A US court has dismissed a suit brought by Metso against Powerscreen for alleged patent infringement.

The United States Court of Appeals for the Federal Circuit reversed an earlier favourable ruling for Metso and decided that Metso's patent is invalid

Metso had issued a lawsuit against Powerscreen International Distribution Ltd (today known as Terex GB Ltd), Terex Corporation, Emerald Equipment Systems, Inc. et al.

The case involves the design of the lateral folding conveyor on Metso’s mobile crushing and screening plants.

The Court of Appeals has reversed favourable decisions given earlier to Metso by the United States District Court for the Eastern District of New York in the case in 2010 and 2011.

Metso said it would seek reversal of this Court of Appeals' decision by motions and, as necessary, by further appeal. The final outcome of the lawsuit would be expected within 2014.

Expect an increase in parallel adjudications following TCC judgment, says Laura Phoenix, associate at Thomas Eggar LLP.

Parties can expect to be on the receiving end of simultaneous adjudications following Willmott Dixon Housing Limited –v- Newlon Housing Trust [2013].

In that case, a Technology &Construction Court (TCC) judge Ramsey J held that:

• A party may refer several disputes to adjudication at the same time using parallel adjudications; and
• Whilst failure to refer a dispute to an adjudicator within 7 days of giving notice of intention to adjudicate automatically deprives an adjudicator jurisdiction, failing to simultaneously copy the Referral to the Responding Party does not.

Background

The Trust employed Willmott Dixon to construct part of a mixed use development on PPC 2000 terms. These embraced collaborative working “to achieve transparent and cooperative exchange of information in all matters relating to the project”.

Disputes arose about the sums Willmott Dixon was entitled to be paid in relation to basement works and in relation to money withheld on account of liquidated and ascertained damages.

Willmott Dixon referred both disputes to adjudication simultaneously and ran the adjudications in parallel using the same CIC-appointed Adjudicator. He decided both disputes in Willmott Dixon’s favour even though the Trust reported that it had not received a copy of either Referral document until a fortnight after the Adjudicator. The Adjudicator gave the Trust an opportunity to serve Rejoinders to answer each Referral before making his Awards.

The Trust did not pay the two sums awarded. Willmott Dixon commenced enforcement proceedings in the Technology and Construction Court (‘TCC’) where the Judge granted summary judgment enforcing both Awards.

In detail

Section 108 grants a right to refer “a dispute” to adjudication. Previous case law arose from scenarios where a party had sought to refer more than one dispute to adjudication in a single adjudication. It concluded that where there are multiple separate and distinct disputes, only one can be referred to an adjudicator unless the parties agree otherwise.

In this case, Willmott Dixon had commenced two adjudications simultaneously, referring one dispute per adjudication. The Judge said this did not deprive the adjudicator of his jurisdiction. He also questioned whether the previous case law was right.

Willmott Dixon’s failure to copy the Referral to the responding party simultaneously did not deprive the adjudicator of jurisdiction. The judge held it would not do so unless the procedure then resulted in a breach of natural justice. In his view, no breach of natural justice had occurred because the Trust had been able to respond to Willmott Dixon’s claims based on letters and documents received within the 7-day period and the Trust had the opportunity to serve Rejoinders following late receipt of the Referrals.

Also, the Judge said he would have expected the Trust to collaborate by querying non-receipt of the Referrals.

Strategy

An increase in parallel adjudications looks likely. This, combined with more flexibility in the requirement for simultaneous service, will put responding parties under greater time pressure. Now, more than ever, preparation is the key to successfully defending adjudication.

Imagine the following scenario, you have entered into an agreement for a lease in relation to a freehold that you own and obtaining a satisfactory planning permission is a condition precedent to a lease being granted. After a while you decide that you want to sell the property. Will you expose yourself to an action for breach of the agreement for lease or will the purchaser be bound by its terms? The recent High Court decision in Ringwood Properties Group Ltd and others v Valero Energy Ltd and another [2013] EWHC 98 suggests that you will be liable, and clever drafting will be required to bind the successor. This article looks at the decision and analyses the potential consequences it will have on drafting contracts.

A petrol station owner, Texaco, entered into numerous conditional agreements with a developer, Ringwood, with a view to build flats and offices above and around the stations on receipt of planning permission. On completion of all developments Ringwood was to acquire an interest in the land. A few months down the line Texaco transferred its interest to S before any planning permission was obtained.

Ringwood argued that by selling the properties Texaco was in repudiatory breach of the agreements. Ringwood said that the breach occurred because Texaco made it impossible for them to perform its obligations under the agreements.

Texaco relied on Section 3 of the Landlord and Tenant (Covenants) Act 1995. Section 3 annexes the benefit and burden of all landlord and tenant obligations to the land and it provides that the benefit and burden of the obligations should pass on assignment. The court rejected this argument stating that conditional agreements are no different to option agreements and they do not bind successors in title. The rationale for this is that they do not create interests in land and the obligations under them are not landlord and tenant obligations within the Act.

Further Texaco could not automatically pass the burden onto the buyer because the clauses in the agreements were not sufficient to render the obligations in the agreement enforceable against the successors in title. In order to compel the buyer to perform there would have to be a clear obligation in unequivocal terms. Texaco was therefore in breach.

