Case Law Updates – October 2021

Facts

The Developer (Mansion Place) appointed the Contractor (Fox Industrial Services) under a contract dated early 2020, to design and build an extension, and refurbish student accommodation.

The works commenced, but delays occurred and resulted in the Contractor failing to meet the completion date.

In October 2020, the parties agreed during a telephone call that neither party would claim damages for the delays. This meant the Developer was not entitled to liquidated damages under the contract, and in return, the Contractor was not entitled to any loss and/or expense arising from the delays.

The issues therefore were:

1. Did both parties enter into an oral agreement, based on their discussions during their telephone call in October 2020? and
2. Depending on this, was the Developer entitled to deduct liquidated damages for failing to complete by the contractual date?

The Developer stated there was no such agreement in existence and they were therefore entitled to deduct damages from the contract sum. However, the Contractor argued the agreement was valid, the Developer failed to serve the relevant notices under the contract and the liquidated damages provision was void.

An adjudication commenced and a decision was given in the Contractor’s favour, which required the Developer to pay sums to the Contractor.

In January 2021, the Developer issued proceedings for repayment of the sums paid to the Contractor.

Directions were given by the court, in relation to the service of witness statements and the dates were extended by consent.

Issue

The Developer argued the Contractor’s witness statement failed to comply with the directions, mainly Practice Direction 57AC, which states “each witness statement will be accompanied by a list of documents identifying what documents the witness has referred to or been referred to for the purpose of providing the evidence set out in their trial witness statement (paragraph 3.2)”, and sought the following orders:

1. The removal of evidence from the Contractor’s statement, which fail to comply with this Practice Direction; and
2. An amendment to the certificate of compliance, highlighting the requirements of this Practice Direction were not explained to the witnesses, before the statements were drafted.

Shortly after, the Contractor sought the same order regarding the Developer’s witness statements.

Which party was correct and could evidence be struck out, due to non-compliance with Practice Direction 57AC?

Judgment

The court dismissed the Developer’s application to amend the certificate of compliance, on the basis the Contractor’s witness statements were drafted in accordance with the Practice Direction.

However, the court held that certain parts of the statements were to be redacted, as they were not direct evidence and instead, formed part of the commentary on the documents referred to.

The same outcome was applied to the Contractor’s application to redact and remove specific evidence from the statements.

For further information, please see: https://www.bailii.org/ew/cases/EWHC/TCC/2021/2747.html

Downs Road Development LLP v Laxmanbhai Construction (UK) Ltd [2001] EWHC 2441 (TCC)

Facts

The Developer (Downs Road Development LLP), appointed the Contractor (Laxmanbhai Construction) under a JCT Design and Build Contract 2011, to carry out construction works, relating to the development of residential units.

The Contractor submitted a payment application (“Payment Application 34”) for over £1million, to which the Developer responded with an initial payment notice and a supplementary note, confirming a detailed notice will be issued in due course, due to the proximity between the service of Payment Application 34 and the due date, and the significant amount of information in the payment application.

A few days later, the Developer served the supplementary payment notice, which stated the sums due to the Contractor, were significantly lower than the amount they were claiming.

The Contractor issued an adjudication to determine the correct sum due to the Contractor under Payment Application 34. The Developer replied with a counter claim, stating the Contractor failed to carry out the works in accordance with the contract and caused the Developer to incur losses.

However, the adjudicator dismissed the counter claim, and issued a decision in the Contractor’s favour, requesting the Developer to pay an additional sum to the Contractor.

Issue

The Developer disagreed and issued Part 8 proceedings, seeking a declaration that the adjudicator’s decision was unenforceable, on the basis the adjudicator failed to consider the Developer’s counter claim.

Judgment

The court held that the Developer’s payment notice was invalid under the contract, and failed to satisfy the requirements under section 110A of the Housing Grants, Construction and Regeneration Act 1996, namely that it was not a true reflection of “the sum that the payer considers to be or to have been due”.

However, the court agreed with the Developer in that the adjudicator should have considered the counter claim in further detail. Therefore, the court held the adjudicator’s decision was unenforceable.

For further information, please see: https://www.bailii.org/ew/cases/EWHC/TCC/2021/2441.html

Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC) (28 September 2021)

This is a summary judgment application brought by Quadro Services Limited (“the Claimant) to enforce an adjudication decision against the Defendant. The application was resisted by the Defendant on the ground the Adjudicator had no jurisdiction to decide on more than one dispute in a single adjudication.

Background

The Parties entered into an oral agreement and that agreement was a construction contract under the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA). Because the oral contract did not contain any written provision for adjudication, the Scheme of Construction Contracts (England and Wales) Regulations 1998 (as amended) (“the Scheme”) applied.

During the course of the contract, the Claimant made a number of payment applications and submitted the subsequent invoices for the sum claimed. Three invoices were not paid by the Defendant and were the subject of the Adjudication.

The payment applications submitted by the Claimant were cumulative, with each payment application being for the full value of the work done, less the previous payment application.

No Pay Less Notices were served by the Defendant and the total value claimed by the Claimant was £40,026 plus VAT.

Adjudication

A letter before action was sent by the Claimant’s solicitors on 2 December 2020. As the Defendant failed to respond to that letter, the Claimant issued an Adjudication on 30 March 2021. A jurisdiction challenge was raised by the Defendant as follows:

“We do not consider that you have jurisdiction to consider this matter because the Referring Party has in fact referred three separate disputes to adjudication under one notice and referral.

