Update: construction

Without prejudice

In October 2010, Oceanbulk Shipping and Trading SA v TMT Asia Ltd and Others [2010] UKSC 44 was considered by the Supreme Court and provided a review of the admissibility in proceedings of 'without prejudice' discussions. The court looked at whether written and verbal negotiations which took place during such discussions were admissible as an aid to construction of a concluded settlement agreement resulting from those negotiations.

This case concerned a series of freight agreements and so was not strictly a construction dispute. However, the principles decided upon by the court are applicable to all without prejudice negotiations.

The parties entered into a written settlement agreement and there was no dispute between the parties concerning the existence of the settlement agreement or the terms of it. The problem was the interpretation of one of the terms. The issue was whether TMT could rely upon certain representations made by Oceanbulk Shipping during the course of the discussions as an aid to the interpretation of the settlement agreement.

Oceanbulk Shipping argued that as the representations were made during the course of without prejudice discussions, they should not be admissible. Disagreeing with the Court of Appeal, the Supreme Court agreed with TNT and admitted the evidence.

Lord Clarke gave the leading judgment and centred largely upon the approach to contractual interpretation set out in Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896, which was further discussed in Chartbrook Limited v Persimmon Homes Ltd [2009] UKHL 38, both of which concentrated on the importance of the factual background or factual 'matrix' when construing a contract.

The courts will consider what a reasonable person having all the background knowledge will have understood the relevant terms of a contract to mean. Objective facts which emerged during negotiations are admissible as part of a factual matrix. The Supreme Court made no distinction between a settlement agreement and an 'ordinary' contract, on the basis that the modern principles of construction of contracts should properly be respected.

As lawyers, we strive to ensure that all agreements are as clear as possible, and so, while the lesson of this case might be that lawyers should aim for more clarity and less ambiguity, the reality is that that is what we are doing anyway. It might be that as a result of this case lawyers may become more guarded in their approach to without prejudice negotiations in terms of the representations they make and the discussions they have during those negotiations. We should at least all be mindful of the impact of this decision during any such negotiations.

Professional negligence

Pantelli Associates Ltd v Corporate City Developments Number Two Limited [2010] EWHC 3189 (TCC) was a claim for payment of professional fees by a firm of quantity surveyors (Pantelli) against the defendant (CCD). CCD counterclaimed, alleging professional negligence against Pantelli. Pantelli notified CCD that they intended to seek an unless order at a case management conference in connection with their view that CCD's pleading was wholly inadequate. The parties agreed to an unless order by consent and a new pleading was subsequently put forward by CCD.

Pantelli applied to the court in connection with the new pleading, specifically in relation to the amendments which purported to set up the counterclaim based on allegations of professional negligence. Pantelli's principal criticism was that the paragraphs in question 'read as if the pleader had simply taken each relevant contract term and then added the words 'failing to' or 'failing adequately or at all to' as a prefix to each obligation, thus turning the obligation into a breach of professional negligence'. CCD's counsel admitted that that was precisely what he had done.

It is here where this case becomes instructive, not because it breaks any ground but because it reminds us of the position in relation to pleading a claim founded on professional negligence.

Mr Justice Coulson referred to the Civil Procedure Rules, part 16.4(1)(a), which requires that particulars of claim must include 'a concise statement of the facts on which the claimant relies'. The judge explained this as meaning: 'The pleading needs to set out clearly what it is that the defendant failed to do that it should have done, and/or what the defendant did that he should not have done, what would have happened but for those acts or omissions, and the loss that eventuated.'

Here, he found that this test had not been met. He went on to say that it would be impossible for a solicitor to take a witness statement from those involved in providing the services as no details had been provided for a prospective witness to accept or dispute.

Further, there was no proper pleading of causation and loss as 'it is just impossible to work out from that terse summary what facts CCD rely on in support of their contention that a particular breach or breaches have given rise to a particular head of loss. There is no answer to the question: but for the negligence, what would have happened and why?'

In summary, the judge said: 'Not only is it simply not good enough to turn a positive contractual obligation into an allegation of professional negligence by adding the words 'failing to' to the obligation, but it is also wholly inappropriate to do so in circumstances where there is no expert input to allow CCD to make such an allegation in the first place.'