The lesson from this case is plain. Any type of agreement for lease needs to contain clear and effective terms pertaining to what happens if the development land is sold before the agreements are unconditional.

If you are in this position, in order to avoid being liable for repudiatory breach of contract you should check the agreement for lease before you transfer the land as it is not unusual for it to contain a restriction that will prevent you from selling the property until you comply with its obligations.

You will be bound by the terms of the agreement for lease, including obligations which you cannot pass by assignment. Therefore it is worth making sure that you use other arrangements to pass your obligations. For example you may obtain a deed of covenant from a purchaser in which they agree to perform the relevant obligations. When drafting agreements for lease you need to carefully consider and account for the above situation to avoid future disputes.

Kasia Burdzy is a paralegal at Thomas Eggar LLP

Brigade Electronics has won its court battle to protect its patented bbs-tek white sound reversing alarms against similar products sold by Amber Valley.

The court action was brought by Brigade Electronics on 7 March  2012, after Amber Valley launched its ‘Ecolarm’ range of products . Brigade claimed that these products infringed one of its patents protecting the bbs-tek white sound alarms that use locatable broadband, multi-frequency sound. In a conclusion to this long running case, on Friday 19 April His Honour Judge Birss QC upheld Brigade’s patent and judged that Amber Valley’s ‘Ecolarm’ products do infringe.

Following this judgment, all Amber Valley ‘Ecolarm’ and ‘Ecotalking’ models that contain multi-frequency broadband sound must be withdrawn from sale. Amber Valley has also been ordered to pay substantial costs and damages to Brigade.

Brigade managing director Philip Hanson-Abbott said: “We are very satisfied with the outcome, which reinforces the strength of our patent and vindicates our huge investment over the years in bringing to market this pioneering safety technology.  It also sends out a clear message to the market that Brigade is prepared to defend its patents and other IP.

“The manoeuvring of large vehicles and machines continues to be an area where innovation can further safeguard people and property. Brigade has been a safety pioneer in this market for over 35 years now, and this decision reinforces and supports our strategy of continuing investment in new technologies and the development of safer products.”

bbs-tek reversing alarms were launched in the UK by Brigade in 2000. The use of white sound in a vehicle motion alarm is claimed to improve safety over tonal, ‘beeping’ alarms by making it very much easier and quicker to locate the source of danger. An additional claimed benefit is the extent to which the sound dissipates outside the danger zone, making it the alarm of choice for many operators of vehicles and machines manoeuvring in or near to built-up areas. Brigade says that its bbs-tek reversing alarms are the only products of their type to carry the Noise Abatement Society’s ‘Quiet Mark’, and to be certified by PIEK, the Dutch authority set up to regulate quiet night-time deliveries in Europe.

“While obviously good news for Brigade, this decision will also be welcomed by our distributor partners, who can continue to promote our unique bbs-tek alarms knowing that we will give them our 100% support in protecting their own investment in developing local markets for these products,” Mr Hanson-Abbott added.

Office partitioning specialist Komfort has won a battle to protect one of its patents.

The Patents Court has upheld the validity of a patent that protects Komfort’s Bubble Joint gasket.

Komfort issued a challenged against a glass-to-glass gasket designed by Lizzanno Partitioning (UK). Komfort claimed that Lizzanno’s design infringed the patent for its Polar Bubble Joint, while Lizzanno counterclaimed that the patent was invalid.

The court found in favour of Komfort on both counts, awarding significant costs and an as yet undecided sum of damages for breaching the patent. It also required that Lizzanno stops using its gasket on any future projects.

Komfort said that, with support from its parent company Laidlaw Interiors Group (LIG), it had spent a lot on defending its Bubble Joint patent as it a key component and differentiator in the Komfort Polar partitioning system.

Komfort managing director Nick Prosser said: “The ruling confirms that our glass-to-glass gasket is rightly protected and Komfort will pursue any other businesses we believe to be infringing this patent or any other Komfort patent.”

Construction union Ucatt is calling to a change in the law after a single site in Aberdeen had four separate interventions from the Health & Safety Executive over a four-year period.

However, on each occasion after work had been stopped, the work transferred to a new contractor, effectively wiping the slate clean. The site may have been a repeat offender, but under current law it was regarded as a first offence on each occasion.

Last week (28 March) MK Builders of County Durham was fined £4,000 for breaching working at height regulations. This was a result of an anonymous tip off in June 2010 concerning work converting the former Grampian Hotel in Carmelite Street, Aberdeen, into luxury flats.

The same site has had a history of serious safety breaches, including the death of 63-year-old Malcolm Doughty in September 2009 from a fall from scaffolding.

The original developer Inveresk Developments had been issued with a prohibition notice back in July 2007 due to the risk of falling from scaffolding. In October 2008 a further inspection led to an immediate halt being placed on all work until there was a competent safety manager in place.

On each occasion after work had been stopped the site changed hands to a new contractor. Under the existing Construction Design & Management Regulations (CDM) the responsibility for the site operating safely is with the dutyholder of the site. As the HSE serves prohibition notices on a company and not on a site, as soon as a site changes hands the existing prohibition notices are wiped off, even if the problems remain.

Ucatt regional secretary Harry Frew said: “It is disgraceful that for the fourth time serious safety failings concerning working at height have been identified on this site. It is incredible that given the sites safety history and the tragic accident that occurred here that the HSE had to rely on an anonymous tip off in order to take action.”

