BULLETIN: Construction law update - June 2016

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A construction law update for June 2016 from Blake Morgan.

Carillion Construction Limited v (1) Woods Bagot Europe Ltd (2) AECOM Ltd (3) Emcor Engineering Services Ltd (4) Emcor (UK) Ltd

The inter-relationship of claims up and down the supply chain in construction projects is often fertile ground for disputes.  How, for example, do the dealings between client and main contractor affect the contractor's own relationship with its subbies?  This case provides a good example of this quandary,  In essence, the Court had to consider complex issues relating to a contractor's claim against two sub-contractors arising from delay in completion of the Rolls Building – the very place where the Technology & Construction Court (TCC) sits.     

Two main issues were considered:-

  1. For a sub-contract based on the DOM/2 (1981 edition), any extension of time should run "contiguously from the end of the existing period for completion", even if the extension is granted during a period when the sub-contractor is in culpable delay.  It did not create a "fresh and distinct period".
  2. The contractor's liability for liquidated damages was not extinguished by a supplemental agreement between the contractor and the client under which the contractor acknowledged that it was in delay, agreed not to claim an extension of time and accepted an adjustment to the contract sum to account for LADs that were payable. Rather, the agreement provided for 'its crystallisation, and satisfaction'.

The court considered the well-known decision in Balfour Beatty Building v Chestermount Properties in relation to extensions of time. However, the decision did not rely on Chestermount, beyond saying that it illustrated how extension of time provisions are commonly understood to operate.

A copy of the full judgment is available here.

Bristol Rovers (1883) Ltd. vs. Sainsbury's Supermarkets Ltd. 2016

Bristol Rovers became the victim of the change in the fortunes of the big four supermarkets, with the result that Sainsbury's no longer wanted to redevelop a new stadium for which it had entered into a conditional contract just a few years before. Sainsbury's had agreed to use all its reasonable endeavours to procure the grant of a "satisfactory" planning consent.

The planning application, submitted in good time and with the full approval of the club, was initially denied by the council. Sainsbury's (as required by its contract) appealed against the refusal and was duly refused again, enabling Sainsbury's to terminate the agreement with the club. The club challenged this, losing at first instance and appealed.

The Court of Appeal had to consider the meaning of "all reasonable endeavours":-

  • The club asserted that Sainsbury's should have timed its appeal to maximise its chance of success.  The Court rejected this as Sainsbury's had a separate obligation to try to procure a planning consent "as soon as reasonably practicable" and before the contractual "termination date". It could not wait for a better political atmosphere which might not come in time for it to comply with its temporal obligations.
  • The club also argued that, since was not allowed (under the agreement) to make its own planning application or appeal without Sainsbury's' consent, as part of its obligation to use all its reasonable endeavours to secure a consent, Sainsbury's should have allowed the club to submit an application that would have stood a good chance of being granted.

As the agreement had set out in considerable detail what the parties could and could not do the "reasonable endeavours" obligation was nuanced by these provisions and was not freestanding and over and above the agreed steps. As Sainsbury's was not obliged to make a further application, it could not be criticised for declining to give its consent to the club doing so.

A copy of the full judgment is available here.

Planning Inspectorate and the Community Infrastructure Levy (CIL)

In a case decided on 17th March 2016 (Planning Inspectorate Appeal Ref: APP/L5240/L/15/1200030), an applicant for a "self-build exemption" from CIL was turned down because he was found to have commenced his development before his claim for exemption had been decided (despite a warning from the planning officer to wait for that decision). The commencement consisted of erecting hoardings and carrying out preliminary groundworks, which was photographed and sent in to the Council. Anyone intending to develop land and claim a CIL exemption must hold back until the claim has been processed or else see it lapse on commencement of development. A copy of the full decision can be found here.

Adjudicator's decision severed by TCC

Case: Stellite Construction Limited v Vascroft Contractors Limited [2016] EWHC 792 (TCC)

Judgment available here.

Proceedings in this case concerned a Part 8 application for declaratory relief.  The TCC considered allegations that an adjudicator had breached the rules of natural justice and had exceeded his jurisdiction.  Carr J found that the adjudicator had not breached the rules of natural justice when deciding that time was at large, but that he had exceeded his jurisdiction when he went on to decide what would be a reasonable time for completion.  The judge decided that it was "common ground" between the parties that the decision on the issue of a reasonable time for completion could be 'severed' from the remainder of the adjudicator's decision.  As such, the remainder of the adjudicator's decision (including that time was at large) survived and was enforceable.  This case provides an example of the Court allowing part of an adjudicator's decision to stand, although it should be stressed that the two issues in this case were clearly distinguishable.