Construction Brief: latest decisions July 2021
This article was co-authored by Tegan Johnson, Solicitor Apprentice, Sheffield, and Miran Bahra, Trainee Solicitor, London.
This update includes a roundup of recent court decisions dealing with liquidated damages, a classic residential property dispute, late service of a claim form, overstated losses in a claim for defects, and another example of adjudication enforcement where natural justice and jurisdiction issues are at play.
Liquidated damages and termination
Triple Point Technology Inc v PTT Public Company Limited [16.07.21]
The Supreme Court brought clarity to the position around liquidated damages, returning to the previously established, orthodox position.
Where a contract is terminated, the contractual mechanism for liquidated damages will apply up until termination. For any losses thereafter, the usual principles for general damages apply.
A High Court take on a residential dispute
Cartwright Pond Limited v Ms Louise Wild [11.06.21]
Unusually, a low value residential claim which should by all accounts have been heard in the County Court was kept in a High Court listing.
Ms Louise Wild (Ms Wild), the homeowner, contracted with Cartwright Pond Ltd (Cartwright) to renovate her property. The dispute covered a variety of issues including:
- The contract terms themselves
- The date for completion
- Liquidated damages
- The termination of the contract (including who terminated and if it was done correctly) and
- The value of the claim.
The first three issues were addressed in turn with the parties deemed to have entered a simple contract (based on tender documents and intra-party correspondence) despite intentions to enter a RIBA form, because one was never drawn up or signed. The tender documents noted a completion date of “14 weeks”, an express term which could not be denied. However, as there was no mechanism for extending time, time became “at large” and Ms Wild could not claim liquidated damages.
The court found that in refusing access for further works, Ms Wild had repudiated the contract, and in examining the claimed losses, the court tended to agree with the conclusions of the joint expert (which aligned with neither party in full). The court allowed the majority of the claimant’s claim for measured works and variations, as well as some of the counterclaim for defects, while refusing a loss of profit claim from Cartwright.
Ultimately, the court noted that the issues at hand were relatively simple and could have been avoided through proper communication and contract administration. As Ms Wild lacked construction knowledge and Cartwright struggled, as a traditional firm, to work with her, a dispute could easily have been avoided with flexibility and genuine discussion.
The judgment is useful as the High Court takes an opportunity to remind us all of the fundamentals – including the importance of the contract and of ongoing contract administration.
Contacts: Helen Johnson and Tegan Johnson
Basic procedure – service of the claim form
Boxwood Leisure Limited v Gleeson Construction Services Limited & anor [19.04.21]
The court dismissed an application for relief that would render valid the late service of a claim form.
Boxwood Leisure Limited (BL) validly served the particulars of claim, but served the claim form two days after the deadline ordered by the court. Gleeson Construction Services Limited and M J Gleeson Group Limited (together the defendants) argued that the late service of the claim form rendered the proceedings a nullity as BL had failed to abide by the order and/or apply for a further extension of time under the Civil Procedure Rules (CPR) 7.6(3).
BL subsequently issued an application to the court seeking relief from sanctions under CPR 3.9 and requesting that the court use its general powers under CPR 3.10 to remedy its failure to serve the claim form in time and/or vary the order to render the claim form as having been properly served.
In determining the issues, the judge considered the three stage test set out in Dentons v TH White Limited , the issue of limitation and particularly, the extent of CPR 7.6(3). Under CPR 7.6(3), the court may make an order to extend the time for serving a claim form only if “…(b) the claimant has taken all reasonable steps to comply with CPR 7.5 (Service of a Claim Form) but has been unable to do so”.
However, the judge found that as BL did not serve the claim form by the deadline ordered by the court, they could not establish that they took all reasonable steps to serve the claim form within the specified period and therefore the conditions set out in CPR 7.6(3) could not be satisfied.
As a result, the court’s powers under CPR 3.9 and 3.10 could not be used to extend the time for serving the claim form.
In addition, as limitation was a live issue, BL was obliged to ensure that the deadline ordered by the court was met and a further extension of time would deprive the defendants of any limitation defence.
The application was subsequently dismissed. This case should serve as a reminder to all parties that the requirements for service should always be adhered to and there are limited circumstances in which the court will grant a retrospective extension for the late service of a claim form.
Contacts: Helen Johnson, Miran Bahra and Tegan Johnson
Claims for defects – overstated losses
Toucan Energy Holdings Limited v Wirsol Energy Limited [14.04.21]
This case is a timely reminder that courts will examine every aspect of a claim and do not look favourably on exaggerated or overstated losses.
Wirsol Energy Ltd (Wirsol) constructed a number of solar energy plants under engineering, procurement and construction (EPC) contracts, which Toucan Energy Holdings Ltd (Toucan) later acquired the ownership of. There were a series of issues across all plants, culminating in Toucan bringing a £28 million claim for defects and breaches, to which Wirsol responded with a £6.4 million counterclaim for an unpaid invoice.
In a judgment reaching over 300 pages, Mr Justice Henshaw set out to examine each and every head of claim in turn; finding that Toucan had failed to prove some aspects of their case and other heads of claim did not affect the losses suffered. Ultimately, Toucan failed in 12 aspects, and were awarded some sums (although only part of the sums claimed) in a further seven. Wirsol’s counterclaim succeeded in respect of the unpaid invoice.
While not providing any new law, the judgment raises a number of interesting points, particularly around waiver and blight. The most obvious take away is clear from the small losses actually allowed and the success of the counterclaim: where losses and defects are minimal, an unreasonable claim for remedial works and re-construction will be dismissed.
Contacts: Helen Johnson and Tegan Johnson
Adjudication enforcement – natural justice and jurisdiction
DMD Environmental Limited v Mitchell Demolition Limited [15.03.21]
The court enforced an adjudicator’s decision despite concerns relating to jurisdiction and a breach of natural justice.
DMD Environmental Limited (DMDE) applied for summary judgment to enforce an adjudicator’s award which related to a final account dispute following works undertaken by the parties in preparation for a re-development.
Mitchell Demolition Limited (MD) argued that summary judgment should not be granted because the adjudicator lacked jurisdiction by determining that the contract of works was based on MD’s acceptance of an email quote, despite some of the works being subject to later oral contracts. MD further claimed that the adjudicator breached natural justice in making an award without MD being able to rely on expert evidence showing that they did not receive the email quote.
Upon considering the jurisdiction issue and examining existing case law, the judge began by considering the nature of the dispute referred to the adjudicator. As this was a final account dispute, the judge found that it made no difference which unwritten contracts applied to establish jurisdiction. In any event, the Scheme for Construction Contracts 1998 applied and the adjudicator had been correctly appointed to determine the nature and scope of the final account issue.
The natural justice issue was determined by considering the facts (mainly correspondence between the parties and adjudicator regarding expert evidence). From the particular circumstances, the judge deciphered that MD had been provided with an opportunity to submit expert evidence as part of their response due prior to the adjudicator’s decision. It was therefore concluded that there was no substantial breach of natural justice in determining the adjudication without expert evidence.
The judge granted the application for summary judgment in favour of DMDE.
Contacts: Helen Johnson and Miran Bahra