Mr Frew added: “There will be many similar sites which have been mothballed due to a combination of safety problems and the recession. When these sites are re-started workers must be assured they are not entering a death trap. Clearly the existing regulations need to be amended if this is not currently the case.”

Kim Teichmann, senior associate of Thomas Eggar LLP, explores the implications of extending the realm of adjudication.

It was with some alarm that I read the words of Mr Justice Coulson in his decision issued on the 20 February 2013 Westfield Construction Limited v Clive Lewis, where he asks whether it is time to do away with the S106 exception in the Construction Act. S106 is a provision that excludes the Act from construction contracts where the Employer intends to occupy the works as a residence. Mr Justice Coulson believes that such a change would allow all parties (including residential occupiers) to enjoy the benefit of adjudication.

I wonder how many residential occupiers when faced with an adjudication claim would share Mr Coulson’s view?  It is very difficult to explain to an individual that although they are at Final Account stage, that defects have become apparent and that the valuation of the works has moved on, a contractor can adjudicate on a previous interim certificate and obtain an Award about something that happened months ago which has no basis in the current state of affairs on site.  It is of little comfort to that home owner to be told that they can claw the money back in the Final Account, because in reality we all know that possession is 9/10ths of the law and once the cash has passed hands, recovering it is another matter.

Interim payments, adjudications, payment notices and pay less notices are a technical game.  Developers and contractors know the rules of the game and even they get it wrong.  The Construction Act is designed to solve the problem of well versed contractors and employers who are holding on to the life blood of any business, namely cash.  Adjudication between a contractor and a residential occupier who has no knowledge of the industry or the unique nature of a construction contract, would be as fair as a boxing match between a professional and a first time amateur.

But what about the Contractor’s perspective?   Contractors should be comforted by the fact that S106 has a limited application.  The courts have interpreted it restrictively and it only applies to genuine residents who are procuring a new build or refurbishment of their home.  S106 does not protect commercially astute developers masquerading as naïve occupiers.   The courts have held that S106 does not apply to in the following situations:

• where more than one building is being constructed under the contract and only one is to be occupied,
• where a party to the contract is a company which is effectively a property developer,
• where a person is doing work to a building on their property, if they are not going to live in the building; and
• where the person intends to let the property when it is completed, even if he lived in it previously.

Contractors do need to be aware that the provisions of the Construction Act will not assist them when they carry out works for a person who intends to occupy the building.  If the contractor requires interim payments and wishes to have the benefit of adjudication, he must make sure that his contract similar provisions to the Construction Act. It is usually the case that in a high value residential project, the occupier is advised by an architect or quantity surveyor and a standard form of contract has been chosen by the advisor.  In that case, since the Employer has the benefit of the knowledge of professionals who know how to navigate the Construction Act, he or she may also benefit from adjudication.

What about professional advisors?  Architects and quantity surveyors routinely adopt tried and tested standard forms. However, they should take heed when their client is a residential occupier.  It is an interesting question whether a client could allege negligence if his/her advisor simply chose a standard form which incorporated the right to adjudicate without advising clearly regarding the consequences of agreeing to adjudication.

Land Securities has lost a court battle with the taxman that could have cost the UK at least £60m.

An HM Revenues & Customs investigation found that Land Securities sold shares in one of its group companies to a Cayman Island subsidiary of investment bank Morgan Stanley, which then inflated the value of the shares by pumping money into the subsidiary.

Land Securities bought back the shares at the inflated price, claiming that the effect of an existing anti-avoidance rule was that they had made a “loss” of £200m that could be used as a deduction against tax.

The company claimed, in tribunal, that disallowing the loss would not be fair as it would be out of pocket if it sold the shares in the future. The tribunal disallowed the loss.

Land Securities is the UK's largest commercial property company.

HMRC director general for business tax Jim Harra said: “This scheme was flagrant tax avoidance that provided finance to a FTSE 100 company that appeared cheap because the UK taxpayer was expected to pick up a £60m bill.

The government welcomed the court ruling. Exchequer secretary David Gauke said: “At a time when we must all pay our fair share, it is increasingly unacceptable for individuals and businesses to try to avoid or evade paying their taxes.

“HMRC has a strong set of weapons to tackle tax avoidance and the outcome of this case and the ruling should send a clear signal to the minority engaged in avoidance activities – the net is closing in.”

The prospect of construction of the £17bn HS2 high speed rail project being stymied by the lawyers of aggrieved homeowners receded today.

A High Court judge today threw out attempts to derail the scheme to build new lines from London the Birmingham, Leeds and Manchester.

In what the government is describing as a landmark victory, of the ten broad areas of challenge presented against HS2 Phase One (from London to Birmingham) by four sets of claimants, The Hon Mr Justice Ouseley ruled categorically in the government’s favour on nine of these.

The judge agreed it was lawful for the government to choose to rule out upgrading the existing network as a credible alternative to HS2 – noting that a patch and mend approach fails to meet the government’s objectives of providing a long term boost to capacity and economic growth.

He also found that the government’s approach to consultation on the HS2 strategy/Phase One route, environmental assessment and consideration of the impact on habitats and protected species, had all been carried out fairly and lawfully. The 15 local authorities challenging the secretary of state for transport lost on all seven grounds of challenge they attempted. The government will be seeking to recoup legal costs from the claimants.

