JCT Suite of Contracts…2024 Edition
The Joint Contracts Tribunal (JCT) announced a new edition of JCT contracts will be published in 2024, which will include the introduction of Target Cost contracts.
Various changes will be introduced to cover events over recent years, and include changes including but not limited to:
- Clarifying the position regarding liquidated damages, so these can only be applied up to the termination of a contract, subsequent to which, only general damages for delay may be claimed.
- Revising the termination provisions in relation to accounts, to ensure there is consistency with the Housing Grants, Construction and Regeneration Act 1996 (Construction Act).
- Parties will have an option to select a nominating body or appointer for resolving disputes (arbitration/adjudication), rather than selecting from the restricted list as per the standard contract. Similar to the NEC, parties are also encouraged to provide the other with an early notification of any potential disputes.
- Extending the “Relevant Events” to allow the Contractor to claim extensions of time as a result of epidemics. The new provisions reduce the period of reply the Employer has to assess extensions of time from 12 to 8 weeks.
- Allowing the Contractor to claim loss and expense for optional additional grounds, such as for epidemics and the exercise of statutory powers which directly impact the works.
- Provisions have been amended to incorporate reference to recent legislation e.g. Building Safety Act 2022, and the new insolvency grounds under the Corporate Insolvency and Governance Act 2020.
- Additional provisions will be included to deal with the risk of contaminated materials and asbestos.
For further information, please see: https://corporate.jctltd.co.uk/jct-the-next-evolution/
Fixed Recoverable Costs Regime – New Changes?
Fixed Recoverable Costs are the total costs a successful party in litigation is entitled to recover from the unsuccessful party, but does not limit the amount parties will be charged by their legal representatives.
The new rules governing Fixed Recoverable Costs will apply from October 2023 onwards, to most civil claims valued up to £100,000.
So, what are these new rules?
- Parties are encouraged to consider Part 36 offers and, provided the judgment is similar to the proposals set out in the Part 36 offer and the unsuccessful party failed to act reasonably, then the successful party is entitled to additional costs.
- Claims may be allocated to the new “intermediate track”, which applies to less complex disputes valued at more than £25,000 but less than £100,000.
- Claims will be assigned to one of the four “complexity bands”, which will determine the level of the fixed recoverable costs. This may be agreed directly between the parties depending upon the circumstances of the dispute or the Court may direct this.
For further information, please see the Law Society Webinar: https://communities.lawsociety.org.uk/inclusive-civil-litigation-webinars/fixed-recoverable-costs-regime-on-demand/6002672.article
Ravestein B.V v Trant Engineering Limited [2023] EWHC 11 TCC
Facts
Ravestein (“the Claimant”), a shipyard and construction company incorporated in the Netherlands, and Trant Engineering (“the Defendant”), an engineering and construction company, entered into an amended Option A NEC3 Engineering and Construction Subcontract June 2005 (with amendments June 2006) (“the Subcontract”) on 14 September 2010.
The Defendant alleged the works carried out by the Claimant were defective and sought damages, therefore referred this dispute to an adjudicator. The adjudicator decided in the Defendant’s favour and ordered the Claimant to pay damages. However, the Claimant failed to pay and the Defendant obtained a default judgment.
The Claimant subsequently referred the dispute to arbitration and both parties agreed the arbitrator should determine whether the Claimant complied with the dispute resolution provisions under the Subcontract (to serve a valid Notice of Dissatisfaction), prior to referring the dispute to the arbitrator.
The arbitrator found the Claimant failed to serve a valid Notice of Dissatisfaction (under clause W2.4(2) of the Subcontract) and therefore, the arbitrator lacked jurisdiction and the decision from the adjudication was final and binding.
Issues
The Claimant disagreed their Notice of Dissatisfaction was invalid, for failing to:
- a) set out the issue in dispute and their intention to refer it to tribunal; and
- b) challenge the adjudicator’s decision, instead of solely the jurisdiction.
