Case Law Updates – June 2024

Laing O’Rourke Delivery Limited v Sweett (UK) Limited [2024] EWHC 1088 (TCC)

Facts

The matter relates to a private finance imitative (“PFI”) contract for construction works of a mental health hospital, Roseberry Park Hospital, in Middlesborough.

The local NHS Trust entered into a Project Agreement dated 12 December 2007 with Three Valleys Healthcare Ltd (referred to as “Project Co”) for the development of a site at the hospital and additional healthcare services.

Project Co entered into a building contract with the Claimant (“LOR”) on 12 December 2007, with LOR acting as design and build contractor.

On the same date, the parties engaged Nisbet as “Independent Tester” for the project via an appointment, and Nisbet provided a collateral warranty in relation to this to LOR. Nisbet was acquired by Sweett (UK) Limited (“Sweett”), and via a Deed of Novation, Sweett stepped into Nisbet’s shoes in respect of the Appointment and Warranty.

Prior to this, on 4 December 2007, LOR appointed Meical Architecture and Arts Projects Ltd (“MAAP”) as its lead consultant and architect under a ‘Services Agreement’.

The Hospital was handed to the Trust in phases and around March 2010, Project Co became insolvent, and as such the Project Agreement was terminated.

Several years into the hospital’s operation, the Trust appointed consultants to examine the fire safety of the hospital which identified some serious issued.

In February 2020 the Trust issued a Letter of Claim against Project Co., claiming in excess of £125 million in respect of defects. Project Co sought to pass this claim down to LOR and the claim was settled on 22 July 2021 for £18 million.

LOR brought the present proceedings against Sweett and MAPP to recover losses it incurred as a result of the settlement agreement.

Summary of Proceedings

LOR’s claim against Sweett alleged the following:

1. The fire protection designs were deficient and non-compliant with Schedule 8 of the Project Agreement;
2. Sweett’s review of the designs was negligent and failed to identify that they were non-compliant;
3. The workmanship was defective and non-compliant with the Project Agreement;
4. Sweett’s inspections of the works were negligent and failed to identify that the works were non-compliant, contrary to its monitoring obligations under the Project Agreement.

LOR claimed the sum of £20.4m exclusive of interest as a result.

Two applications were also made to the Court for consideration:

1. Sweett’s application to strike out parts of the Particulars of Claim pursuant to CPR 3.4(2), asking for Summary Judgment in Sweett’s favour;
2. LOR’s application to amend pleadings.

Sweett objected to LOR’s amendment application on the basis that it had no reasonable prospects of success, the amends are vague/repetitive, irrelevant and added nothing.

Strike Out Application:

Under CPR 3.4(2) the Court can strike out a Statement of Case (“SOC”) if it appears:

1. the SOC discloses no reasonable grounds for bringing or defending the claim;
2. the SOC is an abuse of the Court process or is likely to obstruct the just disposal of proceedings;
3. there has been non-compliance with a rule, Practice Direction or Court order.

Summary Judgment:

Under CPR 24.2 the Court can order Summary Judgment on the whole of the claim/part if:

1. a party has no real prospect of succeeding on the claim, defence or issue; and
2. there is no other compelling reason why the case or issue should be disposed of at trial.

Decision

Mr Justice Freedman allowed LOR’s application to amend its Particulars of Claim on the basis there was a real prospect of success.

He referred to the judgment in the case of EasyAir Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) which was a summary judgment application, but the same approach also applies for strike out applications:

• The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success (Swain v Hillman [2001] 2 All ER 91);
• A “realistic” claim is more than merely arguable and carries some degree of conviction (ED & F Man Liquid Products v Patel [2003] EWCA Civ 472at [8]);
• In reaching its conclusion, the Court must not conduct a ‘mini-trial’. This does not mean the Court must take at face value everything the Claimant puts before the Court e.g. where factual assertions are contradicted by evidence;
• The Court can consider both the evidence placed before it at the application and also the evidence that is reasonably expected to be available at trial (Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550);
• The Court should be hesitant about making a final decision without trial where reasonable grounds exist for believing a fuller investigation into the case may affect the outcome;
• The Court should avoid issuing summary judgment if it can expect that new material will exist of trial and may lead to a real prospect of success.