The one area where a challenge was upheld concerned the way in which the property compensation consultation had been carried out, not the merits of the policies. In order to save time and public money and to limit the impact on residents affected, the Secretary of State has decided that instead of appealing this decision it will re-run this consultation in line with the judge’s finding that further consideration should have been given to other potential compensation models. A re-run property compensation consultation will not affect the HS2 construction timetable in any way.

Transport minister Simon Burns said: “This is a major, landmark victory for HS2 and the future of Britain. The judge has categorically given the green light for the Government to press ahead without delay in building a high speed railway from London to Birmingham, Manchester and Leeds.

“HS2 is the most significant infrastructure investment the UK has seen in modern times and a project the country cannot afford to do without. The judgement ensures that nothing now stands in the way of taking our plans to Parliament.

"We will now move forward as planned with the crucial business of getting the scheme ready for construction in 2017 and delivering enormous benefits for the country.

"We have listened to the judge's comments about the property compensation consultation and to save time and public money we will reconsult on this aspect - but this will not delay HS2. We remain fully committed to fairly compensating the public who are impacted by the scheme."

The judge has not commented on the merits of particular property compensation schemes and he has not said the Government should introduce a property bond – preferred by HS2AA.

The next stages for the HS2 project are a consultation on the draft environmental statement in the spring and the deposit of a hybrid bill by the end of the year.

The HS2 judicial reviews took place at the Royal Courts of Justice, from December 3 to 17 last year.

Fewer than half of construction’s fatal accidents lead to anyone being prosecuted, it has emerged.

The Health & Safety Executive has disclosed that of the 332 fatal accidents involving construction workers between 2004/5 and 2008/9, only 154 (46%) led to a prosecution.

This was disclosed in response to a request under the Freedom of Information Act by construction union Ucatt. The union is now calling for action to be taken to ensure that companies responsible for the death of a construction worker are brought to justice.

Ucatt general secretary Steve Murphy said: “These are truly shocking figures. It is bad enough that families have lost a loved one but the fact in the majority of cases no prosecution has ever been brought is shameful.”

Ucatt did not request figures for more recent recording years, as it typically takes three or four years for a case to come to court after a workplace fatality.

Previous research by the HSE has concluded that 70% of construction fatalities are wholly or partially attributable to management failures.

 Mr Murphy added: “With regard to construction deaths we were already aware that it was a case of justice delayed. We can now see in the majority of cases it is in fact justice denied. Families who have lost a loved one deserve answers about why there are so few prosecutions.”

The Court of Appeal has ruled that a developer is entitled to recover from an engineer losses relating to the drop in value of houses brought about by the property crash. Mark Clinton explores the implications of what appears to be a significant judgment.

How do you claim for losses arising from your client’s breach of contract?

Suppose you engage a tradesman to do some work and, in breach of contract, you are late paying. He had intended to invest the money you owed him in shares. But they have now rocketed. He has missed the market and it is your fault. Can he sue you for his losses?  Probably not.

What if you engage an engineer to do design work for a section 38 agreement for your proposed residential development and he delivers late. This means the project runs late and the sale value of the houses falls. Is he liable for that loss?  ‘Yes’, said the Court of Appeal this month in John Grimes Partnership Ltd v Gubbins.

What is the difference between these cases and how does the court decide what you could be liable for?

Usually a party can only claim for losses arising from the other party's breach of contract if those losses are not too remote. The established test of remoteness is that the innocent party will be able to recover losses arising naturally and losses which may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract.

The appeal in John Grimes Partnership Ltd v Gubbins raised an important issue: whether the loss by Mr Gubbins was too remote.

The judge in the case said it was clear that Tim Swainson, a consultant at John Grimes Partnership, knew at the time of entering into the contract that delay brought with it the risk that the property market might move considerably, including to the significant disadvantage of his client, Mr Gubbins. The loss was thus foreseeable.

Judges will focus on what the parties at the time of making the contract ought reasonably to have contemplated would result from the breach of contract. So returning to the tradesman, it is unlikely to be foreseeable that he had intended to invest the money in shares that have since rocketed. Any loss from that, therefore, would be too remote.

One might ask: But won’t any losses just follow the contract?

The starting point is the contract and express terms will be followed. When there is no express term dealing with what types of losses a party has accepted potential liability for, the law will imply a term to determine the answer. The implied term will be for the types of losses which could reasonably be foreseen at the time of contract.

Wherever possible, the parties should expressly agree for what types of losses a party accepts responsibility.

As in many areas of business, this is not always possible but it is important to consider the commercial background to each deal and what losses could flow from the delay. If it is foreseeable, then there is a good chance your business will be found liable for any losses. But you are unlikely to be responsible for someone’s future investment plans – unless he told you…

About the author: Mark Clinton is a partner of Thomas Eggar LLP

The distinction between performance bonds and guarantees is not always clear. Mark Clinton reports.

It is a sign of the times that performance bonds have become commonplace again on projects. The last thing you want is a dispute over whether you can claim under them when you need to.

The phrase “performance bond” is often misleading. Most construction performance bonds are actually guarantees. Bonds and guarantees are related but they are very different legal instruments. The right to claim under a guarantee is linked to non-performance of the underlying contract. Under a bond, the bank to pay is required to pay on demand regardless of the underlying contract.