The Claimant sought to appeal the arbitrator’s decision.
Judgment
The Court dismissed the Claimant’s permission to appeal, on the basis that:
- The requirements under W2.4(2) of the Subcontract, were not complied with and the Claimant failed to notify the Defendant of the matter in dispute and their intention to refer it to the tribunal; and
- The Claimant only sought to challenge the adjudicator’s jurisdiction, rather than decision, therefore, the Notice of Dissatisfaction was invalid.
For further information, please see: https://www.bailii.org/ew/cases/EWHC/TCC/2023/11.html
ISG Retail Ltd v FK Construction Ltd [2023] EWHC 2012 (TCC) (02 August 2023)
This case was brought before Adrian Williamson KC on the issue of repayment of £1.7 million in respect of an adjudication judgement
Background
In September 2021, ISG Retail Limited (“ISG”) entered into contract with FK Construction Limited (“FK”) in connection with a roofing and cladding works in relation to a project in Bristol (“Project Barberry”). On September 2022 FK submitted Application for Payment Number 16 (“AFP No 16”) for the amount of £4,590,478.67, which after the appropriate deductions under contract gave the sum of £1,391,679.94. A dispute arose whether ISG issued an effective pay less notice in response to AP16. ISG did not issue a payment notice but purported to issue a pay less notice on 28 October 2022. FK brought adjudication seeking payment for the sum of £1,691,679.94 plus VAT. In his decision issued on 27 February 2023, Mr Wood held that “FK’s AFP No 16 is to be regarded as a notice complying with s.110A(3) given pursuant to section 110A(2) of Housing Grants Construction and Regeneration Act 1996 as amended (“the Act”)and I find ISG is to pay FK the sum of £1,691,679.94 plus VAT” (“the Wood Decision”).
ISG brought an adjudication before Mr Molloy and on 14 April Mr Molloy held that the total valuation of FK’s works was £3,736,679.72 and that FK is entitled to an extension of time for 188 days (“the Molloy Decision”).
On 5 May 2023 FK brought enforcement proceedings before Joanna Smith J who issued an order to enforce the Wood Decision.
ISG brought an adjudication before Mr Molloy and on 14 April Mr Molloy held that the total valuation of FK’s works was £3,736,679.72 and that FK is entitled to an extension of time for 188 days (“the Molloy Decision”).
On 13 June 2023 Adrian Williamson KC determined issues on a different Part 8 proceeding relating to Project Barberry (“the Shawyer Proceedings”). The issue put forward was whether a payment notice handed in one day late was in accordance with the contract as required by s.110B(4)(b) of the Act. The submission was made that the payment notice was valid due to Clause 2(6) of the contract which allowed for a late application of payment to be treated as valid. In his judgement, Adrian Williamson KC found that that payment notice was invalid on the basis that “the application is still late and therefore not in accordance with the contract” and “the application is by definition “submitted after the date required for its submission” i.e. it is not in accordance with the contract”.
These Proceedings
On 5 May ISG issued the current proceedings before Adrian Williamson KC seeking enforcement of the Molloy Decision.
Following the Shawyer Judgement, ISG amended their Particulars of Claim to seek repayment of the sums paid in respect of the Wood Decision on the basis that “The Wood Decision, which was enforced by the Smith Order, was also a notified sum dispute in which FK again relied upon a late Application for Payment as a default payee notice under s.110B(4) of the Act. Essentially ISG were arguing that the Shawyer Judgement was a final determination of that issue in law and in the light of that decision, the Wood Decision was shown to be wrong, and therefore ISG should be repaid the sum awarded.
