Quarterly Case Law Update (Article 79)

Introduction

This Article considers three recent Decisions from the English Courts. The issues within these cases centre around:

1. Contractual Interpretation;
2. Adjudication Decision on Interim Valuations; and
3. Concurrent Delay.

Contractual Interpretation

In the case Solutions 4 North Tyneside Limited v Galliford Try Building 2014 Limited [2022] EWHC 2372 (TCC), a dispute arose in relation to a PFI project concerning 26 facilities. The works involved the demolition and replacement of 10 buildings and the refurbishment of 16 more.

The dispute relates to the refurbishment of dwellings. Part A of an ‘'Output Specification’' addressed the minimum design lives that were to be achieved; these ranged from 4 years for internal paint finishes, to 60 years for the roof, floor structures and other structural items. There was also a residual life expectancy, which was to remain when the dwellings were handed back to the Council in 2042, ranging from a year for the internal paint finishes to 30 years for certain of the structural items.

Solutions 4 North Tyneside Limited (“the Claimant”) alleged that defects emerged in mid-2018 to the roofs of the refurbished facilities. The Claimant argued that Galliford Try Building 2014 Limited (“the Defendant”) was liable under the Contract for the rectification of the roofs, arguing that they had a 60-year design life and were capable of residual life expectancy at 2042.

The Defendant claimed that its obligation was to ensure that the refurbished facilities met the stated requirements at the date a Certificate of Availability was issued, and there was no obligation as to the future life expectancy of the facilities.

Judge Mr Justice Eyre found the interpretation of the Defendant to be “substantially correct”, stating:

“The obligations arising from sections 2.9 and 2.10 relate to New Build works. That means that they apply to those dwellings which the Defendant has demolished and replaced. They also apply in circumstances where refurbishment works have been undertaken which involved elements of a new building. In the latter circumstances, the new build elements of the work undertaken on the Refurbishment Dwellings had to have a design life of the duration specified… at the date of the relevant Certificate of Availability.”

It was emphasised that it is “significant” that the Availability Standard in relation to “Structure and Building Fabric”, for both the Refurbishment Dwellings and the New Build Dwellings, is captured in the following generalised terms:

“The Area shall be fit for human habitation with permanent structural elements, building fabric and communal area floor coverings present, in sufficiently good order and not demonstrating failure or damage which materially or adversely affects use of the Site.”

Judge Mr Justice Eyre distinguished between bringing an existing building up to a required standard and the period to which it must remain in that condition, commenting:

“It is of note that the standard is expressed with reference to the condition of the elements at the time of the assessment and does not specify a period for which that condition must persist.”

The Court found in favour of the Defendant in that, it would be “an unusual arrangement” for life expectancy obligations to apply to refurbished properties.

Conclusion

In this case, the Court concluded that for the life expectancy obligations to apply to refurbished properties would be an unusual arrangement and that this was not what the Parties had agreed; if that had been the intention, one would have expected it to have been set out in clear terms.

The case demonstrates an example of the importance of clarity in contract documentation. In this circumstance the extent of the obligations in relation to rectification was unclear, leading the Court to look to generalised terms within the Agreement.

Adjudication Decision on Interim Valuations

In the case Essential Living (Greenwich) Limited v Elements (Europe) Limited [2002] EWHC 1400, a Part 8 claim ensued for declaratory relief concerning the extent to which an Adjudicator’s Decision (on an Interim Valuation), is binding for the purpose of an ongoing Final Account process.

Essential Living (Greenwich) Limited (“the Claimant”) argued that the Adjudicator’s Decision was binding with respect to calculating the final Contract Sum and fixing the completion period in any subsequent Adjudications. Elements (Europe) Limited (“the Defendant”) claimed that the various variation and delay matters, dealt with in the earlier Adjudication Decision, should be reconsidered at Final Account stage.

The Works commenced under an Amended JCT Construction Management Trade Contract 2011. Disputes arose between the Parties, as to the Defendant’s entitlement to adjustments to the Trade Contract Sum. The Defendant had claims for Variations, Extensions of Time and Loss and/or Expense. The Claimant argued it had entitlement to Liquidated Damages and Financing Charges.

The Claimant commenced an Adjudication and the Adjudicator determined (among other issues) the last value of the Defendant’s completed works at the last Interim Valuation.

Subsequent to the Adjudicator’s Decision, the Defendant submitted its documents for the purpose of calculating the Final Trade Contract Sum. The Defendant’s submissions included increased claims for Variations, a full Extension of Time (based on a new Delay Analysis Report), no deductions for Liquidated Damages and additional Prolongation and Disruption Costs. In essence, the Defendant sought to bring new information to the table during the Final Account negotiations, as a means of overcoming the parts of the Adjudicator’s Decision that were not in its favour.

The Claimant sought declaratory relief from the Courts to the effect that the Defendant remained bound by the prior Adjudication Decision.