Dealing with this point, he stated that in most cases where professional negligence is pleaded, the allegations must be supported (in writing by a relevant professional with the necessary expertise). The key here is that CPR part 35 would be unworkable if an allegation of professional negligence did not have a statement of expert opinion to that effect, meaning that expert evidence must be obtained for a pleading to be drafted.

This claim is useful as a refresher in terms of the necessary elements of a pleading founded on professional negligence.

Adjudication enforcement

Redwing Construction Ltd v Charles Wishart [2010] EWHC 3366 (TCC) highlights the importance of an adjudicator getting his or her decision right, specifically in relation to defining what is 'decision' and what is merely is comment or reasoning.

Redwing Construction Ltd was building contractor to Charles Wishart in relation to the refurbishment of a domestic property. The contract was the JCT Prime Cost Building Contract Form (2006 Revision 1 with amendments).

A dispute arose and the parties went to adjudication. Importantly, neither party in that adjudication raised the issue of a possible adjustment to the weekly contract fee payable under the prime cost contract. Instead, the contractor was simply claiming the contract fee for the period of an extension of time. However, the adjudicator suggested in correspondence with the parties that he thought the contract fee could be adjusted and these thoughts were carried through to his decision. The adjudicator did not adjust the contract fee but did award it for the period of the extension.

A year later, a further adjudication took place. The contractor claimed here that there could be an adjustment to the contract fee. Wishart argued that the contract fee issue had already been decided by the first adjudicator and, hence, the adjudicator's decision went to enforcement.

Mr Justice Akenhead held that the issues in the second adjudication were different from those dealt with by the first adjudicator and so the second decision was enforceable. He commented, however, that the adjudicator had no jurisdiction to make a finding of fact in relation to the adjustment of the contract fee where neither party had put forward any evidence on that point. The finding as to whether or not the contract fee was adjustable was not relevant to the issue of whether the contract fee was payable for the period of an extension of time claimed.

Practitioners, particularly those who practise also as adjudicators, should be mindful of this decision and structure adjudication referrals and/or decisions so as to address the issues in question.

Building Regulations

The Building Regulations (BRegs) came into force on 1 October 2010 and relate to the carrying out of works in respect of all types of building operations whether for domestic commercial or industrial purposes '“ they are primarily concerned to ensure the health and safety of people in and around buildings. They can apply to the erection of or an extension to a building or to the installation of services within a building and may also apply to the demolition of all or any part of a building.

The responsibility for ensuring that the BRegs are complied with and for their enforcement rests with local authorities and is usually carried out by the building control (BC) section of a council.

In the event that building work is carried out in contravention of the BRegs, BC have a range of enforcement powers including the ability to:

• serve an enforcement notice (EN);
• seek an injunction; and/or
• prosecute any offence.

Enforcement notice

An EN under section 36 of The Building Act 1984 may require the removal of the non-compliant work (or its alteration to achieve compliance) and can only be served within 12 months of the date of completion of the relevant building work. The EN must give 28 days in which the required work is to be carried out; at the end of which period BC can step in to carry out the required work and charge the owner/occupier for the cost incurred.

Injunction

The power to serve an injunction is in addition to the power to serve an EN and BC can apply to the court to seek an injunction for the removal or alteration of any work which contravenes the BRegs. This potential remedy is usually reserved for situations were there is an urgent need to take action coupled with a risk of serious danger to health and safety.

An injunction will be granted where the court considers that it is just and convenient to do so and that this relief is proportionate in ECHR terms. There is no time limit within which an injunction must be sought.

Prosecution

Offences concerning non-compliance with BRegs are dealt with by way of summary proceedings in the magistrates' court and the maximum fine is currently £5,000 plus the possibility of a further fine of £50 per day for each day the contravention continues after initial conviction.

For breaches of the BRegs committed before 22 September 2008, the time limits within which an offence may be prosecuted would depend upon both when the breach was committed and which BReg had been breached.

However, for all breaches of the BRegs committed on or after 22 September 2008, prosecution must be commenced within six months of the date when the discovery of the offending work was made provided that that prosecution is also commenced within two years of the completion of the offending works.