| Date | 22 July 1998 |
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| Judgment | Scottish Power Plc -v- Kvaerner Construction (Regions) Ltd, Outer House 6 March 1998 |
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| The Issue | Duty of a main contractor to fix commencement dates and to provide continuity of subcontract work. |
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| Implication |
Express terms in subcontracts will readily be given effect where they regulate the access of the subcontractor to the subcontract works. |
printSubcontractors continue to have a rough time of it in the construction industry. Few main contractors would enter into contract where the employer was free to dictate the start and completion dates for the works on site. Fewer still would allow the employer to interrupt their sequence of working or to require that the works be suspended without any right of the main contractor to recover its costs. Subcontractors on the other hand routinely enter into such contracts. The case of Scottish Power Plc -v- Kvaerner Construction (Regions) Ltd, decided in the Outer House of the Court of Session in Scotland on 6 March 1998, considered these matters and questioned whether the subcontractor could rely on implied terms to improve the contractual framework for its benefit. Kvaerner were employed by Strathclyde Regional Council for the design and construction of three water treatment works. Scottish Power were engaged as subcontractors for the design, supply and installation of M&E services. The subcontract contained a particularly onerous clause F concerning the subcontractor's obligation to carry out the works. "The subcontractor will start on site when instructed by the main contractor and will then proceed diligently with the subcontract works, conforming to the main contractor's requirements. In particular, without prejudice to the foregoing generality, no guarantee of continuous work is given by the main contractor and the subcontractor shall carry out the subcontract works in accordance with any timetable specified in the said Appendix, and in such stages and sequences as the main contractor may from time to time require." A pre-contract questionnaire had been appended to the subcontract which stated that the time for completion of the work on site was "mid November 1993 to end April 1994". There was some doubt about the contractual effect of this phrase. The parties were agreed that elsewhere in the subcontract it was stated that the subcontract works should be completed in 24 weeks. The court was asked to consider the effect of these provisions. After having examined the subcontract carefully the Judge concluded that the dates for commencement and completion of the subcontract works were not fixed in a contractually binding way. The term "mid November" was too vague to be treated as a commencement date. This view was reinforced by a consideration of the general circumstances. The Judge stated "The main contractor must deal with the employer, the engineer, other subcontractors, contingencies beyond their control such as inclement weather, and other interruptions to the orderly progress of the works. It seems to me that, with such considerations to bear in mind, it is unlikely that the main contractor would commit themselves six months in advance, and at a time when the design of the subcontract works was not finalised, to a fixed commencement date and a corresponding completion date." More importantly the court highlighted the provisions of clause F, which contemplated that the subcontractor would start on site, not on a contractually predetermined commencement date, but "when instructed by the main contractor". The court then had to consider the effect of the subcontract period of 24 weeks in the context of clause F. Once again the subcontractors faced a harsh interpretation. If the main contractor was entitled to demand that the subcontractors complete the subcontract works within 24 weeks, the corollary to this would be that the subcontractors were entitled to demand that they be given 24 weeks in which to do so. The impact of clause F however was to qualify that proposition. This meant that the main contractor was entitled to demand completion of the subcontract works within an aggregate period of 24 weeks, subject to such interruption to its continuity as the main contractor required. In other words the subcontractors were not entitled to demand that the 24 weeks form a single continuous period. In an attempt to mitigate the effect of these decisions, the subcontractor sought to imply a term into the subcontract to the effect that the main contractor owed a duty not to hinder or prevent them from carrying out their obligations in accordance with the terms of the subcontract. Such an implied term has readily been accepted in construction contracts, such as in the case of London Borough of Merton -v- Stanley Hugh Leach Ltd in 1985. The main contractor argued that its powers under clause F to dictate when and in what order, and subject to what interruption that the subcontracts were carried out, precluded the implication of such a term. The court held, however, that clause F could not be interpreted such that the main contractor would be wholly free to obstruct or disrupt the regular and orderly execution of the subcontract works. Accordingly the implied term would be held to apply, but it must yield to the proper exercise of the main contractor's powers under clause F. Similarly the subcontractor sought the implication of a term to the effect that the main contractor would take all reasonable steps to enable the subcontractor to discharge its obligations under the subcontract in a regular and orderly manner. The court held that such a term would also be subject to the main contractor's powers to regulate the timing and continuity of the subcontract works in accordance with clause F. In considering whether terms should be implied in to the subcontract, the court referred to the case of Rockcliffe Estates Plc -v- Co-operative Wholesale Society in 1994 where Lord Maclean had said "if the parties have simply made a bad bargain, at least in the view of one of them, the court will not accede to a submission that a term should be implied to remedy the position."
CJ-9826
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