Mills & Reeve: Practical Completion

Not fair! Again

A sub-contract between Lanes and Galliford Try did not go well.  Galliford terminated it before the works were completed.  Lanes cried foul.  This resulted in a number of adjudications.  In one adjudication, the adjudicator issued his “Preliminary View” to both parties before he had received any documents from Lanes.  Both parties commented on his “Preliminary View” and sent him further documents.  The adjudicator awarded Galliford approximately £1.3 million.  Lanes refused to pay.  Lanes raised a number of arguments, one being that the adjudicator was or appeared to be biased because he reached his “Preliminary View” before he had considered any of Lanes’ arguments.  The Court of Appeal did not agree (Lanes Group PLC v Galliford Try Infrastructure Limited (CA (Civ Div) 2011)).  It decided that the “Preliminary View” was intended to assist the parties.  It was part of the “rough and ready process”.  Therefore, it would appear that the bar for setting aside an adjudicator’s decision remains high.  If you do intend to raise this type of argument, it’s probably best to shout loudly as early as possible.  If not, your chances of succeeding are likely to be slim!

Why wouldn't a sub-contractor have to progress works regularly and diligently?

The courts recently held that there was no implied term in a contractor's contract with its sub-contractor that the sub-contractor had to progress the works regularly and diligently.

The contractor said there was an implied term to this effect, and looked to use it as a ground to withhold payment from its sub-contractor .  Its claim was based upon a termination provision which allowed it to terminate the sub-contract if the sub-contractor did not progress the works regularly and diligently. 

The court found that this termination provision was not enough to create an implied obligation upon the sub-contractor.  A simple message: if you require your contractor or sub-contractor to progress works regularly and diligently (and who wouldn't?), then make sure you include an express obligation in the contract.

Leander Construction Ltd v Mulalley and Co Ltd [2011] EWHC 3449 (TCC)

 

ANB fees

I see a lot of adjudication referrals, especially just before Christmas. It surprises me how many people are still claiming the fees of the adjudicator nominating body. I keep having to trot out the same response. These are a party costs item. Adjudicators have no power to award party costs. End of story.

Use of the accelerated restricted procedure in 2012

The Cabinet Office has confirmed that the relaxation on the use of the accelerated restricted procedure for major public projects will not be extended into 2012. Employers have, understandably, been taking advantage of the relaxation of the rules for procuring public works contracts which had allowed them to presume that benefitting the economy justified using this procedure where timeframes were tight. This procedure has not gone away – it is still permitted but we are back to the good old days of trying to shoehorn the reasons for using it into the limited grounds available.

What does delay mean in JCT?

The New Year is a good time to remind ourselves of what happens when there is delay to the Completion Date under JCT 2011. It of course depends on who is responsible for the delay.

1. Where the contractor is responsible, a Non-Completion Certificate should be issued. If the contract provides for liquidated and ascertained damages ("LADs") then provided the employer has notified the contractor that it intends to levy LADs it can claim them from the contractor.  Often the employer deducts the LADs from sums otherwise due to the contractor.  That is ok, provided a withholding notice or pay less notice (as appropriate) has been served in time.

2. Where the employer is responsible and one of the Relevant Events listed in the contract has occurred, an extension of time should be granted and a later date for the Completion Date should be fixed. This means that the employer is not entitled to claim LADs.  However it does not automatically mean the contractor is entitled to loss and expense. To claim loss and expense the contractor must show that a Relevant Matter has occurred. Remember not all Relevant Events are Relevant Matters. The contractor also has to prove the loss and expense that he has suffered. 

New Year - but can I back-date?

As contracts and professional appointments, sent out for signature last year, start to make their return to the office we find ourselves making sure, when dating the documents, that we date them 2012 and not 2011!   When it comes to dating documents the distinction is a fairly important one and raised an issue that often crops up.

For one reason or another, professional appointments do not always get signed straightaway and time can lapse from when the work commenced to when the appointment was signed.  Consultants will often ask - can we backdate the appointment?

The date of a document is normally the date from which the parties have agreed to be bound.  As such, it should reflect accurately the date on which the parties signed it, or if signing on different dates, the date the last signature was added.  There are very few occasions where backdating a document may be permitted and documents should only be backdated if it can truthfully be said that the parties intended to be bound on the stated date, but for practical reasons did not sign the contract until later.  Cases where this apply will be rare but an example might be where an original contract is signed and then lost with a replacement being signed later.

A deed on the other hand should never be backdated.  Remember a deed must be in writing and as such the legal obligations created in a deed can only come into effect on (or after) the date of execution.

All change with public procurement?

The European Commission has issued a proposal for a new directive updating public procurement rules.  The aim of the proposed new directive is to modernise the procedure to make it simpler and more effective.  The proposed directive includes changes to enable public bodies to take into account social and environmental benefits when awarding contracts.  More importantly for the construction industry at this time is the proposal to assist small and medium-sized enterprises ("SMEs") in entering public markets.  The directive reduces the documentation required by SMEs to be able to bid successfully for contracts and invites public bodies to break down contracts into smaller lots.  If the public body refuses to do so it will be required to publish an explanation of its reasons.

Watch this space for further updates on the proposed directive.

The e-guarantee

Emails can get you into trouble: abbreviations are common, sentences are short and legal drafting is lacking. In contrast, parent company guarantees are often lengthy and full of complex, archaic and impenetrable language.  Surely the two don’t mix?  Wrong!

In Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2011] EWHC 56 (Comm) an email stated that, “Trustworth fully guaranteed SMI”.  As with many emails, it also had an electronic signature block.  The judge concluded that although the sentence was short, it was clear.  He also said that the electronic signature block amounted to a valid signature.  Therefore, he decided that an email could create a binding guarantee.  So be warned:  emails can get you and your parent company into trouble, IMHO.