Case notes...from Ann Wright

Capped for Liability

Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions Ltd, TCC June 2008

Agreeing all the terms in a subcontract can take months. This leaves considerable scope for argument if anything goes wrong before the subcontract is signed.

In March 2002, Fitzpatrick became the main contractor for refurbishing the Blackwall Tunnel’s southbound bore. The firm subcontracted the design, manufacture and installation of the M&E works to Tyco for £3,802,887.

Tyco’s subcontract did not go well and Fitzpatrick became so dissatisfied with its performance that it took away some of the M&E work. Eventually Fitzpatrick claimed £19m from Tyco, £7.7m of which was for delays and £9m for allegedly defective works. Tyco’s first reaction was to deny a subcontract had ever been concluded as the final documents were never signed.

It then changed its position, arguing that an amendment to clause 3(4) of the subcontract had been agreed, capping Tyco’s total liability to 25% of the subcontract value.

The judge found that although Tyco had originally wanted such a cap, this had been abandoned. He held the agreed amendment to clause 3(4) related to a cap of Fitzpatrick’s liability to the employer for liquidated damages and to other subcontractors for Tyco’s delays.

It did not include any claims Fitzpatrick had for Tyco’s failure to complete the subcontract works properly. Nor did the cap apply to any claim by Fitzpatrick to be reimbursed its reasonable costs for employing others to complete Tyco’s work.

Moral: Costs of delays and remedials are different.

Never mind the bullocks

Graham Adams and Susan Adams v 1.) Scottish and Southern Energy plc, 2) J Riddell. TCC July 2008

Mr Riddell’s bullocks were boisterous. They spooked when he tried  to round them up on December 2, 2005. One rushed into the stay of an electricity support pole, which swayed, rattling the cable feeding Mr Adams’ house 20m away.

Next, Mr Adams heard noises in the roof space – a fire had started, causing some £400,000 worth of damage. The cable should have been connected to the house via a wall bracket with a loop of cable at the bracket. It should then have run down outside the wall, and through the wall to connect to the meter inside.

However, after the fire, investigation showed that the cable ran from the external bracket through the outer skin of brickwork at high level, down inside the cavity, under a doorway at first-floor level, then continued inside the cavity to go through the inner skin into the meter.

The bracket had been attached to a fascia that had come loose from the wall and was itself dangling from the cable, causing the free loop to tighten.

S&S Energy had renewed the supply cable for the pole to the meter in 2001. Mr Adams sued Mr Riddell for losing control of his bullocks and S&S Energy for faulty installation.

The case against Mr Riddell got short shrift. Mr Riddell’s farm manager impressed the judge that he had shown pragmatic good sense in his handling of unusually difficult beasts.

The case against S&S Energy was more complex. Mr Adams was having an extension built at the time the supply cable had been renewed. The builder was unsure exactly how the bracket or cable had been installed, but said it was not him.

S&S Energy said it was good practice to leave a loop of cable at the bracket to give extra slack in case the pole were to be hit or a branch hit the cable, and S&S Energy had done this. It was not good practice to run cables inside cavities and it had not done so.

Again, the judge was impressed by the evidence of S&S Energy’s engineers. He also noted that Mr Adams had apparently failed to mention his own DIY works in the vicinity of the cable after the extension had been completed. Without actually finding who had re-routed the cable, he decided that S&S Energy was not liable. Mr Adams was ordered to pay the costs of both defendants.

Moral: Give impressive evidence. Not bull.

Claimed Withdrawal

VGC Construction Ltd v Jackson Civil Engineering Ltd, TCC August 2008

Everyone agreed that VGC’s subcontract had been delayed by variations. VGC was laying ducting and cabling on the M3 for Jackson. In September 2006, when VGC’s six-month package of work had been scheduled to start, the design had not been completed.

Therefore, when VGC submitted its valuation application no.13 towards the end of its contract in September 2007, VGC was 26 weeks in delay. That application for £4,354,168.67 included a one-line item: ‘Delay and disruption... £300,000’.

Jackson rejected this item completely and, citing ‘contra charges’, including staff and compound costs, deducted some £768,594. On October 27, 2007, VGC requested an extension of time of 26 weeks to September 14, 2007. This was backed by four pages of reasons for delay but no explanation of how they occurred.

VGC’s valuation application no.14, dated November 1, was for £4,358,254.89, again including the single line for £300,000 for delay and disruption. It also included four pages of remeasured items and ten pages of variations.

Jackson’s payment notice no.14 again rejected VGC’s £300,000 and contra-charged. During a short meeting on November 7, 2007 Jackson’s commercial director proposed that VGC’s claim and Jackson’s contra claims be held in abeyance for the time being as it would take VGC six months to produce a substantiated claim. At a meeting on December 7 he again stated that VGC’s claim for extension of time and Jackson’s over-run would be left in abeyance. By April 2008, VGC still had not provided the details. On May 2, 2008, VGC served a notice of adjudication. In spite of Jackson’s argument that VGC’s claim was nebulous and that no dispute had arisen, the adjudicator awarded VGC £745,657.64.

When VGC tried to enforce this decision, Jackson claimed the meeting of December 7 2007 meant that VGC had withdrawn its claim and the adjudication was void. Not so, said the judge. VGC had not withdrawn its claim. Also, it was clear from the content of VGC’s applications what its £300,000 claim was for. The adjudicator’s decision was upheld.

Moral: Disputes can creep up on you.