Bloomberg LP v Malling Pre-Cast Ltd [2015] EWHC 2858 (TCC)

In this case, the TCC considered the interaction between a limitation clause in a collateral warranty and the Civil Liability (Contribution) Act 1978 (‘the Act’).

Background

Standard Life Assurance Company Ltd entered into an agreement for lease with Bloomberg LP in respect of a commercial property in London. Under the agreement, Standard Life was required to undertake construction work at the property.

Mailing Pre-Cast Ltd were appointed to carry out the cladding works pursuant to a trade contract with Standard Life. Mailing provided a collateral warranty to Bloomberg, clause 6 of which stated that “no proceedings shall be commenced against the Contractor after the expiry of twelve years from the date of” practical completion (achieved on 29 August 2000).

Sandberg and Buro Happold Ltd were also engaged by Standard Life as engineering consultants, and both provided collateral warranties to Bloomberg. Problems with the cladding tiles first occurred in 2001; remedial works were carried out by Mailing in 2002.

Further problems arose with the cladding in 2013, and the remedial works were estimated at £2m. Bloomberg proceeded against Sandberg and Buro Happold, having dropped its claim against Mailing due to the fact the contractual limitation period had expired.

Sandberg, however, issued a Part 20 claim against Mailing, who in turn issued an application for summary judgment. The issue before the court, therefore, was whether clause 6 of Mailing’s collateral warranty to Bloomberg also precluded Sandberg from recovering a contribution for damage that occurred after 28 August 2012.

The court held that clause 6 was a procedural bar to Bloomberg’s rights being enforced against Mailing following the cut-off date. However, that did not extinguish the underlying substantive right. Accordingly, Mailing’s application for summary judgment failed.

Practical Implications

It is interesting to note that the wording of clause 6 was interpreted quite narrowly, in that it was held to mean that no proceedings could be brought by Bloomberg. It did not affect the position of any third parties seeking a contribution from Mailing after the relevant period had expired.

In addition, if Mailing’s argument was accepted, this would effectively have allowed Mailing to contract out of the Act without reference to any third party. Whilst the court did not need to reach a conclusion as to whether this would be possible, “it would doubtless take very clear words to accomplish it”. Clause 6 was not clear enough in this regard.

http://www.bailii.org/ew/cases/EWHC/TCC/2015/2858.html

NH International (Caribbean) Ltd v National Insurance Property Development Company Ltd (Trinidad and Tobago) [2015] UKPC 37

This Privy Council case (an appeal against a decision of the Court of Appeal of Trinidad and Tobago, following an initial arbitration) concerned the contractor’s right to terminate under the FIDIC Red Book (1999).

Background

The case related to the construction of a hospital in Trinidad and Tobago.

Under clause 2.4 of the contract, the contractor requested financial information from the employer to evidence that arrangements were in place to pay the contract price of $286,992,070. The employer issued a letter in response advising that the Cabinet had approved additional funding of $59.1m for the project, but was silent regarding the remainder of the contract price.

A number of other letters were subsequently exchanged, but crucially the employer did not confirm whether the Cabinet had approved payment for the sums due under the contract. The contractor then suspended its work under clause 16.1.

Over a year later, the employer wrote to the contractor, confirming that “the Government stands firmly behind the project… and will meet the contractual requirements for completion of the project”. Shortly after, the contractor again requested confirmation that the Cabinet had approved the funds. No response was forthcoming and the contractor terminated its engagement pursuant to clause 16.2.

It was held that the contractor had been entitled to terminate its engagement, as the employer failed to provide sufficient financial information to the contractor. The Privy Council agreed with the original arbitration tribunal that clause 2.4 of the FIDIC Red Book requires evidence beyond showing that the employer is able to pay; the employer must show that financial arrangements are in place for the payment of the contract price.

Practical Implications

The case serves as a reminder to employers that they may be required to provide detailed financial information to contractors at relatively short notice (within 28 days).

Given the fact the contractor was able to terminate, the case suggests that this is an issue best dealt with during the negotiation stage, as opposed to during the construction stage, when the consequences of termination may be significant.

http://www.bailii.org/uk/cases/UKPC/2015/37.html

Purton (t/a Richwood Interiors) v Kilker Projects Limited [2015] EWHC 2624 (TCC)

The Technology and Construction Court has enforced an adjudicator's decision, finding that the parties' oral contract was a construction contract.

Background

The dispute arose out of works carried out by Purton for Kilker at the Dorchester Hotel. The matter before Stuart-Smith J was Purton’s application for summary judgment following an adjudicator’s decision in his favour.

Purton’s Referral asserted that an oral contract had come into existence, the essential terms of which were that there was a specified list of itemised work and an agreed contract price of £350,000. Purton subsequently submitted its final account. This included a request for payment of c.£150,000. Kilker did not serve a payment or pay less notice and it did not pay the sums claimed.

The adjudicator decided that due to the lack of a payment or pay less notice, Kilker should pay to Purton the sum claimed, along with his fees. Kilker failed to make payment and Purton applied for summary judgment to enforce the adjudicator’s decision.

Kilker resisted the application on the basis that there was no concluded contract between the parties and, accordingly, since the right to refer a dispute to adjudication is dependent upon the existence of a construction contract (s. 108(1) of the Housing Grants, Construction and Regeneration Act 1996(“the Act”)), the adjudicator had no jurisdiction to give his decision.

Stuart-Smith J held that there was in fact a construction contract, and so granted summary judgment to enforce the adjudicator's decision.

In reaching this conclusion, the court considered the principles relating to the formation of contracts, particularly where one party has carried out substantial works at the other party's request. Here it was “clear beyond argument that there was a contract” with substantial performance by both parties. Both parties had the assurance of knowing the work would be done and it would be paid for.

Practical Implications

The impact of extending adjudication and payment provisions to oral contracts has been widely debated. The facts of this case suggest that the courts will be supportive of situations where adjudicators are able to determine whether the parties have entered into an oral construction contract and, if so, on what terms. It further emphasises the reluctance of the court to reverse the decision of an adjudicator in enforcement proceedings.

http://www.bailii.org/ew/cases/EWHC/TCC/2015/2624.html