Over time, the wording of bonds and guarantees in common circulation has become confused so that they contain a mixture of terms that belong in bonds and terms that apply to guarantees. It has become difficult to tell whether some of them are bonds or guarantees – even for judges.

In the recent case of Wuhan Guoyu Logistic Group Co Ltd and others v Emporiki Bank of Greece SA [2012] EWHC 1715 (Comm) (22 June 2012), the high court weighed up the provisions in the instrument that suggested it was a bond and those that indicated it was a guarantee.

Wuhan (the seller) operated a shipyard. It entered into a shipbuilding contract where the purchase price was paid by instalments.

Emporiki (the bank) provided finance to the buyer and issued the payment guarantee in favour of the seller which was the subject of this litigation. Emporiki agreed to: “irrecoverably, absolutely and unconditionally guarantee, as a primary obligator and not merely as surety, the due and punctual payment by the buyer” and that “upon receipt by us     of your first written demand stating that the [buyer] has been in default of the payment obligation for twenty day, we shall immediately pay to you...”

Did this wording constitute a guarantee or a performance bond?

The court decided that the wording required a default and therefore it was a guarantee. That meant that the bank did not have to pay unless the buyer actually owed money under the contract. The matter then went to the Court of Appeal ([2012 EWHC 1715 (Comm)) which reached the opposite conclusion.

If the following elements are present in your document, there will usually be a presumption that it is an on-demand bond where the instrument:

• Relates to an underlying transaction between parties in different jurisdictions
• Is issued by a bank
• Contains an undertaking to pay “on demand” (with or without the words “first” and/or “written”)
• Does not contain clauses excluding or limiting the defences available to a guarantor

In Wuhan, the Court of Appeal considered that greater weight should have been given to the presumption of a demand guarantee and therefore the bank was obliged to pay regardless of the position with the underlying contract. So long as the industry continues to use documents like those commonly in circulation, courts will continue to be faced with difficult disputes like that in Wuhan.

This is a difficult area of law. Even when there is no dispute about what the instrument is, arguments about the right to claim arise. Just twelve days after Wuhan, the Court of Appeal had to deal with such a dispute in Aviva Insurance Ltd v Hackney Empire Ltd ([2012] EWCA Civ 1716). This is one for another article. In the meantime, be careful to make sure that you are getting the security you thought you were getting.

About the author: Mark Clinton is a partner of Thomas Eggar LLP

Dr David Mosey, head of projects and construction at law firm Trowers & Hamlins, has been offered a chair of law at King's College London as director of its Centre of Construction Law & Dispute Resolution.

Dr Mosey has led the construction practice of Trowers & Hamlins for 21 years and has specialised in collaborative working.  For six years he co-led the government's National Change Agent programme, helping to make savings in social housing.  He advises on the government's Highways Maintenance Efficiency Programme and on several CITB-ConstructionSkills procurement initiatives.  He is also on the Cabinet Office/Infrastructure UK Trial Project Delivery Group and Trial Project Support Group.

His new role at King's College London will include delivery of the MSc course in construction law, while also developing the centre's links to government and the construction industry.  Dr Moesey will work with founders of the centre, John Uff QC and Phillip Capper (Nash Professor of Engineering), plus a wider team including the newly recruited Professor Renato Nazzini and Dr Francine Baker.

Dr Mosey said: "In these difficult economic times, the UK construction industry requires sustained support for its commitment to best practice.  I look forward to working with King's College London through their education and research agendas to help provide that support."

At Trowers & Hamlins, Stephanie Canham and Charles Morrish will take over as national and London heads from early April, and David will continue to act as a consultant to the firm.

Turner & Townsend has learned the hard way that courts regard letters of intent as no substitute for a contract. Thomas Eggar LLP associate Laura Phoenix reports.

When Turner & Townsend Project Management (TTPM) allowed a building project to reach completion under consecutive letters of intent, without ever getting a formal contract between client and contractor signed, it found itself in court.

High Court Judge Keyser QC held that Ampleforth Abbey Trust had suffered loss and damage as a result of negligence and breach of contract by TTPM.

TTPM failed to approach procurement of a signed building contract with the requisite urgency and focus. In Judge Keyser’s judgment, TTPM had failed to take the steps reasonably required of a competent project manager for the purpose of finalising the contract between the Trust and the Trust’s contractor, Kier Regional.

In Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd[2012] EWHC 2137 (TCC), the judge held that TTPM effectively treated the contract as a dispensable luxury. It seemed to think that the repeated issue of letters of intent was a proper response to continuing difficulties regarding the execution of the contract. The Trust argued that as a direct result of TTPM’s failure to procure the contract, it was unable to deduct liquidated and ascertained damages. The judge awarded the Trust £226,667 in damages in this respect.

The judgment records what the Trust’s expert witness said about TTPM’s breach of duty:

“TTPM's lack of urgency to procure the contract appears to be explained by its mistaken belief that the letters of intent were sufficient to enable the Trust to rely on the terms of the proposed JCT contract and, in particular, to claim liquidated damages in the event of delay. The Trust continued to issue letters of intent both because it was encouraged to do so by TTPM and because TTPM failed to advise it of the limited protection provided by letters of intent in the absence of a contract. If TTPM did not understand the risks of the continued use of letters of intent, it should have sought internal advice from its Contract Services Department; if it still felt unable to advise the Trust on the risks of continuing to use letters of intent, it should have explained the fact to the Trust, so that it could consider taking legal advice.”