Legal Arguments
ISG relied on the comments of Lord Mance in Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2015] 1 WLR 2961:
“In my view, it is a necessary legal consequence of the Scheme implied by the 1996 Act into the parties’ contractual relationship that Aspect must have a directly enforceable right to recover any overpayment to which the adjudicator’s decision can be shown to have led, once there has been a final determination of the dispute…
I emphasise that, on whatever basis the right arises, the same restitutionary considerations underlie it. If and to the extent that the basis on which the payment was made falls away as a result of the court’s determination, an overpayment is, retrospectively, established. Either by contractual implication or, if not, then by virtue of an independent restitutionary obligation, repayment must to that extent be required… This conclusion follows from the fact that, once it is determined by a court or arbitration tribunal that an adjudicator’s decision involved the payment of more than was actually due in accordance with the parties’ substantive rights, the adjudicator’s decision ceases, retrospectively, to bind.”
Judgement
Adrian Williamson KC found that the effect of Aspect v Higgins is that the issue in dispute during the Wood Decision had been resolved as a final point of law in the Shawyer Judgement, and therefore any sums made payable to FK become repayable to ISG as a result. ISG were awarded summary judgement for the repayment of the sum of £1,751,063.70.
For further information, please see: https://www.bailii.org/ew/cases/EWHC/TCC/2023/2012.html
For a summary of the 5 May 2023 judgement please see: https://bartonlegal.com/site/news/case-law-updates-may-2023
Henry Construction Projects Ltd v Alu-Fix (UK) Ltd [2023] EWHC 2010 (TCC) (23 May 2023)
Background
The Claimant was a contractor engaged in a project in relation to a boutique hotel development in Central London. The Defendant was employed by the Claimant as a subcontractor under a JCT Standard Building Subcontract.
In accordance with Clause 7.12 the Defendant terminated the contract at will on 11 November 2022, requiring the Defendant to submit an application for payment in accordance with clause 7.11, by which the Claimant would have to make payment within 28 days. The Defendant made their payment application for £257,004.50 plus VAT on 15 November 2022. The Claimant did not make payment by 13 December 2022 as required and therefore the Claimant referred the dispute to a smash and grab adjudication (“SGA”) in front of Mr Rayner on 15 December 2022.
Whilst the SGA was ongoing, a true value adjudication (“TVA”) was commenced by the Claimant on 18 January 2023 arguing that as a result of overpayment, the Defendant owed the Claimant £235,302.73 plus VAT.
The SGA concluded on 27 January 2023 with Mr Rayner issuing the decision that the Defendant was to be paid £257,004.50 by 3 February 2023. The TVA was suspended until payment was made. Upon payment being made, it was found that the Defendant was liable to the Claimant for the sum of £191,753.88.
The Claimant applied for a summary judgement to enforce the TVA decision, with the Defendant submitting that the adjudicator was out of jurisdiction when making its decision.
Issues
- What is the date of the immediate payment obligation in this case?
- The existence of a genuine dispute as to the existence of any purported immediate payment obligation
- When might a reliance situation materialise on facts similar to these?
Judgement
The judge found that as the Claimant did not discharge its immediate payment obligations to the Defendant, the Claimant did not have grounds to commence the TVA on 18 January 2023 and therefore Mr Molley lacked jurisdiction to make his decision. This conclusion was reached on the basis that Section 111(1) of the Housing Grants Construction and Regeneration Act 1996 stipulates that the notified sum must be paid by the final date for payment. Applying the caselaw of Bexheat Essex Services Group [2022] EWHC 936 (TCC) para 76 (ii), ‘s.111 of the 1996 Act creates an immediate obligation to pay the ‘notified sum’. Mr Rayner made the previous decision in the SGA that the pay less notices served by the Claimant were invalid and therefore the date for payment was 13 December. The statement of Stuart Smith J in M Davenport Builders Ltd v Greer [2019] Bus LR 1273 was relied upon by the judge in making his conclusion, which is as follows, [2019] BLR 241, in that ‘the employer must make payment in accordance with the contract or in accordance with section 111 of the Amended Act before it can commence a “true value” adjudication’. Compliance with their payment obligations was a pre-requisite to commencing a TVA and therefore such action was premature and unenforceable.
For further information, please see: https://www.bailii.org/ew/cases/EWHC/TCC/2023/2010.html