The Courts held that the Parties were bound by the previous Adjudication Decision, in respect of the specific matters determined in the Adjudication, until it is finally determined by the Court or by subsequent settlement. It held that the Parties could not seek a further Decision by an Adjudicator on a matter that had been subject to the previous Adjudication Decision.

The Courts did, however, confirm that the Adjudication Decision was not binding on the Parties for the purpose of the Construction Manager’s final determination of the Completion Period, under Clause 2.27.5 [Assessment of the Completion Period] of the Contract, from which would flow any liability on the part of the Defendant for Liquidated Damages and Finance Charges.

Conclusion

This case shows how an Adjudicator’s Decision on an Interim Valuation may not be binding on parties for the purpose of Final Account negotiations. The Parties are bound by a previous Adjudication Decision in respect of specific matters determined in the Adjudication, for example, Variations considered and assessed by an Adjudicator.

The case also identifies how the drafting of Final Account procedures, contained within a Contract, may allow or prevent parties from bringing forth new information during the Final Account, on items previously decided in an Adjudication.

It is important to understand that, prior to disputing any sums contained within a previous Adjudicator’s Decision, careful analysis of the evidence is undertaken to determine whether the Decision is binding on any other discrete issue referred to and determined by the Adjudicator.

Concurrent Delay

In the case Thomas Barnes & Sons plc v Blackburn with Darwen Borough Council [2022] EWHC 2598 (TCC), Thomas Barnes & Sons plc (in Administration) (“the Claimant”) was appointed by Blackburn with Darwen Borough Council (“the Defendant”) for the construction of Blackburn Bus Station. The Form of Contract was an Amended JCT Standard Building Contract with Quantities 2011.

Delays occurred on the Project, to which the Claimant claimed Extensions of Time. The Claimant did not receive the Extensions of Time to the extent that is sought, and subsequently the Defendant terminated the Contract.

The primary delay concerning the Claimant's Extension of Time related to the deflection of certain steel supports, requiring investigation and remedial work. Responsibility for this delay fell to the Defendant. However, whilst the steel deflection issue was ongoing, the Claimant itself suffered delays to the roofing works.

Both tasks, the steel supports and the roofing works, were critical items. The steel support issue prevented concrete topping from being poured, preventing construction of the Bus Station Hub. Construction of the Hub was required before the internal finishes could commence (the last activity on the Programme). The roofing works, however, required completion to provide a watertight structure to enable the Hub internal finishes to commence.

Both the Claimant and Defendant provided Expert Assessments of the delays, one of which adopted an As-Planned v As-Built Windows Analysis method, whereas the other chose a hybrid of a Time Slice Windows Analysis and a Time Impact Analysis. In reviewing the Analysis used by both Experts, it was held that it would be wrong to attach too much importance to a close analysis of whether each had properly chosen or loyally followed the particular method selected. In coming to this view, His Honour Judge Stephen Davies cited the SCL Protocol (Paragraph 11.2) that:

“…irrespective of which method of delay analysis is deployed, there is an overriding objective of ensuring that the conclusions derived from that analysis are sound from common sense perspective.”

In determining whether the Claimant was entitled to an Extension of Time, His Honour Judge Stephen Davies summarised Keating on Construction Contracts 11th Edition, at 9-105:

“In respect of claims under the contract:

(i) Depending upon the precise wording of the contract a contractor is probably entitled to an extension of time if the event relied upon was an effective cause of delay even if there was another concurrent cause of the same delay in respect of which the contractor was contractually responsible; and

(ii) Depending upon the precise wording of the contract a contractor is only entitled to recover loss and expense where it satisfies the “but for” test. Thus, even if the event relied upon was the dominant cause of the loss, the contractor will fail if there was another cause of that loss for which the contractor was contractually responsible”.

The Court held that both causes of the delay were on the critical path and both were concurrent. It was held that the Claimant was entitled to an Extension of Time for the steelwork delay; the delay caused by the Defendant. However, it was not entitled to any Prolongation Costs other than for the period of the steelwork delay that was not concurrent with the roof covering delay; the delay caused by the Claimant itself.

Conclusion

This case provides important guidance for parties involved in a concurrent delay scenario.

Firstly, it demonstrates that the Courts do not favour one method of Delay Analysis over another, provided that this is undertaken from a common-sense perspective.

Secondly, when faced with a concurrent delay, one of which is Employer-driven and the other a Contractor-driven delay (subject to the wording of the Contract), the Contractor is “probably” entitled to an Extension of Time. However, the Contractor may not be entitled to recover its Loss and Expense, where it is contractually responsible for one of the causes of delay. Effectively, it prevents either party from gaining a financial benefit from the other, the Contractor claiming Loss and Expense or the Employer deducting Liquidated Damages when itself has too caused a delay.

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