What are you implying?

Stockport is a hilly place. The construction of a 14,500 m² B&Q warehouse therefore involved a considerable amount of muck shifting. To be precise, 100,000 m³ of it had to be carted off to build a level platform for the warehouse and a 600-space car park on a site that dropped 20 m in 12 acres.

Mowlem subcontracted the earthworks to PHI Group. PHI was to use the cut material from the upper part of the site to build up the lower part. When PHI tried to do that, it was too wet and didn’t drain properly. PHI brought a claim against Mowlem on the basis that there was an implied term of the subcontract that the fill supplied by Mowlem would be fit for use in the earthworks, and off it all went to arbitration.

Mowlem won the first round of the battle; it persuaded a court to intervene to say that there was no such implied term. PHI probably thought that a decision like that would be the end of the matter.

No such luck. Mowlem was not satisfied with success in round one. It decided to make a few claims itself. In order to build the earthworks, PHI had used some material imported from off site – “6F2 material”. Mowlem had supplied it. Mowlem hadn’t charged at the time, but decided to make a claim for it in the arbitration, on the basis of another implied term.

That still wasn’t enough for Mowlem. The use of the 6F2 material meant that there was a pile of the original cut material that wasn’t used, and had to be moved off site. Mowlem had to pay to do that, and claimed the cost from PHI. Mowlem said that there was another implied term – that PHI would accept and use all the cut material.

And then there was another claim that Mowlem added. The cut material generously supplied to PHI was not only unsuitable because it didn’t drain properly. It contained lumps of concrete, which meant that it had to be crushed. Mowlem supplied a crusher with attendant plant. Now that it had developed a taste for claims in the arbitration, it added a claim for the cost of the crusher.

Brian Eggleston (president of the Chartered Institute of Arbitrators) was not impressed with any of these claims. There was no clear agreement by PHI to pay for the material, or the cart-away, or the crusher. While he may have been sympathetic to a claim for payment when something has been done

It can be easy to think of an implied term that suits your case but more difficult to convince a court or arbitrator

or supplied by one party for the other’s benefit, the 6F2 material had been supplied at least partly for Mowlem’s benefit, because without it the retaining walls could not have been built. There was no implied obligation on PHI to use all the cut material, and therefore no implied agreement to pay for cart-away, and the use of the crusher again gave Mowlem a benefit because it didn’t have to cart away the blocks.

So all the implied terms dreamed up by the parties ended up being just dreams. It can be easy to think of an implied term that suits your case, but much more difficult to convince a court or arbitrator that one exists. To do so, you have to show that it is implied by law or it is necessary to make the contract work. That does not mean necessary to make the contract work in your favour.

The second lesson is that it is not always the case that because someone supplies something, there must be an obligation for someone else to pay for it. Where the supply may be interpreted at least in part as self-interest, there may be no entitlement to payment. Mowlem and PHI would both have spent much less in fees if they had thought of these things before they entered into the contract rather than after they started work.

Arbitrators’ decisions seldom reach the pages of Building because they are confidential. Mowlem made this article possible by appealing the arbitrator’s decision to the court in Salford.

Judge Gilliland, who deals with Technology and Construction Court matters there, thought that Brian Eggleston was right on all counts.

John Redmond is head of construction at solicitor Osborne Clarke in Bristol