Recent construction cases round-up 1

RC Residuals Ltd v Linton Fuel Oils Limited, Court of Appeal, 2.5.02

Quantum was the only issue between the parties. Both parties had ignored a court order permitting the parties to call expert evidence. As a result of this failure the original trial date had to be vacated. The judge consequently made an "unless order", the purpose of which was to ensure that the trial took place on 7th May 2002. The ordered specified that expert reports had to be served by 4pm on 12th April 2002.

The claimant served the reports by fax, one 10 minutes late and the other 20 minutes late at 4.10pm and 4.20pm respectively. The contents of one of the reports had been available at 2.30pm and if it had been e-mailed to the Defendant would have been served in time. The Defendant's solicitor had however refused service by e-mail. The Defendant indicated that if the Claimant wished to rely on the evidence contained in the reports then they would need to apply to the court to do so. The parties nevertheless agreed that the experts should meet and thereby comply with the rest of the order. The Judge however subsequently debarred the evidence contained in the late reports and contended that to allow relief would undermine the seriousness of the "unless order".

The Claimants appeal was successful. The Court of Appeal held that the judge had not correctly carried out the balancing act required under CPR r 3.9(1). It found that the lower court had been correct to stress the importance of an "unless order" but that this had to be balanced against the fact that the objective of the order had nevertheless still been achieved with the trial due to take place on 7th May 2002.

The Court of Appeal went on to find that whilst the Defendants were entitled to refuse e-mail service of the reports it was to be noted that in an emergency such a rigid refusal may have made it more likely that relief would have been granted by the court.

Marcic v Thames Water Utilities Ltd, Court of Appeal, 7.2.02

The Claimant's property was seriously affected by flooding owing to back flow from the sewer system. The Defendant was the statutory water and sewerage undertaker responsible for the sewer system. The Claimant brought a claim alleging nuisance and negligence and breach of s 6(1) the Human Rights Act 1998 (the "Act") (right to peaceful enjoyment of possessions).

The court held that there was no claim under nuisance or negligence, as no claim could be founded upon a breach by the defendant of statutory powers, or the negligent failure to exercise those powers. However, the defendant's failure to remedy the continuing nuisance did constitute a breach under the Act. Damages were assessed by reference to the effect on the value of the Defendant's home on the basis that no steps would be taken to prevent future flooding. The Defendant appealed, arguing it had not breached the Act and the Claimant cross appealed arguing that the claim for nuisance should have been allowed and its refusal removed the prospect of damages for the period before the Act came into force.

The Court of Appeal dismissed the Defendants appeal and allowed the cross appeal. The Defendant was the owner and had control of the sewers and had knowledge of the hazard. It was therefore under a duty to take steps to prevent the flooding. The Defendant failed to take any reasonable steps to abate the nuisance whether under statutory powers or otherwise.

The common law right to damages displaced the right the claimant would otherwise have had under the Act. The judge had not been wrong to hold that the defendant had infringed the Claimant's rights.

Amec Process and Energy Limited v Stork Engineers & Contractors BV, Technology and Construction Court, [2002] All ER (D) 98 (Feb).

The Claimant subcontracted to the Defendant the fabrication of steelwork for pipes and the assembly of necessary pipes and plant in connection with a project to manufacture floating production storage units for use in the North Sea oil fields. The subcontract imposed very detailed obligations on both parties. Following requests from the Defendant and knowing that its Employer would not tolerate any delays the Claimant twice changed the sequence in which it worked and increased the manpower employed on the project. The Defendant approved the Claimant's revised plan and the work was subsequently completed.

The Claimant brought an action against the Defendant for the recovery of the increased costs necessitated by the increased labour. An issue arose as to whether there had been a variation. A variation was defined in the contract as including any revision of the work, which could include changes in the methods of construction, acceleration of the work in order to recover a delay, a re-programming of the work and a re-scheduling of its resources in order to complete the works within the plan.

The court ruled that as under the contract the Claimant was obliged to work strictly in accordance with the job specification, any instruction requiring a revision would constitute a variation. In addition, any instruction requiring or which caused an acceleration, re-programming or re-scheduling of the works would also be a variation. The court held that there had therefore been variations and that the Claimant was entitled to remuneration for the additional labour.

Amec Process and Energy Limited v Stork Engineers & Contractors (No2), Technology and Construction Court, 15th March 2002

Following the handing down of the judgment in the above case it became apparent that certain matters had been omitted from the judgment including the financing charges incurred by the Claimant for the costs of the variations.

The contract set out detailed provisions regarding variations. The Defendant consistently denied any variations and therefore ignored these provisions. As a result the Defendant had to finance the variations by way of an inter-company loan from its holding company. The terms of the loan included interest compounded at monthly rests. The contract provided for valuation on, inter alia, a "reimbursable costs" basis, which included "a percentage mark-up to cover the cost and overheads".

The court held that as the Defendant had failed to adhere to the variation provisions in the contract and had accordingly failed to specify the basis of payment during the work, the Claimant became immediately entitled to payment on a reimbursable costs basis, as no other basis of valuation was appropriate. In addition, it held that the contractual definition of the reimbursable costs was sufficiently wide to include interest paid to enable the works to be financed. In those circumstances there was no reason why compound interest should not be awarded. However, it would not be fair or reasonable to allow the Claimant a more generous compounding basis of payment than would be recoverable had the funding been by way of an overdraft at its bank.

Additionally the court explained that as the Defendant had access to the Claimant's accounts it would have realised that late payment would have to be funded by borrowing and the claim could thus have been brought as a breach of contract.

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