Declaration Trumps Decision by Laughlan Steer
July 17, 2018 | Silver Shemmings
It is fair to say that, as a firm, we do a lot of adjudications. It was therefore a matter of not inconsiderable interest when O’Farrell J handed down her judgment in respect of the above case. A lot of adjudication decisions do not require subsequent court or arbitration proceedings, but some do, this was one such case.
For the time being however, cast your mind back almost a decade to Walter Lilly & Co Ltd v Dmw Developments Ltd, in which Coulson J reaffirmed the principle that, either in parallel or subsequent to an adjudication, the parties thereto are at liberty to seek declaratory relief.
This right, Coulson J confirmed, was subject always to the suitability of the subject matter of the dispute. To seek a Part 8 declaration therefore, there should be no difference between the parties as to factual matters which might require witness evidence, and the scope of the dispute should be sufficiently narrow as to be dealt with as a discrete issue.
Turning now to the case at hand. The dispute referred to adjudication pertained to Beumer’s delay in respect of its sectional completion of the scope of its sub-contractor works, which related to the baggage handling facilities at Gatwick Airport. Matters were further complicated by a settlement agreement entered into by the parties which altered the dates for completion of the final two sections. At the heart of the dispute was the operation of the liquidated damages clause as altered by the settlement agreement.
Dr Chem, the nominated adjudicator under the NEC 3 EC sub-contract between Vinci (as main contractor) and Beumer, found that, absent clarity as to into which of sections 5 and 6 various portions of Beumer’s scope of works fell, the liquidated damages provisions were “uncertain, inoperable and unenforceable”. Clearly, such ascertainment is necessary to prove periods of delay and any attributable compensation in the form of liquidated damages.
When Vinci subsequently sought from the Technology and Construction Court a Part 8 declaration as to the proper construction of the subcontract, O’Farrell J found contrary to Dr Chem. Indeed, she decided that there was an identifiable demarcation of the works as between sections 5 and 6, and therefore that the liquidated damages provisions were both operable and enforceable.
In coming to this conclusion O’Farrell J considered the legal principles of contract interpretation as outlined in the cases of Arnold v Britton and Wood v Capita Insurance Services Ltd:
“… meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the contract, (iii) the overall purpose of the clause and the contract, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions…”
O’ Farrell J also discussed at length why the courts are “reluctant to hold a provision in a contract void for uncertainty, particularly where the contract has been performed.”
The result of this is that Vinci succeeded in “appealing” Dr Chem’s decision, obtaining for itself both a final and binding decision (in direct contradiction to that of the adjudicator), and an entitlement to payment
Author Laughlan Steer is a Solicitor specialising in Construction and Real Estate law, his experience spans non-contentious as well as contentious matters. He has led a number of adjudications and is well-versed in both Part 7 and Part 8 litigation proceedings and Mediation. Laughlan has also acted on a number of complex commercial matters within the energy and renewables sector, where his professional life beganHe enjoys servicing a diverse client-base, from sub-contractors, to architects and high net worth individuals and he regularly presents seminars and lectures to the public, local authorities, consultancies and construction companies of all sizes
At Silver Shemmings Ash, we provide seminars and training alongside our core activities in contentious and non-contentious matters, the purpose if these is to facilitate a greater knowledge and understanding of construction and property law. There remains a considered lack of training in such areas for companies and one to which we look to address
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