce an adjudicator’s decision in favour of a party in administration, we have successfully represented the claimant in Styles and Wood Ltd (in administration) (S&W) v GE CIF Trustees Ltd.

Relying on the Supreme Court’s judgment in Bresco, S&W argued that the insolvency set-off rules did not trump a construction contract party’s right to adjudicate. Further, S&W proposed to fulfil the conditions of enforcement, as set out in Meadowside Building Developments Ltd (In Liquidation) v 12 – 18 Hill Street Management Co Ltd, with the joint administrators undertaking to ringfence the sum the adjudicator awarded and providing an ATE insurance policy to cover any potential adverse costs order in subsequent final determination proceedings.

The court accepted these arguments and decided in favour of S&W.

Continue reading →

REUTERS | Yuriko Nakao
September 29, 2020

Time isn’t on your side and resolving old disputes is never easy

Time flies when you are having fun, or so the saying goes. I think it flies whether you are having fun or not, although I’m sure we’ve all experienced those moments when it isn’t flying at all and it feels like it has stood still. As Pink Floyd famously sang, “Ticking away the moments that make up a dull day”.

You may wonder why I am talking about time. Well, it’s because of the events leading up to Fraser J’s judgment in John Doyle Contractors Ltd v Erith Contractors Ltd. They are all to do with time. Continue reading →

REUTERS | Ints Kalnins
September 25, 2020

Dangers of construction insolvency

For many years, the construction industry has suffered more than most with insolvencies.

In 2018, it was the hardest hit economic sector, with construction insolvencies representing 17% (3,001 from a total of 17,454). This trend continued into 2019, with provisional figures indicating construction insolvencies accounted for 18.6% (3,198 from a total of 17,197). These statistics are regularly translated through the media as there never seems to be a month that goes by without news of contractor insolvency – from high profile industry names to historic brands to specialist contractors – no one appears to be safe.

Heading into 2020, and even before the COVID-19 pandemic changed the world, many industry analysts were warning that the construction sector should prepare for distress within the supply chain as market analysis indicated a falling demand, rising input costs and lower margins.

In addition to the already precarious market, COVID-19 is having a significant impact on the construction sector at large, with pressure on the labour, supply chains and finances of all companies involved. The environment in which these organisations are having to operate is ever-changing, with regular advice from the government and the Construction Leadership Council (CLC) about how to keep sites open while ensuring that contractors comply with the government’s social distancing requirements. Notwithstanding the emergency support measures introduced by the government, and the continued efforts of the construction industry to be open for business, it is inevitable that the financial health of all companies will be impacted and, despite best efforts, some will be fatally wounded.

Given the current climate, there is a growing need to be alert to the fragile market with contractors displaying early warning signs of distress. The challenge is for employers to identify these early warning signs and to act quickly wherever possible. Continue reading →

REUTERS | Juan Carlos Ulate
September 21, 2020

Global Water Associates: applying Hadley v Baxendale

From time to time, those seminal cases we all studied during the early parts of our career pop up in practice. We’re all familiar with them: the snail in the bottle in Donoghue v Stevenson; the spurious sounding flu remedy in Carlill v Carbolic Smoke Ball Co — the list goes on.

Of these key cases, one that has us continually reaching for the textbooks and considering in increasingly varied circumstances is the Court of Exchequer’s 1854 decision in Hadley v Baxendale. The scope of recoverability for damages arising from a breach of contract laid down in that case — or the test for “remoteness“— is well-known:

“Now we think the proper rule in such a case as the present is this:—Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”

The proper application of the two limbs to commercial contracts has remained a hot topic ever since, with the Privy Council’s decision in Attorney General of the Virgin Islands v Global Water Associates Ltd being the most recent addition to a long line of such cases. Continue reading →

REUTERS | Lucy Nicholson
September 18, 2020

The landscape after Bresco continues to evolve

You must have been in isolation if you haven’t heard or read about the Supreme Court’s decision in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd. It has been hailed by some as opening the floodgates to adjudications by insolvent companies. But, as a series of recent judgments show, there remain a number of obstacles that need to be overcome by insolvent entities seeking to enforce an adjudication award. Fraser J’s judgment in John Doyle Construction Ltd v Erith Contractors Ltd is the latest in line. Continue reading →

REUTERS | Henry Nicholls
September 15, 2020

Jurisdictional reservations revisited

I’m pleased to say that I am too young to remember The Doors in their heyday, but I loved the biographical film that was released when I was a teenager. What, you may well ask, have The Doors got to do with jurisdictional reservations? Well, when I read the recent adjudication enforcement judgment in Lane End Developments Construction v Kingstone Civil Engineering, which concerns, among other things, jurisdictional reservations, the song that popped into my head was People Are Strange. I can only put this down to some of the facts. Continue reading →