Construction Brief: latest decisions May 2021

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06/05/2021

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This article was co-authored by Tegan Johnson, Solicitor Apprentice, Sheffield.

This update includes a roundup of recent court decisions dealing with the retrospective effect of contracts, the interpretation of exclusion clauses, liability between parties without a contract, the effect of an exclusive jurisdiction clause on enforcement of an adjudication decision, and conduct when providing a Reply to a Defence.

Sub-contracts – retrospective effect

Balfour Beatty Regional Construction Limited v Van Elle Limited [31.03.21]

This case confirmed that a sub-contract had retrospective effect in respect of works carried out before it was executed.

Balfour Beatty sought to claim against its specialist sub-contractor, Van Elle, for defective piling works. Van Elle raised a number of defences, including that the sub-contract entered into did not govern the distinct area of piling which was subject to the claim. Van Elle argued that this was instead governed by an earlier written quotation, which had been accepted by conduct. The quotation was subject to Van Elle’s standard terms and conditions, which contained a number of clauses seeking to limit Van Elle’s liability.

The preliminary issues considered were:

  • Whether the arrangement between the parties was subject to the sub-contract or the earlier quote and
  • If it is the latter, what was the effect of the limitation of liability clauses?

The parties agreed that the sub-contract existed, but disagreed as to whether it applied to the piling works in question. In the circumstances, the parties had acted as if there was a single contract, including invoicing and using one contract and project number. While there had been various iterations of contractual dealings before the sub-contract was entered into, the court had no reason to find that the sub-contract did not apply retrospectively as intended in the drafting.

The second issue did not need to be decided as a result, but the judge set out some helpful obiter comments regarding the limitations of liability in the Van Elle terms. Notably, the court stated that the wording of the clause in question was not and could not be interpreted as a financial limit and so would not limit Van Elle’s potential financial exposure.

The case should serve as a reminder to all parties to ensure that the terms agreed clearly encompass all elements of works that they are intended to encompass.

Contacts: Helen Birchall and Tegan Johnson

Exclusion clauses – interpretation

Mott MacDonald Limited v Trant Engineering Limited [30.03.21]

The court has clarified that exclusion clauses can apply to breaches of contract that are fundamental, deliberate or wilful.

The parties entered into a settlement and services agreement (SSA) relating to an ongoing project. The SSA contained an exclusion of liability clause. Mott MacDonald brought a claim for payment against Trant Engineering Limited (Trant), to which Trant responded with a substantial counterclaim alleging that Mott MacDonald had “fundamentally, deliberately, and wilfully” breached the SSA.

Mott MacDonald denied breaching the SSA but pointed to the exclusion clause, arguing that it would act to exclude liability for any such breaches. Mott Macdonald applied for summary judgment on this issue.

The judge examined the existing case law and concluded that the correct approach to interpreting exclusion clauses is “by reference to the normal principles of contractual construction without the imposition of a presumption and without requiring any particular form of words or level of language to achieve the effect of excluding liability”. The court is to construe the contract so as to give effect to the parties’ intention, regardless of the nature of the breach.

Applying this to the clause in question, the court considered that the clause was clear and capable of applying to the relevant breaches, including those that were fundamental, deliberate or wilful.

Summary judgment was granted in Mott MacDonald’s favour.

Contacts: Helen Birchall and Tegan Johnson

Liability of sub-contractors – no contractual relations

Multiplex Construction Europe Limited v Bathgate Realisations Civil Engineering Limited & others [16.03.21]

This case considered the liability of a sub-contractor’s consultant to the contractor where there was no direct contractual relationship.

Multiplex Construction Europe Limited (Multiplex) brought a number of claims against its sub-contractors for defective works. It also claimed against RNP Associates Ltd (RNP), who was a consultant engaged by one of the sub-contractors. RNP provided independent design checks and issued design check certificates, but did not provide design works or construction. There was no direct contractual relationship or clear warranty provided to Multiplex.