The Judge found that pleadings are not “marked out of ten with a basic pass-mark”, failing which they are struck out. The striking out for abuse of process depends on analysis of serious deficiencies which affect the ability of the Court to try the matter at trial.

Practice Commentary:

This case shows that the Court will allow amendments to a statement of case where new evidence has arisen which could affect the case prospects. As such, a strike out case should not be made unless there are serious deficiencies in the case, taking into consideration that the Court will not accept arguments at face value and will review of the evidence placed before it, in addition to further evidence it will likely receive.

Glover & Anor v Fluid Structural Engineers & Technical Designers Ltd & Ors [2024] EWHC 1257 (TCC)

Facts

The Claimants are the owners of 124 Westbourne Grove, London. In or around 2016 they commenced renovation works to their property including creating a new basement. During the course of these works, damage was sustained to the adjoining properties.

The Claimants brought claims against a number of parties including the original building contractor for the works and the appointed Structural Engineers for the works.

The Court in this case was informed that the other claims were compromised and the Claimants now only proceed against the Sixth Defendant, AXA XL, in relation to an insurance policy issued in their favour.

AXA XL seeks to rely on a range of exclusions in the policy including that the damage was the fault of the builder or designer, was inevitable damage and was due to works undertaken prior to the start of the policy. The trial in relation to this dispute is listed for 16 September 2024.

Summary of Proceedings

This case related to an application by the Claimants seeking permission to replace their structural engineering expert, Mr Andrew Hardy.

The Claimants also sought an extension of time for service of a Schedule of Loss, with costs of that application to be determined.

AXA XL, sought revocation of the Claimant’s permission to rely on the expert evidence of Mr Hardy following the Claimants admitting they had interfered with the expert process.

In brief, it was found that the Claimant’s solicitors had significant input into the preparation of the Expert’s Joint Statement. The fourth version of this Statement had substantially changed from the third version, raising concerns by the Defendant’s expert that there may have been involvement from the Claimant’s solicitors. An application was made by the Sixth Defendant’s Solicitors to revoke the Claimant’s ability to rely on this expert evidence and the Claimant admitted their interference in the expert process.

AXA XL subsequently resisted the appointment of a replacement expert, or in the alternative, submitted that if permission were to be granted, it should be conditional on the disclosure of without prejudice communications with Mr Hardy.

The issues before the Court were whether the Claimants should be granted permission to replace their expert, and if granted, what conditions should be placed on that permission.

Decision

The Court granted permission for the Claimants to obtain a replacement expert as their evidence would be key to the issues in the case. This was on the basis that the instruction of the new expert would not interfere with the previously set timetabling of the trial date.

The Court referenced the overriding objective and need to deal with cases justly and at a proportionate cost, and also reaffirmed the need for transparency and adherence to the rules in the expert process.

The Claimants were ordered to pay the Sixth Defendant’s costs in relation to the making of their applications, in addition to 30% of the Sixth Defendant’s costs in considering the Expert Joint Statement and new expert report, on an indemnity basis. This is in addition to the Claimants bearing their own costs of instructing a new expert and new Expert Joint Statement.

Practice Commentary

This is a clear reminder of the importance of complying with the rules and guidelines in the expert process and to refrain from interfering with the drafting of the expert reports.

Level 1 Raised Flooring Ltd v JM Construction (SW) Ltd [2023] EWHC 2841 (TCC)

Claimant: Level 1 Raised Flooring Ltd (L1)

Defendant: M Construction (SW) Ltd (JM)

Facts:

• L1 instructed JM to carry out works under a JCT Minor Works Contract 2016, on 31 March 2021, to carry out building works to a property in London.
• Through the termination provisions, L1 terminated the Contract on 5^th November 2021, as the relationship between both L1 and JM broke down.
• L1 argued that JM had been overpaid immediately prior to termination, referring the matter to adjudication.
• JM believed that the total value of what was owed to the them by L1 in relation to the works and wrongful termination, was in excess of what L1 had already paid.
• L1 sought £138,080.19 from JM, as redress.

Adjudication:

• The Adjudicator considered the following questions:

1. At termination, what was the value of the work undertaken by JM?
2. Could L1 deduct monies in respect of corrective works? How much could they deduct?

