Nicola Webster is a commercial dispute resolution specialist with particular experience in resolving disputes in the construction sector. In this article she identifies the key takeaways from three recent construction dispute cases that have been before the UK Courts and the implications of these cases for those operating in the construction industry.
1. Balfour Beatty Regional Construction Limited v Van Elle Ltd [2021] EWHC 794 (TCC)
In a case heard in the Technology and Construction Court in March this year, Balfour Beatty Regional Construction Limited (“Balfour Beatty”) v Van Elle Ltd (“Van Elle”), a sub-contract was found to cover works carried out by a sub-contractor, even though it was unsigned at the time the works were carried out.
Background
The Claimant in this case, Balfour Beatty, was engaged as a main contractor for a construction project at a site in Newcastle upon Tyne (“the Site”). Balfour Beatty was to design and construct a sub-sea cable manufacturing facility at the Site. The work to be completed by Balfour Beatty required a considerable amount of foundational piling. Balfour Beatty engaged a sub-contractor in respect of the foundational piling, Van Elle, the Defendant in this case.
A distinct element of the works known as “the Northern Carousel” was carried out by Van Elle prior to the parties signing a formal sub-contract (based on one of the JCT standard form contracts).
Shortly after installation excessive settlement was discovered and extensive remedial works were required. Balfour Beatty raised a claim against Van Elle to recover the remedial costs and for an indemnity from Van Elle for any liability that maybe due from Balfour Beatty to the Employer.
Van Elle argued that the works to the Northern Carousel were carried out before the parties signed the formal sub-contract and the contract between the parties was therefore set out in a written quotation that Van Elle had sent to Balfour Beatty sometime earlier. Van Elle argued Balfour Beatty accepted the earlier quotation by permitting Van Elle to commence work at the Site. The quote provided by Van Elle incorporated Van Elle’s standard terms of business. This was important because those standard terms of business contained several possible limitations of liability for Van Elle.
What did the Court decide?
The Judge found that the formal sub-contract governed all the works, even those to the North Carousel that were carried out before the parties signed the formal sub-contract. Although his comments were not binding, the Judge also considered and commented upon the various limitations Van Elle sought to make in their standard terms of business
Take away
Construction companies should take particular care at the outset of a construction project to determine the terms upon which work is carried out and should consider looking at their standard terms in relation to limitation in light of the Judge’s comments.
2. Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd and others [2021] EWHC 590 (TCC)
In February this year, the Technology and Construction Court considered whether a consultant could have liability to a contractor where there was no contractual relationship between them.
Background
The case of Multiplex Construction Europe Ltd (“Multiplex”) v Bathgate Realisation Civil Engineering Ltd and others [2021]EWHC 590 (TCC) concerned a sizable construction project in the City of London. Multiplex was the main contractor and had design and build responsibilities to the Employer.
One of the three defendants in this case, Bathgate Realisations Civil Engineering Limited (formerly known as Dunne Building and Civil Engineering Limited) (In administration) (“Dunne”) was a sub-contractor of Multiplex and had full design responsibility for the concrete works and the temporary works.
The concrete core was constructed with use of a slipform rig which was part of the temporary works. The slipform rig was designed by another Defendant, BRM Construction LLC (“BRM”). The contract required that the temporary works were checked by a qualified third party. RNP Associates Limited (“RNP”) were engaged by Dunne to carry out those third part independent checks of the temporary works. RNP entered liquidation in 2018 and was insured by another (and final) Defendant in this case, Argo Global Syndicate 1200 (“Argo”).
During the course of the works, Multiplex’s subcontractor, Dunne, went into administration. Multiplex therefore terminated its agreement with Dunne and engaged a new sub-contractor. The new subcontractor investigated the work undertaken to date and said that both the work and the slipform rig were defective and, it said, aspects were unsafe. Multiplex therefore had the rig replaced.
Multiplex wished to recover its costs of replacing the slipform rig and other remedial works, which were substantial (it claimed over £12 million). Multiplex obtained judgments against Dunne and BRM but also wished to make a claim direct against RNP’s insurer, Argo, who was the third defendant in this case. The reason Multiplex wished to proceed in this way was because the initial subcontractor, Dunne, had entered administration and the designer, BRM, was based in Dubai and uninsured.
There was no contractual relationship between Multiplex and RNP but Multiplex argued that it would have a claim against RNP on the basis that RNP owed Multiplex a duty of care, negligent misstatement and/or provided warranties to Multiplex.
What did the Court decide?
