This was an appeal by Mowlem against an arbitrator’s award. Mowlem was main contractor on a development of retail premises and had subcontracted the earthworks and associated design and construction of retaining walls to PHI. PHI’s work essentially entailed construction of terracing to form suitably level areas which could when surfaced be used for customer car parking at the development.
Mowlem supplied free issue fill material to PHI for incorporation into the earthworks. Although this free issue fill met the requirements of the subcontract it was found unsuitable for PHI’s works because it could not be compacted properly. Mowlem supplied alternate material for filling purposes (“the 6F2 material”). The incorporation of the 6F2 material meant that less free issue fill material was needed and so Mowlem was required to remove from site the surplus material that was not used in the earthworks.
As a result of previous applications to the court it was determined that there was no implied term in the subcontract that the free issue fill supplied by Mowlem free of charge should be fit for incorporation into the earthworks. Further, at arbitration the arbitrator found that: PHI had not agreed to pay Mowlem for the supply of the 6F2 material; that no term could be implied that PHI would pay for the material; and that Mowlem was not entitled to recover payment on a restitutionary basis. Accordingly Mowlem’s claim for payment of the 6F2 material failed for lack of legal entitlement.
As regards Mowlem’s claim for the costs of carting away from site the surplus free issue fill that was not used in the earthworks, the arbitrator found that Mowlem had no legal basis for such claim.
Mowlem contended that the arbitrator had erred in law in finding that there was no legal entitlement to be paid for the 6F2 material and that the arbitrator had further erred in law in finding that Mowlem had not established a legal basis to be paid for the costs of carting away the excess free issue fill.
The court held that there was no implied term that payment was to be made for the 6F2 material. There was no evidence of any mutual understanding that payment should be made and there was no necessity for implying such a term. Those conclusions could not be challenged and were clearly correct in law. In respect of restitution, the approach of the arbitrator could not be faulted in law and his conclusion that in the circumstances there was no entitlement by Mowlem to restitutionary relief was one which he was entitled to reach - no error of law by the arbitrator had been demonstrated.
In respect of the costs of carting away the excess free issue fill, the court held that the rejection of an implied term - that PHI must accept whatever specified material was supplied and in sufficient quantities to complete the subcontract works, on the basis that there was no need to imply such a term in order to give business efficacy to the subcontract - did not demonstrate any error of law.
The obligation on Mowlem was to supply free issue fill and the presence of the quantity of 6000 m3 as an indicative quantity did not limit Mowlem’s obligation to supply only 6000 m3 of fill. The arbitrator did err in construing the 6000 m3 as being of contractual force but this did not affect the outcome of the present appeal.
The appeal was therefore dismissed.
*Full case details
owlem Plc vs PHI Group Ltd 28 July 2004, Queens Bench Division, Technology & Construction Court, Judgment of Mr. Justice Gilliland.
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The decision serves as a reminder to subcontractors to ensure that any free issue materials that are to be supplied to them are specified within the subcontract as being fit for their particular purpose. It is also useful for employers to remember to ensure that issues relating to payment in respect of any free issue materials supplied to subcontractors are expressly dealt with in the relevant subcontract - reliance on any purported implied term could prove dangerous.