A negative attitude

The advent of the right to adjudicate has led to a great many cases in which one side attempts to prove a negative. This might be that another party is not entitled to adjudicate, or that a contract is not a construction contract, or that a contract does not fall under the Construction Act. However, historically, the courts have been reluctant to hear claims for a negative.

The reason for this is simple: the risk in deciding a negative is that it may not actually lead anywhere. Even if a negative is obtained, it may not stop or prevent an action being put on a different basis and the courts could become clogged up with vast numbers of competing claims. As Lord Woolf put it: “The deployment of negative declarations should be scrutinised and their use rejected where it would serve no useful purpose.”

Of course, there is the practical issue of just how you do obtain a remedy from the court for a negative anyway. The process by which this could be done is by either an injunction, to stop a party doing something, or a declaration. The court can, therefore, declare that there is no contract or that a contract is not compliant with the Construction Act. The courts have done this – for instance, in the Palmers vs ABB case. But they have always taken the position that they should not make a declaration in the absence of a party or a pleading/case from a party. A negative declaration cannot be obtained by default.

A party wanting to prove a negative can wait for its opponent to claim a positive. Put simply, if you are going to deny that there is a construction contract, you can wait for somebody else to assert that there is a construction contract and then seek to prove them wrong. All fine – but, in the meantime, that adjudication claim may roll on.

So what criteria are the courts likely to apply when deciding whether to entertain a claim for a negative declaration? These issues were considered recently in a case in Birmingham regarding the theft of goods while in the course of international transit between England and Germany. There were six parties, all of German origin, and the case name is therefore somewhat lengthy. For reference purposes, the claimant was Transtdanubia Speditions Gesellchaaft MBH and the claim number was 6BM40058 in the Mercantile Court in the Birmingham Registry. As recorded in the judgment: “In the action, the claimants seek a declaration against the defendants that they are not liable to the defendants in respect of the alleged loss resulting from the theft of goods on or about 28 September 2005.”

A party wanting to prove a negative can wait for its opponent to claim a positive, and then seek to prove them wrong

The basic facts of the case were that a German company contracted to transport goods from the premises of another German company in England to a site in Austria. In Essex, the goods were stolen from the lorry. The issue that arose was whether the court would issue a negative declaration – namely, that the claimants were not responsible in law for the losses, which arose by way of the theft.

This would appear to be a difficult claim, but it succeeded. The test the court applied was whether the negative declaration was required to do justice between the parties. The court held it was, commenting that the application performed a useful purpose.

One of the reasons was that, otherwise, the case would have to go on to full trial at further expense and delay. This seems the kind of reasoning which would support the court giving a declaration in a suitable construction case that there is no contract or no right to adjudicate.

Cases like this show the courts are more flexible than they perhaps once were and are prepared to be negative in a positive way.