| Date | 6 February 2002 |
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| Judgment | Various |
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| The Issue | Contractual and commercial issues arising during 2001. |
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| Implication |
A round-up of legal cases dealing with contractual and commercial matters during last year. |
printLast year saw a number of interesting cases pass through the courts. The following is a selection of particular interest to those managing commercial and contractual issues arising from building and engineering projects. In the case of J Jarvis & Sons Ltd -v- Castle Wharf Developments (Court of Appeal 19 January 2001) the court had to consider the manner in which a client's professional team might owe duties of care to a tendering design and build contractor. Jarvis complained that the tender enquiry documents had failed properly to identify difficulties which had been raised by the planning authorities in regard to the proposed scheme. The court held that there could be no reason in principle why the professional agent of the employer could not become liable to a contractor for negligent misstatements made to induce the contractor to tender, if the contractor relied on those misstatements. In Rainford House Limited -v- Cadogan Limited (TCC 13 February 2001) the court held that credible evidence as to the insolvency of a successful party in adjudication will be sufficient for enforcement of the adjudicator's decision to be refused, or for a stay of that enforcement to be granted, pending resolution of any counterclaim. Adjudication may be the answer to many contractors' problems but clearly it does not solve the difficulty of an insolvent client. In Discain Project Services Limited -v- Opecprime Development Limited (TCC 11 April 2001) the court looked into the difficult question of natural justice in the context of adjudication. The adjudicator had conducted a number of telephone conversations with one party. This gave rise to doubt that the full flavour of those conversations had been made known and an opportunity to respond given to the other side. Enforcement was refused. In Scottish & Newcastle plc -v- G D Construction (St Albans) Ltd (TCC 29 March 2001) the court had to examine whether a contractor would be liable for reinstatement costs in the event of a fire caused by its negligence. It was held that under the JCT Intermediate Form a contractor will be protected by the joint names policy of insurance only in the event of a fire caused by an act of God and not by a fire caused by its negligence. Curiously, the courts have held the opposite to be the case with the JCT 80 form. The case of Blyth & Blyth Limited -v- Carillion Construction Limited, (Outer House, Court of Session 18 April 2001) concerned the effect of novation agreements in design and build contracts. It was alleged by Carillion that through errors in the employers' requirements prepared by Blyth & Blyth prior to tender, it had suffered a loss. The court held that Carillion could not recover those losses from Blyth & Blyth. It could only claim for an assignment of the employer's losses, if any, prior to novation. The warning for design and build contractors is that the wording commonly used in such novation agreements may not give the contractor appropriate rights against its novated design consultants. The case of S L Timber Systems Limited -v- Carillion Construction Ltd, (Outer House Court of Session 27 June 2001) answered a question which had been troubling adjudicators for some time. Opinions had been split on whether the absence of a withholding or payment notice would result in the adjudicator being obliged to order payment of the amount claimed without further enquiry. The court held this to be incorrect. The absence of a Section 110(2) payment notice or a Section 111 withholding notice does not prevent the paying party from arguing that the sum claimed is not due under the terms of the contract. In City Inn Limited -v- Shepherd Construction Limited (Court of Session 17 July 2001) a clause had been added to the contact which required that the contractor should give a notice whenever it received an instruction which would require an adjustment to the contract sum or an extension of time. The notice was stated to be a "condition precedent" such that a failure to give notice would result in loss of the contractor's remedy. The court held that such a provision was entirely legitimate and did not constitute a penalty. In Maxi Construction Management Limited -v- Morton Rolls Limited, (Outer House Court of Session 7 August 2001) the court was asked to examine the requirements of an application for payment in accordance with the Construction Act. Maxi had put forward an interim valuation in which a number of lump sum figures were claimed without explanation or further breakdown. The court held that this valuation failed to satisfy the requirements of paragraph 12 of the Scheme for the "making of a claim" and constituted no more than a request for agreement of the valuation. Without a properly detailed breakdown for each item claimed for payment, the application could not form a basis for establishing the amount due. In Smith -v- Bridgend County Borough Council (8 November 2001) the House of Lords was asked to look into the operation of the ICE conditions to determine whether they gave an effective transfer of title in constructional plant upon the insolvency of the contractor. Clause 63 provides that in the event of the contractor's insolvency the employer may at any time sell any of the plant, temporary works or unused goods and materials which remain on site and apply the proceeds of the sale towards payment of any sums due to the insolvent contractor. The House of Lords held that this arrangement amounted to the placing of a floating charge over the contractor's assets, and as such the deductions were unlawful unless the charge had been registered in accordance with the Company's Act.
CJ-0205
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