| Date | 22 October 2003 |
|
|
| Judgment | Bovis Lend Lease Ltd v R D Fire Protection Ltd, TCC 6 February 2003 |
|
|
| The Issue | The impact of a settlement agreement between an employer and main contractor in related claims between the main contractor and a subcontractor. |
|
|
| Implication |
Where a main contractor enters into a settlement agreement with its employer in connection with matters that are in dispute with a subcontractor, the main contractor will be required to show evidence of the breakdown of that settlement agreement in so far as it relates to the claims being made against the subcontractor. |
printIn 1997, Bovis Lend Lease entered into a heavily amended JCT 1981 'With Contractor's Design' form of contract with a company called Braehead Glasgow Limited for the construction of a large shopping and leisure centre in Glasgow. The contract sum was in excess of £184 million. The performance of this contract gave rise to wide ranging disputes between Braehead and Bovis. Bovis claimed loss and damages in the total sum of approximately £37 million and Braehead counterclaimed for overpayment, delay damages and defective works in the sum of approximately £65 million. These proceedings were eventually compromised between the parties by a settlement agreement made in January 2002. This was a global settlement under which all the claims and counterclaims in the proceedings were compromised on terms that Braehead would pay £15 million to Bovis and the parties would enter into a potential construction contract in relation to another development. Although the contract had been based on the JCT 1981 form, in reality Bovis had acted more in the manner of a management contractor for the project. The works were subdivided into works packages entered into by Bovis, and the payments which Bovis received under the main contract were in part determined upon the amounts payable to each works contractor. One of those packages was for fire protection work, and a company called Baris UK had been appointed by Bovis to undertake this particular work. However, Bovis had progressively removed parts of this work from Baris and had appointed a second company, R D Fire, to complete the fire protection works. In the event, Baris carried out approximately 90% of the fire protection works and R D Fire approximately 10%, but R D Fire had provided Bovis with a warranty in respect of all the fire protection works. The counterclaims that Braehead had raised against Bovis included complaints that the fire protection works were defective or incomplete. That counterclaim was quantified at approximately £4.8 million, a sum that was made up of costs which were in the main those described as being reasonably necessary to remedy the alleged defects. Unsurprisingly, Bovis had joined R D Fire as a defendant to the Braehead counterclaim, essentially claiming an indemnity for any loss or damages it might incur as a result of Braehead's allegations of defective or incomplete fire protection works. Having made its settlement agreement with Braehead, Bovis continued its outstanding claims against R D Fire and certain other third party defendants. Bovis argued that its settlement should essentially have no direct bearing upon the case against R D Fire. It elected not to produce any evidence of the circumstances of the settlement, of negotiations leading up to the settlement, or of the make up or contents of the settlement. R D Fire argued on the contrary that the settlement with Braehead was of critical importance and that it had the effect of extinguishing the entirety of Bovis' claim against them. His Honour Judge Thornton QC was therefore asked to try a series of preliminary issues as to whether the settlement extinguished Bovis' claim or was relevant to that claim. Judge Thornton recalled the 1951 case of Biggin & Co v Permanite and made certain conclusions which could be deduced from that case. Firstly, he noted that a defendant such as R D Fire was to be taken to have foreseen that a consequence of its breach of contract would be that Bovis might be liable to third parties, such as the employer ,and that that liability might give rise to litigation and settlement under which Bovis would incur financial loss. Secondly, where a settlement had occurred in respect of such a third party claim, the relevant component of that settlement would be taken as the upper limit of what would be recoverable from R D Fire. Thirdly, Bovis would, in principle, be able to recover the sum paid in settlement if it could establish that the settlement was reasonable and that it was reasonable to settle. To the extent that the settlement was unreasonable it would be irrecoverable since the loss would not be caused by the defendant's breach. Finally, Bovis would be required to establish by normal methods of proof that R D Fire was in breach of contract and that the breach caused the claims being made. Judge Thornton noted that, had the Biggin principles merely been rules of evidence, they could be disregarded by Bovis and it would then have been for R D Fire, if they wished to contend that a ceiling had been placed on Bovis' possible recovery by the settlement, to have established what that ceiling was. However, Judge Thornton was clear that the Biggin principles were also rules that governed and affected causation and remoteness of damage in settlement cases. As such they vitally shaped the loss that the law allowed Bovis to recover. These rules imposed a burden on Bovis to establish what, if any, financial detriment occurred as a result of the settlement. Bovis had not sought to adduce any evidence as to the circumstances and breakdown of its settlement with Braehead. That being so, Bovis could not establish any relevant loss that was attributable to the alleged breaches of contract by R D Fire. The burden was on Bovis to establish that relevant loss and Bovis was not entitled to ignore or bypass the settlement agreement in discharging that burden.
CJ-0341
|
|||
|
© Brewer Consulting |
|||
 |
|||