The judgment does not ignore the fact that one cannot force another party to sign a contract, but it does give clear guidance that wherea letter of intent is issued:

1. It is incumbent on the relevant project manager or advisor to bring urgency and focus to bear upon agreement of the contract by, for example, preparing a list of impediments to entering into the contract and eliminating them methodically.
2. Advisors must regularly and comprehensively advise clients of the remaining impediments and the risk(s) of continuing under a letter of intent.
3. Where a client needs specialist advice, outside of a project manager’s portfolio of specialist skills, that project manager should advise their client to take advice from a relevant specialist.

A new spin on the blacklisting saga has emerged from a court hearing that suggests that trades unions may be as guilty of black arts as construction companies.

Three members of the Unite union brought a case against Interserve Industrial Services alleging that they had been ‘blacklisted’ based on an illegally-compiled industry database.

It was one of the first claims to be brought under the new anti-union blacklisting legislation

But the Employment Appeal Tribunal (EAT) has backed an earlier ruling supporting Interserve's assertion that the union tried to bully the company into employing the three men, whom it had earmarked to be shop stewards.

When Interserve refused to pushed around by the union, Unite cried ‘blacklist’ and lodged legal proceedings.

The Employment Appeal Tribunal (EAT) heard how, in early March 2010, Unite regional officer Allan Card had telephoned Interserve operations manager Tim Jenkins to push the case for Keith Miller, Ian Aldred and a Mr Sutton to be taken on for a Murco refinery shutdown project. Mr Card regarded the provisions of the collective agreement as giving the union, in effect, a right to nominate members for recruitment with a view to their acting as shop stewards. He made it clear to Mr Jenkins that he wished his men to be recruited on that basis.

Fundamentally, the EAT agreed that, as a fact, the lack of recruitment was because the employer resented being bullied by the union, took against Mr Card’s combative manner and did not wish to be dictated to about whom to employ. Due to this motivation the employer had not refused to employ the individuals because of their trade union membership.

The tribunal concluded: “It is not in every case that an employer who refuses to engage a potential shop steward suggested to him by a recognised trade union will be able to persuade a tribunal that his reasons had nothing to do with the candidate's trade union activities; and indeed we would expect any such explanation to be scrutinised narrowly. But on this occasion the respondent passed the test.”

Matthew Burton, a partner at Interserve’s solicitors BPE, said that the EAT’s Judgment, which was released last week, supported the tribunal’s original conclusion that there had been no discrimination. Mr Burton, who has represented Interserve in this claim since it began in 2010, believes that one of the EAT’s key findings was that an employer can, in certain circumstances, refuse to be dictated to about whom to employ without breaking trade union membership discrimination laws.

Court finds that you are NOT liable for the adjudicator's fees if the decision is unenforceable. Rebecca Evans reports.

Newcomers to adjudication are usually surprised when they find out that they cannot refuse to pay an award because the adjudicator got the law or facts wrong. The court will enforce the adjudicator’s decision even if the award is wrong and the adjudicator must be paid.

However, a decision may be unenforceable if the adjudicator made a decision which he had no power to make, or he conducted the adjudication in such a way that amounted to a breach of natural justice.

These issues regularly come before the court as parties who do not want to pay an adjudicator’s award need to show that there is some reason why it is unenforceable.  However, if the court does find that it is unenforceable, the previous position was that the adjudicator would be paid regardless. A recent Court of Appeal case gives a little back to those in this situation.

On 23 October in Harrington Contractors Ltd v Systech International Ltd the Court of Appeal found that if you are left with a useless award that cannot be enforced, the adjudicator has failed in his job and you do not need to pay him/her.

In this particular, case the adjudicator refused to deal with the responding party’s defence on the basis that it was outside the ambit of the dispute referred. The Referring Party was claiming unpaid retentions on three different projects. The Responding Party argued that it had overpaid the contractor and that this had to be set-off against the outstanding retention. 

At first blush the award appears to be fair: why should someone be allowed to hold onto retentions? The adjudicator could have reached the same conclusion (even if incorrect in law) and the award would have been enforceable but by refusing to deal with the defence when reaching his conclusion he had breached natural justice.   

The Court of Appeal found that the adjudicator should provide an enforceable decision in return for his fees. By making a decision that was unenforceable the adjudicator had defaulted on the terms of his contract with the parties. 

It is notable that Court of Appeal said that if a party raises a challenge as to whether or not the adjudicator has jurisdiction to continue before a decision is reached, the adjudicator indicates he considers that he does have jurisdiction and the challenging party carries on with the adjudication, then you cannot rely on this later. The adjudicator’s fees must be paid even if it is later found that the challenge to the jurisdiction was correct.

The Court of Appeal did, however, find that if an adjudicator expressly includes a term in his contract that he will be paid even if his award is found to be unenforceable, then you may have to pay him. This observation by the court will probably result in many adjudicators revising their terms and conditions. If they do, it may raise some complex issues that may be the subject of future cases.

About the author: Rebecca Evans is a solicitor with Thomas Eggar LLP

Can a contractor ‘deem’ a subcontractor’s property rights away? Laura Phoenix reports.