The two preliminary issues considered were:

  • Whether any obligations and/or duties of care were owed by RNP to Multiplex in respect of the design check certificates and
  • Whether any warranties were provided by RNP to Multiplex.

Upon examination of the existing case law, as well as the facts (mainly the lack of a contractual relationship, as well as RNP’s limited role), the judge decided RNP did not assume a duty to Multiplex, and it would not be just, reasonable or fair to impose one.

The court then considered the position regarding any warranties which may have been provided. There had been no warranty documents provided, and the certificates themselves did not contain wording to that effect. The court found none had arisen.

This case will be reassuring for consultants engaged by sub-contractors in situations where there are no direct contractual links up the chain. On the flip side, it also emphasises the importance to those higher up the chain of putting in place clear contractual arrangements, if they want to be able to rely on the services carried out by those down the chain.

Contacts: Helen Birchall and Tegan Johnson

Adjudication enforcement – exclusive jurisdiction clauses

Motacus Constructions Limited v Paolo Castelli SPA [22.02.21]

The court granted summary judgment to enforce an adjudication decision despite an exclusive jurisdiction clause in favour of a foreign court. This is noted to be the first case dealing with the question of whether such a clause precludes English courts from entertaining these type of proceedings.

In the contract, the parties submitted to the exclusive jurisdiction of the courts of Paris, France. The works took place in England, and the contract was governed by the laws of Italy.

The Construction Act applies to construction contracts governing work done in the UK, regardless of the applicable law under the contract. The adjudication provisions contained within the Scheme for Construction Contracts were therefore implied into the contract. When proceedings were brought to enforce the adjudicator’s decision, the jurisdiction of the English courts was challenged.

International jurisdiction questions are determined by the Convention on Choice of Court Agreement. This states that the court shall dismiss or suspend proceedings to which an exclusive choice of court agreement applies - unless exceptions apply. The claimant sought to rely on the exceptions in Article 6C (where giving effect to the court of choice in the contract would lead to manifest injustice or be contrary to public policy) and Article 7 (where the remedy sought was interim).

The court found that while the high bar for Article 6C to apply had not been met, it agreed that an adjudication decision and summary judgment to enforce it would be included within the definition of “interim remedy” under Article 7. In the circumstances this was an interim measure, and summary judgment was granted for the claimant on the basis of the Article 7 exception.

This will be an important precedent going forward, demonstrating that exclusive jurisdiction clauses do not always apply as fully as intended.

Contacts: Helen Birchall and Tegan Johnson

Particulars of Claim – alternative cases

Martlett Homes Limited v Mulalley & Co Limited [16.02.21]

In an application focusing on the issue of pleading a potentially new claim in a Reply to the Defence, the court struck out the relevant paragraphs but allowed an amendment to the Particulars of Claim (Particulars).

Martlett Homes Limited (Martlett) brought a claim against Mulalley & Co (Mulalley) for negligence and breaches of contract surrounding cladding work. The proceedings were commenced a matter of days before the limitation period expired.

After the defence was served, Martlett served a Reply, which included a number of paragraphs headed “Alternative Case”. The defendant sought to strike out these paragraphs on the basis that they were not responsive to the defence but sought to set up a new claim. Martlett then made an application to amend its Particulars of Claim.

The court examined existing precedents and noted that the new alternative case was not used as a shield to a counterclaim (in which case the addition may have been permissible) but as a new claim to establish liability. The alternative case was not properly raised by way of Reply and was struck from the Reply document.

However, the court did allow the amendment to the Particulars of Claim on the basis that a new claim would be statute-barred, following the judgment of Hyde v Nygate. While the factual basis of the claim was a new cause of action, it arose from substantially the same facts as set out in the Defence. The court therefore exercised its discretion as it was “self-evident that it would lose the opportunity to hold Mulalley to account” if the Particulars could not be amended.

Contacts: Helen Birchall and Tegan Johnson


Read other items in Construction and Engineering Brief - May 2021