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No implied obligation to proceed regularly and diligently

In this English case, Mr Justice Coulson in the Technology and Construction Court (TCC) has refused to find an implied term requiring a sub-contractor to proceed regularly and diligently with its works.

In the court proceedings, the contractor accepted that the Activity Schedule for the works did not set out contractually binding dates, but argued that the sub-contractor had an implied obligation to proceed regularly and diligently with the works (and that the Activity Schedule was the best way of testing compliance with that). The contractor alleged that the implied obligation was justified because the sub-contract included an express right to terminate for failing to proceed regularly and diligently.

The court rejected this argument on the basis that:

• In terms of previous case law and a proper construction of the sub-contract wording, the contractor had failed to show that the implied term was necessary to give the sub-contract business efficacy (i.e. to show the presumed or objective intent of the parties to the contract)
• In no previous case had the courts found an implied term imposing obligations as to rate of progress or detailed performance if there was already a contractual completion date (as was the case here)
  

The judge rationalised why a right to terminate for failing to proceed regularly and diligently does not necessarily imply the existence of a separate, stand-alone duty to proceed regularly and diligently with the works.

The case is a reminder that, unless the contract includes an express obligation upon the party to adhere to a programme and/or to carry out its works regularly and diligently, then where that party has completed its works by the agreed contract completion date, the pace at which it did so was irrelevant.

It is thought likely that the Scottish Courts would arrive at a similar conclusion.

To see the judgement click here.

Payment provisions in the NEC3 contract

SGL Carbon Fibres Ltd v RBG Limited [2012] CSOH 19

In a recent Scottish case in the Court of Session, the court confirmed the award of an arbitrator. This is only the second written Opinion issued by a judge of the Court of Session in relation to a legal error appeal made under the Scottish Arbitration Rules (the Rules are set out in Schedule 1 of the Arbitration (Scotland) Act 2010). It is also one of the few reported cases concerning the NEC3 form of contract.

SGL entered into a contract with RBG to construct a carbon fibre production line at their factory in Inverness-shire. The contract was an amended NEC3 form (June 2005), with Options C and W2. SGL argued that RBG had been overpaid. RBG considered that they had been underpaid. Following various methods of dispute resolution, the parties found themselves engaged in arbitration.

The parties submitted various preliminary issues to the arbitrator to be determined. One of those issues was which party should bear the onus of proof in the arbitration in relation to SGL's claim for overpayment. SGL submitted that the onus was on RBG. They argued that RBG were obliged by the terms of the contract, in respect of each interim payment sought, to re-establish by reference to accounts and records an entitlement to all sums claimed by RBG, including those sums which SGL had already paid RBG. RBG argued that they were only obliged to establish an entitlement to any sums they were claiming over and above what they had already been paid.

The arbitrator found that: (i) the onus of proof lay on SGL to prove that any sums paid to RBG on the basis of payment certificates issued by the Project Manager (or comparable agreement by the parties' quantity surveyors) amounted to overpayment; and (ii) the onus of proof lay on RBG to prove it was entitled to any further sums. SGL appealed the finding of the arbitrator in relation to point (i).

Lord Glennie agreed with the arbitrator and RBG. He found that the onus of proof "must be on the party seeking to persuade the arbitrator to depart from the assessment... made by the Project Manager. In so far as the Contractor (RBG) seeks further payment, the burden is on him. In so far as the Employer (SGL) seeks to argue that the Project Manager's assessment is too high, it must shoulder the burden."

Lord Glennie said that SGL's submissions in relation to where the onus of proof should lie "ignores the process of assessment and certification which has taken place at each assessment date throughout the life of the contract." As a result, the award of the arbitrator was confirmed.

Click here to see judgement.

NEC works information guidance

NEC have issued a detailed guidance note to assist users who require to produce the Works Information document for the NEC3 Engineering and Construction Contract. The Works Information document describes what the employer wants and what the contractor agrees to provide and is central to the operation of the contract. The purpose of the guidance note is to assist in the creation of better quality Works Information documents and it contains, amongst other things, a checklist of possible topics to be included and a sample Works Information structure.

Click here for a copy of the guidance note.

Revised asbestos regulations

The Health and Safety Executive plans to introduce a single set of revised asbestos regulations by April 2012, revoking the Control of Asbestos Regulations 2006. Proposed changes mean that in future, fewer types of lower risk work will be exempt from the requirements to notify work, carry out medical examinations and maintain health records.

Click here for more detail. HSE Guidance will be published.

Information on contaminated land has to be disclosed by a local authority

Following a request under the Freedom of Information Act, the Information Commissioner's Office (ICO) ordered Advantage West Midlands Regional Development Agency (AWM) to disclose information relating to the nature and scale of contamination of a site (which was formerly a copper refinery) in Walsall. The site was the subject of a potential sale to a private sector company leading to possible opencast coal mining and ultimate redevelopment.