• Was L1 entitled to payment?
• The Adjudicator decided on:

(i) the value of the work undertaken by JM was £163,415.79;

(ii) L1 could deduct monies of £6,618.48 for corrective works;

(iii) There was an entitlement to payment of £67,042.84 to JM. However, the Adjudicator did not order payment to be issued to L1, as under clause 6.7 of the JCT Contract, L1 had to follow a specific accounting procedure when lawfully terminating the Contract (which they had not done). This procedure included preparing an account specifying how much was owed to either party.

Issues/ Summary of the Proceedings: (Following Adjudication)

• After the Adjudicator had issued their decision, L1 completed the required accounting procedure, asserting that JM owed L1 £350,050.82. This included the £67,042.84 that was awarded by the Adjudicator.
• Having now completed the specific accounting procedure under the JCT Contract, L1 sought to enforce the Adjudicator’s decision.
• JM argued the Adjudicator assumed that L1 correctly terminated the Contract, and based on this assumption, found that there was an overpayment. Furthermore, the Adjudicator had not awarded payment, but instead carried out a valuation of the works conducted by JM, at that particular moment. Therefore, JM contended that there was no decision for payment, that was enforceable by the Court.

Decision:

• The Court refused to grant a summary judgment, relying on the principles set out in Workspace Management v YJL London Ltd (2009), as the payment sought was not a “logical and indispensable” result of the Adjudicator’s decision. Specifically, the Adjudicator had not addressed the fact that L1 was entitled to an overpayment from JM, following L1 completing the accounting procedure.
•  As the Adjudicator had not specifically awarded payment after L1 completed the accounting procedure, there was no enforceable decision for payment.

Practical Commentary:

• This case confirmed that the Court can enforce an Adjudicator’s award, where the Adjudicator did not award payment. However, the award must be a clear, logical, and indispensable outcome of the decision.
• Furthermore, when referring a party to adjudication, the Notice to Adjudicate and subsequent Referral, must be precise in what the Adjudicator is requested to decide.

TClarke Contracting Limited and Bell Build Limited [2024] EWHC 992 (TCC)

Claimant: TClarke Contracting Limited (TC)

Defendant: Bell Build Limited (Bell)

Facts:

• TC (main contractor) instructed Bell (sub-contractor) in a JCT Design and Build Sub-Contract, dated 04 November 2021, in respect of the construction of a data centre, for £20,013,088
• Bell issued a payment application (no.18). A dispute arose as to whether TC has served a valid Pay Less Notice (“PLN”).
• Bell referred the matter to Adjudication, where it was decided that the PLN was invalid due to a Contract variation in March, and TC must pay £2,129,672.69 plus VAT to Bell.
• TC issued a Part 8 claim to set aside the Adjudicator’s decision, claiming that the Adjudicator should not have relied on the March agreement as a variation of the Contract.

(A Part 8 claim is a streamlined procedure where the claimant seeks the Court’s decision on a matter where there are no disputes over the facts. Typically, in an Adjudication it is used to enforce an Adjudicator’s decision).

• Bell protested the use of the Part 8 procedure, pleading that the Adjudicator’s reasons for issuing a decision, was not relevant under this Part 8 claim.

Issues:

• Was the Adjudicator’s decision correct, that the PLN was invalid? Furthermore, under a reasonable and objective interpretation, was the notice intended to be a PLN?
• Was there a substantial dispute in fact? And as a result, was TC’s Part 8 claim suitable for such as dispute?

Decision:

• In the Court’s view, if the Part 8 procedure was used, the Court may reach an ill-informed decision that would not conclude the dispute.
• Bell’s defence under estoppel, would require witness evidence, as the alleged Contract variation was not in writing.

(Estoppel is where, subsequent to a contract between two parties, during the project, a party acts in a way which is different and/or contradictory to the contract. For an estoppel argument to be agreed by the Court, there must be evidence of one party arguing something contrary to what they previously agreed, and this has become a detriment to the second party, who relied on the initial agreement).

• Therefore, as the Part 8 claim was to determine if there was a contract variation, using the Part 8 procedure for this case was incorrect, and instead the Part 7 procedure should have been utilised.

(Part 7 claims are a procedure where the Claimant seeks for the Court to decide on the facts of a matter. This is typically a longer process, which involves more consideration of the various details of a matter).

Practical Commentary:

• When a party disagrees with an Adjudicator’s decision, they should not issue a Part 8 claim. Instead, a Part 7 claim would be appropriate to determine the decision.