Summary

In Almacantar (Centre Point) Ltd v Sir Robert McAlpine Ltd [2018] EWHC 232 (TCC), if the relevant terms had been clearly defined and consistently applied throughout the contract, the parties could have avoided the inherent uncertainty of an adjudication and trial and potentially over £1m if the contract had been drafted more explicitly in favour of the Contractor. In any event, the case serves a warning to practitioners about the drafting and use of defined terms.

Facts

In September 2012, Almacantar (the Employer) and SRM (the Contractor) entered into a Pre-Construction Services Agreement (PCSA) in relation to the redevelopment project of Centre Point Tower in London at an anticipated project cost of over £100 million. The parties agreed a fixed lump sum price in the PCSA which contained a schedule of amendments to a design and build contract which being negotiated concurrently and were subject to final agreement. The payment clause stating the following:

“12.1A - For the avoidance of doubt, notwithstanding any other provision in this Agreement the final Fee instalment of [50% of the final Fee] shall not become payable to the Contractor until the first valuation subsequent to commencement on site under the main contract.”

In September 2014 the Contractor refused to enter into a design and build contract (only considering a construction  management contract) causing the Employer to terminate the PCSA. The Employer entered into a new PCSA with a third party shortly afterward causing duplicate work and additional costs. A building contract was entered into in January 2015.

In September 2015 the Contractor issued a payment application for the 50% and eventually won the adjudication in June 2017 by successfully arguing that a payment was due following the first instalment of the “main contract” the Employer had with the third party. The Employer commenced court proceedings in the TCC to overturn the adjudication.

Decision

The TCC reversed the adjudicator’s decision and held that the Contractor was not entitled to the payment. Although the defined term had not been used, the term “main contract” was inconsistently defined throughout the PCSA. After reviewing the contract the judge stated his decision “seems to [him] to reflect the intention of the parties that the second 50% would only become payable when and if a contract was entered into and performed by SRM.

The judge also stated that “the purpose of the PCSA was to put the Employer in a position to proceed with a well-planned design and build contract with developed Contractor's Proposals and a robust Contract Sum.” and that the Contractor’s argument that the term “main contract” included a contract with a third party is inconsistent with the purpose of the PCSA.

Practical Considerations

Legal advisors will recognise the impact of defined terms. The fact that term “main contract” in clause 12.1A was not defined was one reason which caused the Employer to lose the adjudication in first instance. Similarly, the Contractor’s primary argument that a payment had been made in the “main contract” would not even have got past first base if a correct defined term had been used from the outset, clarifying that the main contract was the design and build contract between the Contractor and Employer. Conversely, if the intention between the parties at the time of drafting was for the payment to be made upon any subsequent contract being entered into, the lack of a clear defined term ended up costing the Contractor over £1m!

Almacantar (Centre Point) Ltd v Sir Robert McAlpine Ltd [2018] EWHC 232 (TCC)

http://www.bailii.org/ew/cases/EWHC/TCC/2018/232.html