The complainant was concerned that excavations to the heavily contaminated site would impact on the local environment and had requested information from AWM, relating to the levels and type of contamination at the site. AWM had refused to disclose reports containing this information, relying on section 43(2) (safeguarding commercial interests) of the Freedom of Information Act 2000. The complainant referred the matter to the ICO.

The ICO stated that the information requested was environmental information as defined in the Environmental Information Regulations 2004 (SI 2004/3391) (EIR) and asked AWM to reconsider the request under the EIR. AWM responded, withholding the reports, relying principally on regulation 12(5) (e (commercial confidentiality exception). The ICO accepted that the information contained in the reports was commercial and industrial in nature, however, he disagreed that disclosure of them would amount to breach of confidentiality or copyright held by third parties or have an adverse effect on those involved in the sale of the site, holding that a large amount of information about the site and its scale of contamination was already in the public domain.

Standing the high level of public interest in the development of contaminated land sites, local authorities looking to keep reports on scale and levels of contamination are likely to have to make a strong case for non-disclosure. The decision also highlights the general point that any claim to the ICO that an exemption or exception applies to a piece of information must be accompanied by substantive evidence on why this is the case. If it is not, the claim is likely to be dismissed.

Click here to view the decision.

Scotland has its own Information Commissioner who regulates the Freedom for Information (Scotland) Act which covers Scottish public authorities.

Adjudicator - breach of natural justice

Highlands and Islands Airports Limited v Shetland Islands Council [2012] CSOH 12

This Scottish case, heard in the Court of Session, highlights how careful adjudicators must be when seeking legal advice.

The Pursuer sought payment of a sum awarded by the adjudicator in respect of loss arising out of the construction of a runway extension at Sumburgh Airport.

During the adjudication, the adjudicator sought what he described as 'confirmation of a view I held on a particular matter.' The matter in question was the meaning of Clause 41.3 of NEC Professional Services Contract.

The adjudicator sought this confirmation in a two to three minute telephone conversation with Senior Counsel. He advised the court that no legal opinion or advice was sought and no fee was to be charged. The adjudicator described this as a 'freebie'.

Neither party to the adjudication was aware during the adjudication that this telephone call had taken place. They were not given the opportunity to comment on the advice which the adjudicator had received. The fact that this conversation had taken place was discovered by chance at a later date. It was argued that there had been a breach of natural justice.

Lord Menzies decided that the confirmation which the adjudicator sought from Senior Counsel was legal advice, notwithstanding the informal nature of the advice and the fact that no fee was to be paid for it. The question asked of Senior Counsel was of considerable potential importance and the parties should have been made aware that such advice was sought.

Adjudicators should be careful to advise the parties of any legal advice that has been sought, however informal the adjudicator may consider that advice to have been. Otherwise the decision of the adjudicator is open to challenge and can ultimately be set aside on the grounds of a breach of natural justice.

Click here to see the judgement.

Consultation on changes to the building regulations

2012 consultation paper on changes to the Building Regulations in England: Section two - Part L (Conservation of fuel and power)

This consultation paper sets out the detailed proposals on Parts L, and is Section two of four, relating to the 2012 Building Regulations consultation exercise. It includes proposals for tighter carbon dioxide emission standards for new homes and non-domestic buildings, to take the next step towards 'zero carbon' standards, plus tighter performance standards for works to existing buildings. The paper also contains proposals to introduce, on a phased basis, requirements for additional energy efficiency improvements to be carried out when other specified works (e.g. extensions) are planned, and Green Deal finance is available as an option to meet the up-front costs.

The consultation is presented as four Sections. Section one outlines the consultation approach and then presents proposals to change various technical aspects of the regulations. Section two outlines proposals to increase the energy efficiency of buildings. Section three contains proposals in relation to electrical safety in homes. Section four outlines changes to the building control system.

A response form is provided for each Section of the consultation to assist consultees provide comments. Responses can be provided up until 27 April, although responses by 27 March are invited on some aspects of the consultation on energy efficiency outlined in Section two.

Click here to view the consultation paper.

JCT named specialist update

The Joint Contracts Tribunal have issued an update to their Standard Building Contract (all versions) that contains optional provisions to name individual specialists as domestic sub-contractors for identified parts of the works under the contract. The right may be limited to specialists identified in the contract documents or may extend to naming specialists post-contract in the case of provisional sums. In the latter case and in the case of naming replacements, the contractor is given a right of reasonable objection. The contractor is also entitled to an extension of time and to loss and expense that arise where such a specialist becomes insolvent.

These provisions can be incorporated by amending the contract document to refer to the JCT update.

Click here to see a copy of the update.

Contact us

If you think your business may be affected by any of the above, or if you have any other questions, please contact:

Mark Macaulay
Partner
0141 271 5691
mark.macaulay@mms.co.uk

Kirsti Olson
Partner
0131 228 7211
kirsti.olson@mms.co.uk

David Scott
Partner
0131 228 7203
david.scott@mms.co.uk

This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.