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The Week That Was - 1 October 2021

01 October 2021. Published by Ben Goodier, Partner and Sarah O'Callaghan, Associate

Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.

Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2589 (Ch) (19 August 2021)
One dispute or three?  That was the issue before judge (HHJ Sarah Watson).  Under section 108(1) of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"), a party has the right to refer "a dispute" to adjudication.  An adjudicator therefore only has jurisdiction for a single dispute, unless the parties agree otherwise.  The distinction between multiple disputes, or a single dispute comprising multiple issues is a question of fact. 

In the Quadro case, the defendant argued that the claimant's three payment applications should be treated as three separate adjudications.  The effect of this would be that the adjudicator lacked jurisdiction and his decision awarding payment of the full amount of the claim (c.£40,000) would not be enforceable.  The judge disagreed and held the adjudicator to have jurisdiction.  A single dispute could include sub-issues capable of being determined independently from each other, but nonetheless formed part of the wider dispute. In Quadro there were three payment applications that had not been paid.  These formed part of the wider dispute over the total sum due to the claimant, meaning they could be considered as "a dispute", falling under the jurisdiction of the arbitrator. 

The judge commented on the practical ramifications of accepting the defendant's argument.  She noted that, had she accepted the defendant's argument, that a party would have to incur the "very significant cost and inconvenience" of starting multiple adjudications in order to claim "a single claimed balance under a single contract".  This would undermine the very purpose of adjudication, which is to provide parties with a "process of efficient, swift and cost-effective resolution of disputes on an interim basis".

A copy of the judgment can be found here

 
Select Committee launch new inquiry into a potential carbon border adjustment mechanism
The House of Commons Environmental Audit Committee have recently launched a new inquiry on a potential carbon adjustment mechanism (CBAM).  A CBAM is a tax levied at a border when goods from energy intensive industries (EII), such as concrete and steel, are imported into a country.  This ensures that imported EII goods have the equivalent carbon cost as domestically produced EII goods.  It is hoped that CBAMs will prevent "carbon leakage", whereby EII goods are imported more cheaply from countries with lower environmental standards.  Carbon leakage disadvantages domestic  EIIs in countries with comparatively higher environmental standards.
 
While the UK Government has not yet suggested that it will develop a CBAM, the EU, US and Canada among others are considering proposals.  A recent report from the Board of Trade has suggested that the issue of carbon leakage may be better addressed through agreeing common international product standards, rather than fiscal measures.
 
The call for evidence seeks written submissions on whether the UK should introduce a CBAM, what form it should take and what implementation of a UK CBAM might look like.  Evidence must be submitted by 25 October 2021.
 
For more information, please click here.
 
Sheds & Outbuildings: The New Home Insurance Cover Gap

The consumer habits during lockdown has added fresh risk to a significantly underinsured market. Data from moveable.uk shows that over 1.5 million people have had a shed built, and over 700,000 had a home gym installed, and these are often not covered under a typical policy.  

Zurich has warned that outbuilding fires – in sheds, garages, and conservatories – have risen by 16% last year compared with 2019. According to the insurer, the popularity of conversions to home offices, gyms and domestic drinks bars increased the fire risk. In total, three-quarters of areas in the UK recorded more fires. Electrical equipment, as well as popular lockdown purchases such as pizza ovens and fire pits, added to the existing fire risks created in gardens by mowers, barbecues, and paint thinners.

Due to the surge in home buying as a result of the Stamp Duty Holiday, there is estimated to be  £266 billion of content and trillions of pounds of property, that is totally unprotected.

For further information, please click here

 

Adjudicator had jurisdiction but materially breached rules of natural justice by not considering set-off defence (TCC)
In adjudication enforcement, the court often deals with enforcement and declaratory relief applications at the same time, which is what happened in CC Construction Ltd v Mincione [2021] EWHC 2502 (TCC) (15 September 2021) (HHJ Eyre QC).

In April 2016, the parties entered into an amended JCT Design and Build Contract, 2011 for a substantial dwelling in Knightsbridge, London.   The employer took partial possession of the property before practical completion was certified in November 2019. Various notices were issued, including the contractor's Final Statement for £480,000 in October 2020. There followed a dispute over the sum due to the contractor and whether the employer was entitled to deduct liquidated damages (LADs).

The adjudicator decided that a dispute as to whether the Final Statement had crystallised and was conclusive (the employer's letter did not prevent this): the contractor was entitled to the sum claimed as no payment or pay less notice had been issued before the due date for payment.  He also decided the LADs claim was not part of the dispute referred and could not be raised as a set-off.

In the enforcement proceedings that followed, the judge decided that the employer's letter did prevent the Final Statement becoming conclusive.  The adjudicator had jurisdiction to address the conclusivity question but failing to deal with LADs was a material breach of the rules of natural justice.  The judge suggested he could sever the decision and could enforce the balance over the amount of the LADs claim. This is a rather mixed result and neither party is likely to be entirely satisfied with the outcome. Adjudicators were reminded that in a payment claim, they should not deliberately exclude a cross-claim or set-off. Instead, they should consider the issue and explain why that defence is not tenable. 

For a copy of the judgment, please click here

 

Code for Construction Product Information published 
As a part of the push to raise standards against the background of Grenfell, the Construction Products Association's Marketing Integrity Group has published a robust 11 point code to regularise and clarify product information standards within the manufacturing industry, following an industry-wide consultation.  Registrations for verification under the scheme will open at the end of 2021 and will be managed by CPI Ltd.  The core principle guiding the Code is that product information should be clear, accurate, up to date, accessible and unambiguous to all those involved in the design, construction and maintenance of buildings. 

To read the Code – click here, for Guidance, click here  and for the "Preparing for the Code" information pack, click here.

 
Eco World-Ballymore Embassy Gardens Company Ltd v Dobler UK Ltd [2021] EWHC 2207 (TCC)
This case concerned declarations about the liquidated damages provisions in a construction contract entered into between EWB and Dobler, in circumstances where EWB had taken possession of 2 out of the 3 residential tower blocks in June 2018, but the third was not completed until December 2018.  The parties disputed the LADs payable with the first adjudication not reaching a decision, the second holding June 2018 as practical completion with no LADs payable and the third rejecting EWB's claim for general damages. 
 
EWB sought to disapply the LAD provisions on the basis it was a penalty.  The court noted this was the opposite position than at the second adjudication, seemingly due to EWB realising that the potential general damages of £2.2m was far greater than the capped £570,000 LADs.  The court reiterated that it is slow to find that LADs are penalties and unenforceable, particularly where both parties had external lawyers when negotiating the contract and there was a legitimate interest by EWB in timely completion. 
 
To read the decision in full, click here
 
Thank you to Charles Underwood, Georgina Taylor and Emrys Moore for contributing to this week's edition.