Construction update July 2011

In this month’s construction update, Hill Dickinson’s Head of Construction, Michael Woolley, looks at some of the recent cases likely to impact the construction industry.  Topics covered include the immunity status of expert witness from negligence claims; contribution to costs in construction disputes; and the latest ruling on public procurement processes.

Experts

Jones v Kaney [2011] UKSC 13 (29 March 2011)

Experts often feature in construction disputes. They may be architects, engineers, programming experts, surveyors or others. In Jones v Kaney, the Supreme Court ruled that they are not immune from a claim for a breach of duty in performing their role.

The case contains a full discussion of the arguments for and against maintaining the public policy immunity that had applied and came down against maintaining it.

What impact the decision will have in practice remains to be seen.

Read our full analysis of the Jones v Kaney judgment here

Tubb v JD Wetherspoon Plc [2011] EWCA Civ 136 (25 February 2011)

This is a useful reminder of the potential difficulties of getting a report from one expert and then choosing another. General practice is that the court will require as a condition of giving permission to use the second expert that the report of the first is disclosed.

Contribution

Mouchel Ltd v Van Oord (UK) Ltd (No 2) [2011] EWHC 1516 (TCC) (15 June 2011)

An issue that sometimes arises in construction disputes is how much a party (C) who shares liability with another (B) for damage suffered by a claimant (A) should contribute to costs.

It is often argued that the delay by such a party in agreeing its share of responsibility is a critical factor in causing costs. In Mouchel Ltd v Van Oord (UK) Ltd, the court concluded that absent special circumstances C should pay the same share of the costs B paid to A as its share of the overall liability.

The court also decided that B could not obtain from C contribution in respect of B’s own costs – but did decide that the court could exercise the discretion it had generally in relation to costs though it did not do so in this instance.

The practical lesson from the case is that it is likely to be beneficial, at least from a costs point of view, to make sure that all contributing parties are brought into the proceedings and that issues where contribution does not apply are resolved earlier or dealt with as separate items in the proceedings.

Procurement

Mears Ltd v Leeds City Council (No 2) [2011] EWHC 1031 (TCC)

While the Government may be spending less, it is still a major customer. Disappointed suppliers, including contractors, may well want to consider whether procurement methods are wholly compliant with the complex EU rules in this area.

One of the issues in Mears was the level of detail in relation to selection criteria given to prospective suppliers who were completing a tender. Mr Justice Ramsey reviewed the case law and offered this guidance:

“(1) The contracting authority must disclose to tenderers those award criteria or sub-criteria which it intends to apply to the award.

(2) The contracting authority is obliged to disclose to tenderers any rules for the relative weighting of the selection criteria which it intends to use.

(3) The contracting authority could attach specific undisclosed weight to sub-criteria by dividing among those sub-criteria the points awarded to a particular criterion if that weighting:

(a) does not alter the criteria for the award of the contract set out in the contract documents or the contract notice;

(b) does not contain elements which, if they had been known at the time the tenders were prepared, could have affected that preparation;

(c) was not adopted on the basis of matters likely to give rise to discrimination against one of the tenderers.

(4) There is a distinction to be drawn between award criteria which are aimed at identifying the tender which is economically the most advantageous and criteria which are linked to the evaluation of the tenderers' ability to perform the contract in question.

(5) There is a level of assessment below the criteria, sub-criteria and weightings which the contracting authority may use in evaluating the award criteria which it does not have to disclose for a number of reasons. First, because it does not, on a reasonable view, introduce different or new criteria, sub-criteria or weightings. This aspect must be considered in the light of what would be reasonably foreseeable to a reasonably well-informed and normally diligent tenderer. Secondly, because it could not have affected the tenders. Thirdly, because it is not a matter aimed at identifying the most economically advantageous tender but instead is linked to the evaluation of the tenderers' ability to perform the contract in question. In each case it will be a matter of fact whether the matters alleged come, on balance, within any of those categories.”

Aggrieved tenderers can recover for the loss of the chance of the contribution to their business that they might have earned.

Adjudication

Adjudication issues continue to take up time in the TCC. While the grounds for resisting the enforcement of adjudicator’s decisions are now fairly well established, novel situations continue to crop up. Here are two – in the same case.

Lanes Group Plc v Galliford Try Infrastructure Ltd [2011] EWHC 1679 (TCC)

Here the ICE appointed an adjudicator whom Galliford Try did not want. Galliford Try then chose not to serve a referral and then served a fresh Notice of Adjudication. Lanes had sought an injunction to restrain the pursuit of the further adjudication (see Lanes Group Plc v Galliford Try Infrastructure Ltd [2011] EWHC 1035 (TCC)) but were unsuccessful.

The adjudication proceeded.

The adjudicator decided that the Lanes should pay Galliford Try £1,360,145.28 together with the adjudicator's fees. Lanes were not happy and, probably, smarting from the earlier hearing.

They argued that there was an implied bar on restarting an adjudication and that it was an abuse of the process. They lost these points. The adjudicator had however given Lanes another argument. During the case he had issued his ‘preliminary views’. He had done so at a time when Lanes had indicated that it wanted to and would respond but had not been able to conclude its response to the Referral. The judge said it was “headed up as if were a judgment or an award” . It set out the adjudicator’s views on the basis there was no Response from Lanes. The judge concluded that it gave the impression of someone who had already made up their mind. Accordingly he refused enforcement on the basis of apparent bias.

In conclusion he offered this advice to adjudicators “I would not have thought that documents expressing provisional views on which parties were then invited to comment were likely to be helpful or appropriate.”

Fenice Investments Inc v Jerram Falkus Construction Ltd [2011] EWHC 1678 (TCC)

This offers some comfort to adjudicators in relation to their fees and a discouragement to parties to litigate over them. He confirmed the basis for paying fees was contractual (though it might be express or implied).

“The overall burden of proving reasonableness must rest upon the adjudicator – there is no basis in paragraph 25 [of the Scheme] for reversing it. But assuming that when the fees dispute first arose, the adjudicator explained how the fees were made up by reference to rate, hours worked and (at least in summary) on what, there will be an evidential burden on the Defendant to make out at least a prima facie case to say that they are unreasonable. In my judgment, simply putting the adjudicator to proof is not enough.”

“If the defendant does properly raise the issue of reasonableness the court's approach on any assessment should be a robust one”

“in relation to hourly rates, provided that the rate claimed is not clearly outside an overall band of reasonableness, there will be no basis to interfere, even if it could be shown that a different adjudicator, especially an adjudicator with different qualifications, may have charged less or even significantly less.”

and

“the party to an adjudication which is considering a fees challenge will need to give careful consideration as to whether there is any realistic basis for disputing the fees claimed”

The last quote being a judicial warning that the case would need to be very persuasive.

If you would like further advice or guidance about the issues raised by the cases mentioned above, please contact: