| Date | 28 May 2008 |
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| Judgment | Keller Ltd -v- Morrison/Bilfinger Berger Court of Appeal, 14 January 1998 |
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| The Issue | Waiver of entitlement to damages and equitable estoppel. |
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| Implication |
The election to waive an entitlement to damages, or the equitable estoppel of a party to enforce legal rights, both require clear and unequivocal representation by the party that would otherwise possess those rights. |
printIn September 1996 I reported the case of Keller -v- Morrison/Bilfinger and Berger JV. In that case the subcontractor was held to be liable for damages arising from its failure to carry out the works in a good and workmanlike manner. The case has now come before the Court of Appeal with the subcontractor arguing that the main contractor had waived its rights under the subcontract to claim such damages, or otherwise was estopped from so doing. The project concerned the construction of a railway underbridge south of Bedford on the mainline north from St Pancras. The bridge was to accommodate the new Bedford southern by-pass and was to be constructed at a point where the railway ran across an embankment some two metres high. It was considered necessary to grout the embankment to ensure that it would be stable during construction. The subcontract was in the FCEC blue form, amended to provide for design by the subcontractor. A general specification was incorporated which stated that the pressure grouting was to be carried out in one continuous operation until refusal or emergence of the grout from the surface of the soil. It also specified that grout was not permitted within the track ballast. The subcontractor was required to prepare a comprehensive method statement which was duly produced and approved by the engineer. The grouting was generally unsuccessful. Grout had surfaced into the track ballast causing the track to twist, rendering it extremely difficult for the client, Railtrack, to correct the alignment. In consequence a ten mile per hour emergency speed restriction had been imposed. The Official Referee held that the combination of ineffective monitoring and insufficiently controlled pressure led to the excessive degree of breakout of grout into the track ballast. That constituted failure on the part of the subcontractor to carry out the works in a good and workmanlike manner and thus the subcontractor was in breach of an implied term to this effect. Unhappy with this decision, the subcontractor turned to the Court of Appeal, arguing that the main contractor had waived its right to rely upon these breaches. The principle of waiver was set out in the case The Kanchenjunga in 1990, when Lord Goff said: "It is a commonplace that the expression 'waiver' is one which may, in law, bear different meanings. In particular, it may refer to forbearance from exercising a right or to an abandonment of a right. Here we are concerned with waiver in the sense of the abandonment of a right which arises by virtue of a party making an election. Election itself is a concept which may be relevant in more than one context. In the present case, we are concerned with an election which may arise in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract, or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election." Elsewhere in the judgment it is stated that the election can only occur if it has been communicated to the other party in clear and unequivocal terms. Election (to waive rights against another party) is to be contrasted with equitable estoppel. This latter occurs where a party, having legal rights against another, unequivocally represents by words or conduct that it does not intend to enforce those legal rights, and the other party acts in reliance upon that representation. The important similarity between these two principles is that each requires an unequivocal representation of the relevant party's rights. Returning to our case, the subcontractor Keller argued that the main contractor's representative had signed daily grouting sheets and made no mention of the dissatisfaction of the employer's engineer. In reliance on this they argued they had continued to carry out the monitoring exercise. At no time had the main contractor disclosed the fact that the works were not being carried out to the reasonable satisfaction of the engineer. The Court of Appeal dismissed these arguments swiftly. Signature of the daily grouting reports amounted to nothing more that acknowledgement of the receipt of the document, or at best an acknowledgement of the accuracy of the facts stated on the document. Nothing passed between the parties which in any way justified a conclusion that the defendant main contractor was waiving its right to rely upon any breaches of contract, or to exercise its contractual rights including the right to damages. Accordingly the appeal was rejected.
CJ-9819
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