The Adjudicator having considered that challenge, reached the non-binding conclusion that he had jurisdiction as “a single dispute had been referred, namely a dispute over an amount owed in the sum of £40,026 or such other sum as the Adjudicator may decide arising out of one cause of action”.

Furthermore, the Adjudicator issued his decision and held that the invoices as applications for payment were valid and awarded the full sum to the Claimant, as well as the interest and damages for late payment.

The Defendant was ordered to pay the Adjudicator’s fee and they did not pay.

Issue

The question before HHJ Watson was whether or not the Defendant has a real prospect of success on the basis the Adjudicator had no jurisdiction because three disputes were referred to him.

Judgment

Having considered the matter of the fact, HHJ Watson held that the ‘payment applications were cumulative, with each application being for the full value of the work less a deduction for the value of work already invoiced. Each payment claim built on the previous one. There is a clear link between them’. She further held that ‘none of the payment applications were disputed on substantive grounds or on procedural grounds. The fact that two were expressly agreed and one not challenged does not mean they must be separate disputes.’

Accordingly, she held that the Adjudicator was right to conclude he had jurisdiction because only one dispute had been referred to him.

For further information, please see: https://www.bailii.org/ew/cases/EWHC/TCC/2021/2637.html

Toppan Holdings v Simply Construct [2021] EWHC 2110 (TCC)

Facts

The Claimant (Toppan), a freeholder appointed the Defendant (Simply Construct), a contractor, to carry out works at care home in London.

Works were completed in 2016, however the Claimant and tenant discovered fire safety defects a few years later.

Instructions were given to the Defendant to remedy the defects, but the Defendant refused. The Claimant employed another contractor to carry out repair works and upon doing so, discovered additional defects.

Proceedings were issued by the Claimant requiring specific performance under the contract and successfully forcing the Defendant to execute a collateral warranty.

The Claimant issued adjudication proceedings against the Defendant, for the losses incurred (defects and remedial works). However, the Defendant argued the adjudicator lacked jurisdiction on the basis the warranty did not fall within the definition of “construction contract” under section 104 of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”).

A decision was issued by the adjudicator in favour of the Claimant, requiring the Defendant to pay sums. However, the Defendant failed to do so and the Claimant issued enforcement proceedings.

Issues

The judge had to consider whether a warranty is a “construction contract” under the definition of the Act and therefore, whether the Claimant was entitled to issue adjudication proceedings, and enforce the adjudicator’s decision.

Decision

The court relied on previous case law, Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013], where the classification of a warranty as a construction contract depended on if the required works had been completed or were due to be completed.

In the above case, the warranty was deemed a construction contract on the basis the works were yet to be completed.

However, in considering the current case, the court held the warranty had been granted for retrospective works. Therefore, it did not amount to a “construction contract” under the Act and the Claimant was not entitled to adjudicate, nor can the adjudicator’s decision be enforced.

For further information, please see: Toppan Holdings Ltd & Anor v Simply Construct (UK) LLP [2021] EWHC 2110 (TCC) (27 July 2021) (bailii.org)

Westminster City Council v Sports and Leisure Management Limited [2021] EWHC 98 (TCC)

Facts

This case concerns a claim for declaratory relief to determine the true meaning of a contract for the provision of leisure facilities and how losses caused by coronavirus restrictions should be allocated.

The Claimant (the Council) entered into a contract with the Defendant (Sports and Leisure Management Limited, “SLM”) in 2016. SLM were the contractors and were to:

1. Operate and oversee leisure facilities for the Claimant; and
2. Pay a management fee to the Claimant, in return for a specific amount of revenue generated by the facilities.

The restrictions caused by the 2020 pandemic meant the leisure facilities were either operating at a limited capacity or not open at all, and resulted in a loss of revenue for SLM.

Clause 39 of the contract included provisions relating to a change in law and differentiated between the different types. Given the restrictions were not foreseeable at the time the contract was executed, they amounted to a Specific Change in the Law and thus, a Qualifying Change to the Law.

Issue

The issue was the allocation of risk for loss of profit and the court had to determine the correct interpretation of this under the contract.

The Defendant argued that under clause 37, such a change should result in a change in the financial terms of the contract and the management fee becoming less than zero and payable by the Claimant to the Defendant.

However, the Claimant argued that though this was a Qualifying Change in Law, it did not require them to reduce the management fee nor make any payment to the Defendant.

Decision

Mr Justice Kerr upon considering the submissions from both parties held the correct interpretation of the contract required the parties to operate the clause 37 process, following the Specific Change in Law.

He further held that the financial implication of the Specific Change in Law cannot result in the management fee becoming less than zero and cannot therefore be payable to the Defendant. However, it can include a reduction as far as zero or a lump sum payment to the Defendant by the Claimant.

The declaration the Claimant applied for was granted on this basis.

For further information, please see: Westminster City Council v Sports And Leisure Management Ltd [2021] EWHC 98 (TCC) (22 January 2021) (bailii.org)

Please note, these updates are for educational purposes only and should not be relied on as legal advice.  Barton Legal do not make any representations as to the legal validity of them and any claims that this is legal advice will be unsubstantiated.