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Construction Disputes in 2019 – Overview and Impact

Posted on 15th February, 2020

dispute with builder

I have been looking back at 2019 and some of the cases and decisions which were made.  This is a good exercise to undertake to ensure these are born in mind when advising clients where they may have an impact on construction related disputes/contracts going forward.

In this blog I will give a brief summary of some of the more interesting decisions throughout the year.

In February 2019 the TCC confirmed in the matter of M Davenport Builders Ltd v Greer and another [2019] EWHC 318 (TCC) that an Employer in a Construction Contract will not be permitted to rely upon a true valuation adjudication decision to defend or set off the enforcement of an early Adjudication Decision awarding an interim payment in default of a valid payment/payless notice, if the Employer did not pay the first award before commencing the second true value Adjudication.

Over recent years there was an increase in Contractors and Sub Contractors starting and succeeding in Adjudications for payment of Interim Applications, purely on the grounds that the paying party failed to comply with the provisions requiring Payment and/or Pay Less Notices to be served within prescribed periods. These became known in the industry as “smash and grab” Adjudications. However, case law emerged thereafter which confirmed that this did not preclude the paying party from subsequently commencing a new separate Adjudication for the true value of the interim payment to be determined where they felt that this had caused an overpayment (subject to contractual terms). This case makes it clear that this does not avoid the necessity for the paying party to settle the sums required under the first adjudication before taking the true value action.

In March 2019 the Court of Appeal in Triple Point Technology Inc v PTT Public Co Ltd [2019] EWHC Civ 230 reiterated that there were three possible outcomes which could be ordered when making awards for Liquidated Damages for delay in construction contracts in circumstances where the original contractor never completed the works, and the contract was terminated, and thereafter a third party contractor ultimately stepped in and finished the works. Either;

  • no Liquidated Damages were payable at all as the clause did not apply following termination, or
  • the clause applied but only to the date of termination of the original contract and this capped the sums potentially payable; or
  • the clause continued to apply until the subsequent contractor completed the work.

Which position is correct/applicable will largely depend upon the precise wording, or the contract, and how it should be interpreted on a case by case basis. In the present case, the wording resulted in there being no entitlement to LD’s when the contract was terminated but did not preclude the Employer seeking damages for non-completion generally of course.

This case highlights the importance of carefully considering such issues at the point the contract is drafted and the importance of contractors taking the time to consider and understand to potential impacts of such clauses on them in the event of termination – if the clause was adequately worded this could have severe consequences over which they had no control in the event the third outcome came into play.

In August 2019 the TCC handed down a Judgment in the case of Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019 EWHC 2246 (TCC) confirming that the Court will be willing to exercise its discretion to stay Court Proceedings when the Claimant had issued them prematurely by failing to engage/comply with the contractual Alternative Dispute Resolution (ADR) provisions. In the case the Judge stayed the proceedings to require the parties to conduct the Mediation required pursuant to the terms of the contract, it however it also provided additional steps for service of pleadings to be completed in advance in order to improve the prospects of settlement.

This case shows that it is important for parties to consider any ADR provisions in their contracts before rushing disputes into the Courts.

In December 2019 the TCC in the matter of Rubierca v Building & Handyman Group Ltd and others [2019] EXHC 3469 the Court made an order requiring the director/shareholder of the Defendant company to pay the adverse costs due to the Claimant after the Defendant company went into Creditors Voluntary Liquidation on the eve of Trial. The case involved a claim for defective building works against the Defendant and a cross claim for an unpaid invoice. The matter was ultimately decided in the claimant’s favour, but the Defendant Company went into a CVA. The Director/Shareholder ran the litigation and following the CVA set up a sister company to continue to trade to the end that the Claimant would be unable to recover the sums ordered. The Court will in certain circumstances make orders against third parties and this case provides an example of one situation where this may be done, effectively concluding that the third party is the “real Defendant”.

It is unlikely that the Court will routinely make decisions holding directors personally responsible for adverse costs, but it does show a willingness of the Court to make such orders pursuant to section 51 of the Senior Courts Act 1981 if the circumstances make it just to do so. Too frequently as a litigator, you see controlling persons within small limited companies taking the stance that they will run claims/counterclaims behind the safety net of the vail of incorporation on the assumption that if it all goes wrong then they can simple liquidate the company and start again. This case may result in more careful consideration to whether cases lacking significant prospects should be brought/fought going forward.

Angie Papprill, Solicitor, Dispute Resolution and Debt Recovery

T: 01642 356 500 E: apapprill@jacksons-law.com

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