This month a technology and construction court judge, the Hon Mr Justice Akenhead considered what happens to a subcontractor’s equipment when brought to site under a contract providing that the equipment is ‘deemed’ to be the contractor’s property when on site for the purposes of the subcontract work.

The case is called Alstom Power Ltd v Somi Impianti SRL and it shows that deeming provisions are dangerous and likely to cause disputes about their duration.

Alstom was engaged by RWE Npower as the main contractor to engineer, procure and construct a power plant in Pembrokeshire. Alstom employed an Italian company, Somi, as its subcontractor to carry out mechanical and plant piping erection. Somi failed to perform its duties under the subcontract, Alstom terminated the contract and Somi went into liquidation in Italy.

Although Alstom handed over the main works to RWE Npower in September 2012, Alstom wished to keep equipment supplied by Somi for the execution and completion of the works at the site for the foreseeable future. 

Alstom had already obtained a judgement against Somi for £5.3m. In these separate proceedings, Alstom sought a declaration that all of Somi’s equipment on site belonged to Alstom and that Alstom was entitled to sell it.

The key question was: Had title to Somi’s equipment passed to Alstom under the deeming provision ‘for ever’ and, if not, did that title revert to Somi when Alstom no longer needed the equipment for the construction of the power plant?

Alstom relied on the terms of the subcontract. The general conditions of subcontract were based, at least in part, on well-known standard forms and said that the materials, when brought on to the site, were ‘deemed to be exclusively intended for the execution of the Works’ and ‘deemed to be the property of the Contractor’.

Other relevant subcontract provisions said that in the event of termination, Alstom could take possession of Somi’s equipment on site as reasonably required to complete the work and that Alstom could sell Somi’s equipment to satisfy any debt owed by Somi to Alstom.

Justice Akenhead held that proprietary ownership did not permanently pass to Alstom, as there is a marked difference between the meaning of ‘deemed to be’ and the meaning of ‘becoming’.  The court took this to mean the property was deemed to be Alstom’s while on the site for the purpose of building the project but only for that purpose (i.e. temporarily) but not after because the words ‘deemed to be [the Contractor’s property]’ had been used rather than ‘becomes’.  

Akenhead gave Clause 1.1 of the definitions section of the Contract as the reason for his decision.  Clause 1.1 defined Subcontractor’s Equipment as ‘all appliances and things of whatsoever nature…. required for the execution and completion of the Works, excluding ….. things intended to form part of the Permanent Works.’

Akenhead held that Alstom was therefore entitled to possession of Somi’s equipment until completion of the warranty period (not just until practical completion of the work).

In a final twist, the judge held that, subject to Italian insolvency law, Alstom nevertheless had the right to sell Somi’s equipment once the post-termination final account procedure had been followed pursuant to the terms of the contract. I imagine this is because (a) the £5.3m judgment debt was expected to be greater than any sum ultimately due to Somi and (b) the contract contained an express provision to this effect, although Akenhead did not give specific reasons at this point in his judgment.

Like a magic spell, deeming provisions can clearly lose their potency over time. If, as a subcontractor, you are forced to accept a deeming provision, then make sure that it is time- or purpose-limited. If, as the employer, you intend to obtain title to a subcontractor’s equipment permanently, avoid deeming provisions and use clear words instead. Who wants a pumpkin instead of a golden carriage?

About the author: Laura Phoenix is an associate in the construction team at Thomas Eggar LLP

Exclusion clauses in your terms and conditions could save your business, reports Thomas Eggar LLP senior associate Kim Teichmann.

In Allen Fabrications Limited v ASD Limited the defendant avoided a £7m claim due to a term tha tlimited its liability to £705. A large saving for such a little clause!

A new two-storey workshop for repairing and maintaining boats was built on the Isle of Wight. The workshop included a rigid steel platform on the first floor level. Forklifts would place the boat onto the platform. The boat would then be pushed along the platform into the workshop on the first floor. The claimant was a subsubcontractor supplying the constituent elements of the platform in kit form. The platform required steel gratings to be placed over its steel members and fixed onto the steel members with clips. The defendant supplied the gratings and clips.

In 2006 a section of the grating gave way as an employee was pushing a boat on the platform. The employee fell through the platform onto the ground below and suffered serious head injuries. Damages of £7m were agreed.  The employer is now suing six different parties including Allen Fabrications and ASD. 

The issue was that 25 clips plus one spare were supplied. However more clips were required to make the platform safe. Allen Fabrications said that ASD was negligent in supplying too few clips.

ASD tried to avoid the £7m claim by relying on exclusion clauses in its terms and conditions that limited its liability to £705. ASD argued that its terms and conditions applied to the contract. Allen said they did not. 

The contract was formed in the usual way: an enquiry was sent with drawings, a quotation was provided in response, an order was placed. However, the question was whether ASD’s terms and conditions were included in that contract due to the fact that there had been a course of dealings between the parties previously. On more than 250 occasions ASD had delivered advice notes and invoices to Allen Fabrications, which incorporated ASD’s terms and conditions. 

Allen had also filled out a credit application for credit from ASD. This application also incorporated ASD’s terms and conditions.

The court agreed that ASD’s terms and conditions were incorporated in both instances.

