Case and Legal Updates

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RGB Plastering Limited v Tawe Drylining and Plastering Limited [2020] EWHC 3028 (TCC)

The Sub-contractor (Tawe Drylining and Plastering Limited) was appointed by the Contractor (RGB Plastering Limited) to carry out works for a project in Portsmouth.

Clause 18 of the Sub-contract set out the payment mechanism and the payment schedule listed the dates the parties were required to follow, including the payment application dates, and the due dates. It also listed the email address to which the applications need to be submitted, and the consequence of submitting late applications.

The Sub-contractor submitted a payment application, which was late, not sent to the specified email address and referred to a valuation date not listed in the payment schedule. The Contractor did not pay the amount specified in the payment application and terminated the Sub-contract.

This was referred to adjudication, which was found in the Sub-contractor’s favour. However, the Contractor sought to challenge the validity of the payment application in court, for failing to satisfy the Sub-contract requirements.

It was held that the payment application failed to comply with the Sub-contract requirements and was therefore invalid.

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Styles Wood Ltd v GE CIF Trustees [2020] EWHC 2694 (TCC)

The Employer (GE CIF Trustees) appointed the Contractor (Styles & Wood Limited) under a JCT Intermediate Building Contract 2011 (with design), to carry out works at a site in Manchester.

The Contractor submitted a final account, which was around £4 million higher than the amount valued by the quantity surveyor. So, what was the correct amount due to the Contractor?

An adjudication was issued to determine this, but during the process, the Contractor went into administration. The adjudicator found in favour of the Contractor, however, the sum awarded to the Contractor was much lower than the amount submitted in the final account.

The Employer disagreed with the adjudicator’s decision and sought a stay of execution. The Contractor on the other hand, sought to enforce the decision in court.

It was held that the adjudicator’s decision shall be enforced, on the basis that despite being insolvent, the Contractor provided the appropriate undertakings and security.

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Maeda Kensetsu Kogyo Kabushiki Kaisha and China State Construction Engineering Limited v Bauer Hong Kong Limited [2020] HKCA 830

The Contractor (Maeda and China State) appointed the Sub-contractor (Bauer) for excavation and installation works, relating to a tunnel project for a rail link in Hong Kong.

During the works, the Sub-contractor came across unexpected ground conditions and realised further work would be required.

The Sub-contractor issued a notice, heard by an arbitrator, claiming the further work required is a variation under the contract. However, the Sub-contractor later decided to claim on the basis the ground conditions would cause a delay. The issue was whether the Subcontractor could claim in relation to poor ground conditions, even though the initial notice focused on a different issue?

The arbitrator accepted the Sub-contractor’s claim relating to poor ground conditions. However, the High Court disagreed and held the provision under clause 21 of the Sub-contract is condition precedent for a loss and expense claim, and expressly states any claims should be notified to the Contractor, with full and detailed particulars. This was later reinforced by the Court of Appeal.

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Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48

This case concerned an arbitration between the insured (Halliburton Company) and the insurer (Chubb Bermuda Insurance Ltd), following an explosion and fire in the Gulf of Mexico in 2010.

The insured claimed against their insurer under the Bermuda Form liability policy, but the insurer did not pay the amount claimed, as it was deemed unreasonable. The insured sought to refer this matter to arbitration, and although two arbitrators were appointed, they were unable to agree on a final arbitrator. The court appointed the final arbitrator, and the insured applied for the removal of this arbitrator and appealed to the Supreme Court, on the basis they had previously acted in matters the insurer was involved in.

The issues were:

  1. Can an arbitrator be appointed for different cases concerning the same matter, which involve the same party?
  2. Does the arbitrator have a duty to disclose this?

The appeal was dismissed on the basis that appointing the same arbitrator would only be an issue if it was apparent there is bias, which in this case was not. However, the court upheld the legal duty of disclosure, which requires an arbitrator to disclose any facts and circumstances, which may give rise to bias.

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Joanne Properties Ltd v Moneything Capital Ltd and another [2020] EWCA Civ 1541

Joanna Properties (‘JP’) had taken a loan from Moneything (‘MT’) and had found it was unable to pay off the loan, a receiver was appointed over JP’s assets.

JP and MT entered into a compromise agreement in respect of the loan.  The agreement was never put into a formal contract but various emails and letters had been sent between the parties’ solicitors which were headed ‘subject to contract’.

The Court of Appeal held that the use of the term ‘subject to contract’ and the lack of an actual contract meant the court should not find an agreement in this instance.  The court will not imply a legally binding agreement between the parties as these types of communications make it clear they do not want to be bound until a contract is finalised and executed.

