This Legal Update contains brief details of cases and other developments of interest which have been published in the last month. .
This month we report on cases involving: allegations of fraud, letters of intent, the Defective Premises Act, making time of the essence, and jurisdiction in adjudication. Developments noted are: Royal Assent for the Local Democracy, Economic Development and Construction Bill, Competition Appeal Tribunal Guidance on appeal OFT fines, OFT reasons for its decisions on bid rigging, and consultation guidelines for corporate manslaughter
All links are correct at the time of publication.
The following topics are covered:
Fraud defeating enforcement of adjudication award?
Allegations of fraud by commercial developers against a building contractor could not be used to defeat the enforcement of two adjudicators' awards in favour of the building contractor. The developers had not spelled out their case in sufficient detail or with credible supporting evidence. The Judge said that this requirement was probably more important in adjudication than in other proceedings "when it would be very easy to bandy about fraud allegations to seek to avoid enforcement".
Letter of intent for long term agreement did not amount to a contract
In this case, the parties, in contemplation of the signing of a formal written long term contract, commenced operating on the basis that a contract would be signed - performing services as contemplated by the terms being negotiated and being remunerated by a price contemplated by the terms being negotiated. The Court of Appeal confirmed that, following a letter of intent, the parties had not by conduct concluded a contract. Financial reimbursement for the work done would therefore be on an unjust enrichment basis, because the supplier had provided its services for a short period at a price appropriate to a long term contract.
Lack of a crystallised dispute did not deprive adjudicator of jurisdiction
A dispute over the financial consequences of an alleged
unlawful termination of a construction contract had not
crystallised before a referral to adjudication was made. It
is normally necessary for a dispute to have "crystallised" for an
adjudicator to have jurisdiction. However, in this case the
court found that there had been no valid or effective
jurisdictional reservation by the respondent, who had acceded
to the jurisdiction of the adjudicator to determine all issues in
the notice of Referral Notice. The adjudicator was therefore
entitled to consider the financial claim and make an award of
damages. The lesson to learn is to ensure that jurisdiction
challenges should be clearly and fully articulated.
Allied P&L Ltd v Paradigm Housing Group Ltd  EWHC 2890 (TCC)
Defective Premises – claim against structural engineers
The court had to consider whether a dwelling as a whole was
unfit for habitation when determining whether there had been a
breach of the Defective Premises Act 1972 s.1. It was not necessary
to consider each defect separately and ask whether that defect, on
its own or in together with other defects, rendered the dwelling
unfit for habitation.
Bole and anor v Richard Money and anor  EWCA Civ 1146
Making time of the essence
The Claimants' correspondence with a contractor, complaining about delays and asking for the works to be completed "as soon as possible" and "as a matter of urgency", failed to make time of the essence. A notice making time of the essence must clearly convey that, unless the notice is complied with, the party giving the notice will treat the contract between the parties as at an end. A proper notice making time of the essence must also be clear as to the time by which compliance is required - a date must be specified as the date by which the recipient is to do what the notice requires. If a date is specified, it must be a date sufficiently in the future at the date the notice is given to amount to giving the recipient of the notice a reasonable time for compliance. The determination of contracts for building work to by the Claimant owners, on the basis of a failure on the part of the builder to complete the work in time and for defects in the work carried out, was therefore a wrongful repudiation of the contracts.
Sunshine Ventures Ltd and R Thakar v Hussein Kurdieh  EWHC 2866 (QB)
The Local Democracy, Economic Development and Construction Bill received Royal Assent on 12 November
The Bill will become the Local Democracy, Economic Development and Construction Act 2009. No commencement date has been set since consultation on amendments to the Scheme for Construction Contracts needs to be carried out, and this is not expected to start until early in 2010. The most interesting amendment to the Bill was made shortly before it received Royal Assent - an amendment to give the Secretary of State a discretionary power to exclude specified types of contracts from the operation of the Housing Grants, Construction and Regeneration act 1996. It is expected that this power will be used in connection with PFI contracts, to enable SPVs to rely on "pay when paid" clauses, leaving SPVs less exposed to potential cash flow risk.
Updated draft guidelines on corporate manslaughter sentences out for consultation
The Sentencing Guidelines Council (SGC) has published draft guidelines on sentencing organisations convicted of corporate manslaughter and health and safety offences causing death. The SGC consultation on its draft guidelines closes on 5 January 2010.
Competition Appeal Tribunal Guidance on appealing OFT fines issued
The CAT has published guidance for those who intend to appeal against the recent decision of the OFT that 103 construction companies breached the Competition Act 1998 by illegal cover pricing.
OFT reasons for bid rigging decisions published
The OFT has published its reasons for its decisions following its investigations into bid rigging. The 1,945 page document sets out the legal framework against which each of the infringements was considered by the OFT. It sets out an assessment of the conduct of the accused contractors, a section on the OFT’s conclusions, with representations from the contractors.
If you require any further information about any of the items mentioned, or if you have been forwarded this update by a colleague and would like to receive it direct, please contact David Kirkpatrick , Associate Solicitor and Professional Support Lawyer for the Construction & Engineering Department.