The court refused to find that the exclusion clauses were unfair and did not apply. Both parties were commercial entities, exclusion clauses of this type are the norm in the industry and the buyer was insured against the risk posed by the exclusion clause. 

The lesson learnt is clear. When you enter into any contract, no matter how small, ask yourself the following:

- Have we been clear about whose terms and conditions apply?

- If the contract is silent, be careful that you have not unwittingly already signed a credit application or received delivery notes or invoices incorporating terms and conditions.

- Make sure that your terms and conditions limit your liability. You may only be supplying a few hundred pounds worth of goods or services, but the claim that follows could just be for millions.

Rebecca Evans, solicitor with Thomas Eggar LLP, reports on a case that offers good news for contractors in England.

A recent case, heard by Akenhead J in the Technology & Construction Court in London, has practical consequences for contractors: the effect of concurrent delay on an extension of time claim.

Walter Lily Company (WLC) was employed by DMW Developments Ltd (DMW) to construct a substantial house in the Boltons in London. DMW was the corporate vehicle for Mr and Mrs Mackay. The architects were Barrett Lloyd Davis Associates (BLDA). The work started in 2004 with the initial projected timeframe of 18-20 months.

From the outset it would appear that the design was not in a state of readiness to enable WLC to proceed with the works. However, due to a planning requirement, the Mackays needed to press ahead. Somewhat unusually the Contractor’s Designed Portion in the JCT was set out as a list of things that ‘may’ be instructed, should the Mackays so decide. 

Perhaps with the benefit of hindsight delay was inevitable. WLC contested that delays were attributable to incomplete design information and that was a matter for which they were not responsible. Indeed, BLDA rarely challenged WLC’s extension of time notices, their opinion being that the primary cause of the delay was poor design information provision and poor coordination by the design team. The project became substantially delayed by approximately a year.

The Mackays became increasingly frustrated by the delays and became uncooperative with WLC. Mr Mackay made explicit a strategy of omitting works from the contract which were not causing delay so as to leave matters in the contract which were already delayed with the intention to hit WLC with substantial liquidated damages. The extension of time claim became paramount. 

The court found entirely for WLC and awarded the whole extension applied for. The case is of interest not only for its facts but because the extension of time claim concerned some delays which were allegedly concurrent – i.e. there were matters which were the responsibility of WLC and Mackay causing the same delay. Readers may be familiar with a recent Scottish decision that stated, in Scotland at least, that the effect of concurrent delays should be apportioned between the parties. Akenhead J stated that this is not the law in England.  

Under the JCT, or a similarly drafted clause, if there are two concurrent causes of delay, one a relevant event (employer risk) and the other not (contractor risk), then the contractor is entitled to an extension for the period of the delay caused by the relevant event notwithstanding that there was a concurrent delay.

This will be welcome news for contractors.  Contractors should get an extension of time for the full impact of an employer risk event that delays the project. If there is a concurrent delay caused by the contractor, this is ignored.  However, if you are working on a Scottish project – beware, the law is quite different there!

How can a UK contractor enforce payment from an overseas client? Laura Phoenix explains.

There are two considerations when trying to win payment from an overseas client.

Firstly, ‘Can the contractor enforce a judgment or monetary award in the country where the client is based?’

And secondly, ‘Where are the overseas client’s chargeable assets?’

European Union based clients

The starting point is to consider whether your potential overseas client lives or is incorporated in an EU member state.

If so, then there is a streamlined procedure for enforcing judgements obtained in UK courts, thanks to the European Enforcements Order Regulation (EEO). This can work to your advantage if your debtor client has assumed themselves and their assets are ‘safe beyond our shores’ and did nothing to defend the UK court proceedings; the debtor will have missed the boat as regards defensive action during the UK legal proceedings only to find that there is no right to object to enforcement under the EEO.

Clients based further afield

Enforcement works on the basis of reciprocity. Commonwealth countries tend to have reciprocal arrangements in place with the UK, governed by the Administration of Justice Act 1920. This is not a watertight guide, as things can change; Hong Kong, for example, is no longer a party to any arrangement with the UK, although in reality UK judgements can still be enforced in Hong Kong by Hong Kong’s local lawyers. Contact me for a list of countries covered by the Administration of Justice Act 1920.

Seizing, freezing and charging UK assets

If your client owns UK property, such as the site your work relates to, you could secure any judgment debt via a charging order against the property. A charging order can be registered to show your interest against the property to any potential purchaser or lender and the debt, which should include legal costs, must be discharged in full before the property can be sold. Interest continues to accrue on the sum secured until the debt is satisfied.

The obvious disadvantage is the impact on your cash flow as the mere existence of a charging order will not necessarily entitle you to obtain an order for sale of the property, but it should safeguard the debt as long as there is sufficient equity in the property to cover the charge. Other registered interests (such as a lender’s) may take priority over yours and there is no guarantee that proceeds from the sale will be sufficient.

Third party debt orders

Another option - currently little used - is to apply for a third party debt order. This is an enforcement method by which sums owed to a judgment debtor, but still in the hands of a third party (e.g. the debtor’s client, bank or employer), are frozen and seized for the benefit of the judgment creditor. Third party debt orders can only be obtained where the third party is within the UK jurisdiction.

Summing up

Before accepting an order from an overseas client you would be wise to consider what your enforcement options will be if the client fails to pay.

Laura Phoenix is a construction associate at Thomas Eggar