The court also held that the use of the term ‘subject to contract’ made it clear that both parties wanted to be afforded the right to walk away from contract negotiations and not finalise a deal if necessary.

The court also explained that a Part 36 offer in proceedings is different to other types of offers as it can be accepted even if it is initially rejected.

The moral here is that the contractor and/or Employer must ensure that it has a written settlement agreement in place and does not rely on communications that may have been exchanged between the parties and/or their legal representatives, especially if these communications are without prejudice/part of an attempt to settle the matter.

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OD Developments v Oak Dry Lining Ltd [2020] EWHC 2854 (TCC)

The Contractor, OD Developments (‘ODD’), had engaged the Sub-Contractor, Oak Dry Lining (‘Oak’), to undertake dry-lining Works on the project.  The parties entered into a Letter of Intent, which set out that they would enter into a JCT Design and Build Subcontract.  The Subcontract was never entered into by either party.

Oak brought an adjudication for lack of payment by ODD, the adjudicator found that ODD should pay Oak £431,291.81 and pay the adjudicator’s fees.  The adjudicator also found that the JCT Subcontract’s terms were to be referred to as if they formed part of the contract because the LOI said the JCT Subcontract would apply and the parties acted in accordance with the Subcontract.

ODD brought a part 8 claim to the TCC, claiming that the adjudicator was incorrectly appointed and did not have the jurisdiction to hear this dispute.

The Court held that the notice of adjudication that Oak issued and served was valid.  It was not of relevance that the notice did not refer directly to the adjudication clause in the LOI, the main thing was that the notice was drafted in accordance with, and satisfied the applicable criteria in, the adjudication clause of the LOI.

The Court also held that the wording of the LOI made it clear that either:

  1. The LOI would form the basis of the contract; or
  2. The JCT Subcontract would have to be entered into.

The Court was not satisfied that the LOI intended for the JCT Subcontract to amalgamate into the LOI and form a hybrid contract.

The Court, in this instance, did not enforce the adjudicator’s decision as they found he had decided on this matter based on a contract that did not exist and therefore had no jurisdiction.

This is a rare case where the Court will not enforce an adjudicator’s decision.  However, this was done on the basis of a lack of jurisdiction (it is therefore not a ground breaking case in this regard).

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PBS Energo AS v Bester Generation UK Ltd [2020] EWHC 223 (TCC)

The Contractor (Bester) appointed a Subcontractor (PBS) under a FIDIC Silver Book contract, to assist in the design, construction and installation of a biomass energy plant. The parent company of PBS provided a guarantee to complete the works.

Delays were caused to the completion of the works, and both parties claimed they were entitled to terminate the contract. The Subcontractor relied on the Contractor’s failure to make a milestone payment and the Contractor’s failure to adhere to the contract. However, the Contractor relied on the Subcontractor’s failure to comply with a notice to correct, and the Subcontractor’s abandonment of the works.

It was held that the Contractor was entitled to terminate, and not the Subcontractor, on the basis that the Subcontractor did not achieve the milestone, and abandoned the works, without an intention to perform the subcontract.

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Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd [2020] NSWCA 172

The developer (Parrwood) employed the contractor (Trinity) to design and construct the Affinity Project.  The developer believed the contractor breached the contract, and retook possession of the works. Upon receipt of the contractor’s payment claim,  the developer stated the contractor was not entitled to any payment. The contractor referred the claim to adjudication.

The first adjudicator concluded the contractor was not entitled to any payment. However, the second adjudicator concluded the first adjudication was void on the basis the adjudicator failed to determine the payment claim.

The developer sought to challenge the second adjudicator’s decision in the Supreme Court, and later in the Court of Appeal. The developer’s appeal was dismissed. The court found the first adjudication was void, as the adjudicator failed to determine the amount of the progress payment the contractor was due.

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National Stadium (Grenada) Corporation (Respondent) v NH International (Caribbean) Ltd (Appellant (Trinidad and Tobago) [2020] UKPC 25

NS employed Imbert Construction Services (ICS) to develop a national stadium in Grenada, and the project was agreed to be funded by Clico Bank (CB). ICS outsourced the work to a major contractor, NH. NH’s fees were to be paid by CB directly.

ICS wanted to terminate its agreement with NH, who claimed it was entitled to payment for the work carried out. NH obtained injunctions requiring CB to deposit money into an account at the Unit Trust Corporation (UTC). CB and ICS went into liquidation, and the contractor could only get paid if it could claim the money in the account at the UTC.

Initially, it was held that NH was entitled to the amount in the UTC account. However, upon appeal, NH was ordered to pay the money to NS.

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