In a preliminary issues hearing (meaning a hearing on a particular legal issue before a full trial), the Judge held that RNP, the consultant that had undertaken the third party independent check of the temporary works, did not owe any duties as argued by Multiplex nor did it provide any warranties.
Take away
Contractors should consider carefully the terms, in particular those dealing with the allocation of risk, upon which sub-contractors and consultants are engaged in construction projects and, if a dispute should arise, parties should always carefully consider a potential defendant’s ability to pay should a claim be successful.
3. JSM Construction Limited v Western Power Distribution (West Midlands) plc [2020] EWHC 3583 (TCC)
In the case of JSM Construction Ltd v Western Power Distribution (West Midlands) plc [2020] EWHC 3583 (TCC) the Technology and Construction Court (the “TCC”) considered the adequacy of payment provisions in a construction contract that failed to include a final account mechanism.
What is a final account?
Final accounts in construction projects are prepared at the completion of the construction phase. The purpose is to set out the final sum to be paid by the Employer to the Contractor taking into account all necessary adjustments. Generally, the final account should finalise any disputes that had arisen between the parties during the construction phase (aside from defects), for example, any disputes relating to losses incurred due to extensions of time, variations etc.
The precedent forms of construction contracts have slightly different ways of dealing with final accounts but in this case, there was no procedure set out for dealing with one. The Court therefore considered whether a procedure could be implied under statute, more specifically, under section 110 of the Construction & Regeneration Act 1996 (“the Act”).
Background
JSM Construction Ltd (“JSM”) is a utilities service provider. Western Power Distribution (West Midlands) plc (“Western Power”) is an electricity distribution network. In this case, Western Power was the Employer and JSM was the Contractor.
Under the contract between JSM and Western Power, JSM agreed to install two cables and associated ductwork in Birmingham. The contract provided that interim payments would apply but no provision was made for a final account.
Throughout the course of the works JSM submitted interims applications for payment. Some months after its last interim application for payment, JSM made a further application that it called a “final application”. The sum in the final application had been based on a remeasurement of the works undertaken by JSM.
Western Power refused to pay JSM’s final application arguing that, under the terms of the contract between the parties, JSM was only entitled to a series of interim payments but was not entitled to raise a final account or to a final payment.
JSM commenced court action against Western Power to try and seek payment of the sums it claimed were owing. One of the arguments raised by JSM was that the payment mechanisms in the contract between Western Power and itself were inadequate and therefore, the final account provisions in paragraph 5 of the Scheme for Construction Contracts 1998 (“the Scheme”) should be implied instead.
Western Power argued that the failure of the contract to provide for a final account did not render the payment terms inadequate and the Scheme should not therefore be implied.
Western Power made an application to have JSM’s claim “struck out” (meaning it was asking the Court to dismiss JSM’s claim without a full hearing of all the evidence on the grounds it was bound to fail) or failing that, have a summary judgment entered against JSM (which, similarly, means it was asking the court to make a judgment against JSM at an early stage without a full trial).
The Judge hearing Western Power’s application therefore had to decide whether or not there was an implied term pursuant to section 110 of the Act.
What did the Court decide?
The Judge held that there was nothing in the wording of section 110 of the Act that required parties to a construction contract to agree a separate procedure for dealing with final accounts in order for the payment mechanism to be “adequate” as required by the Act. The Judge noted that simple contracts for fixed fees and staged payments could well be “adequate” for the purposes of section 110 of the Act without there being a final account.
Western Power’s application to have JSM’s case struck out or alternatively, for summary judgment to be entered against JSM, failed on the basis that the Judge could not decide the matter without addressing the full facts of the matter which was not possible at an application hearing (as opposed to a full trial).
Take away
If a construction contract does not provide a mechanism for a final account, it does not necessarily follow that one will be implied. Parties should therefore not rely on the Act or the Scheme to remedy when they have entered into a bad bargain.
One to look out for…
4. Naylor and others v Roamquest Ltd and another [2021] EWHC 567 (TCC)
The Technology and Construction Court heard an application in March in relation to an ongoing cladding claim regarding a development of residential and commercial units comprising of eleven tower blocks in London. The Defendants in the case were the freehold owner and main contractor who carried out the design and build. The claimants are some of the leasehold owners.
At the stage of this application the leaseholders’ claim was inadequately pleaded but the Judge allowed them the opportunity to amend the pleadings. Therefore, should this case proceed to trial it is likely to be of significant interest given the widespread fears following the Grenfell Tower fire.
If you are involved in a construction contract dispute it is important to act quickly. Nicola has a reputation for her strong commercial approach which achieves swift and favourable outcomes for her clients. Contact her now for further advice.
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