Construction on i-lawOctober 2017 highlights – the best of i-law.com

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ContentsWritten by experts in building and contract law, Construction on i-law.com contains an unrivalled collection of commentary, analysis and international and English law case reports – a must-read for legal practitioners, construction industry professionals and contractors working in the sector.

This booklet of extracts combines recent articles from Building Law Reports, International Construction Law Review and Building Law Monthly, as well as other sources on i-law.com, to provide a round-up of our must-see content from October 2017.

M T Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Ltd and AnotherConstruction of a contract for the design and installation of wind turbines – Warranty of fitness for purpose – Whether provision requiring compliance with industry standard qualified obligation of fitness for purpose – Whether obligation to comply with contractual technical standard imposed a strict obligation.Building Law Reports, [2017] BLR 477

Merit Holdings Ltd v Michael J Lonsdale LtdExpiry of letter of intent – Terms of contract between parties – Appropriateness of use of CPR Part 8 procedure – Potential use of Part 7.Construction Law Reporter

New FIDIC Yellow Book (2017): a case of when more (words) mean less (clarity)?At its International Contract Users’ Conference in December 2016, FIDIC previewed – to much fanfare – the proposed second edition of its Yellow Book (“YB2”).International Construction Law Review, [2017] ICLR 349

Allocating responsibility for concurrent delayIn North Midland Building Ltd v Cyden Homes Ltd Fraser J held that contracting parties were entitled to make their own provision for the occurrence of concurrent delay and that the task of the court was to give effect to the agreement which the parties had made.Building Law Monthly, October 2017

Polytec Overseas Ltd and Another v Grand Dragon International Holdings Company Ltd and AnotherArbitration Ordinance – Mandatory stay to arbitration – Construction of contracts.Building Law Reports, [2017] BLR 523

design the turbines with due care and diligence in accordance with internationally recognised standards of Good Industry Practice.

Fit for purpose was defined as “fitness for purpose in accordance with, and as can properly be inferred from the Employer’s Requirements”. The Employer’s Requirements incorporated amongst other documents at Part 1: Technical Requirements (“TR”).

The TR required all parts of the Works to be designed for a minimum service life. Paragraphs 3.2.2.2 and 3 b.5.1 stated that the design shall “ensure lifetime of 20 years in every aspect without planned replacement”.

This is an extract of the original Report headnote. To access the full headnote, Report and commentary, please visit Building Law Reports on www.i-law.com.

M T Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Ltd and Another

[2017] UKSC 59, Supreme Court, Lord Neuberger President, Lord Mance, Lord Clarke, Lord Sumption and Lord Hodge

Construction of a contract for the design and installation of wind turbines – Warranty of fitness for purpose – Whether provision requiring compliance with industry standard qualified obligation of fitness for purpose – Whether obligation to comply with contractual technical standard imposed a strict obligation.

By contract dated 26 December 2006, M T Højgaard A/S (“MTH”) contracted with two E.ON companies to design and install wind turbines at Robin Rigg East and Robin Rigg West, situated in the Solway Firth. The individual wind turbines consisted of a foundation piece and a transition piece fixed together with a grouted connection. The foundation piece fits over the monopile and the connection between the two parts of the wind turbine is made by filling the annulus between the two parts of the wind turbine with grout. This connection holds the transition piece in place through friction between the grout and the steel surfaces.

By the date of the Robin Rigg development a similar design had been used in other wind farms and was covered by an international industry standard, J101. Section 9 of J101 deals with the design and construction of grouted connections. At section B of section 9 of J101 the standard provided a formula for calculating the interface shear strength of the grouted connection. This formula contained an error and a design based on the formula will over-estimate the axial capacity of the connection. The Contract Conditions contained at clause 8.1, General Obligations of MTH, which required MTH to

Building Law Reports, [2017] BLR 477

Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC)Expiry of letter of intent – Terms of contract between parties – Appropriateness of use of CPR Part 8 procedure – Potential use of Part 7.

The claimant brought a CPR Part 8 claim in which it sought a declaration as to the “correct interpretation of the contract” between the parties. The initial contractual relationship was set out in a letter of intent under which the defendant agreed to reimburse the claimant in respect of the “costs wholly and necessarily incurred by you pursuant to this letter up to a maximum of £330,000”. The letter of intent was replaced by two subsequent letters, the final one of which increased the cap to £430,000 and extended the date of expiry to 29 April 2016.

Notwithstanding the expiry of the final letter of intent, the claimant continued to work on the project until 12 July 2016. On 12 July the defendant terminated the arrangement between the parties on the ground of the claimant’s persistent failure to proceed regularly and diligently with the works. A dispute then arose between the parties which was referred to adjudication and the adjudicator decided that the defendant was obliged to pay the claimant £1,128,106.42. In reaching that decision the adjudicator decided that the parties’ contractual relationship continued after the expiry of the letter of intent and, on the basis of that subsequent conduct of the parties, concluded that payment was to be made by the defendant by reference to the Contract Sum and the Quantified Schedule of Rates.

This is an extract of an article first published in the Construction Law Reporter service, available via email and on www.i-law.com.

Construction Law Reporter

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New FIDIC Yellow Book (2017): a case of when more (words) mean less (clarity)?

At its International Contract Users’ Conference in December 2016, FIDIC previewed – to much fanfare – the proposed second edition of its Yellow Book (“YB2”). The preamble to the conference agenda referred to the unveiling as “a highly anticipated event for the global construction industry”, and much debate ensued (both at the conference and since) over the many significant changes that the new amendments are poised to usher in.

Due for publication later this year together with the second edition of the Red and Silver Books, YB2 represents the first update to FIDIC’s Yellow Book since its release in 1999 as part of the 1999 FIDIC Rainbow Suite (the “1999 YB”). Since then, it has become one of the most widely used standard forms of contract internationally, setting something of a benchmark for parties involved in tendering for large-scale design and build projects. However, the 1999 YB has not been without its issues, many of which have been raised with FIDIC over the intervening 17 years. As such, the process of amending the Yellow Book – which has been in train for some time – has been closely followed by both those involved in international construction and its advisers for indications that the concerns of the industry have been addressed.

Whilst the FIDIC drafting committee has trialled certain of the proposed changes to the industry in recent years (particularly with the release in 2008 of the FIDIC Gold Book for DBO projects), it is only since the proposed draft was circulated to the conference attendees in late 2016 that the extent of the amendments – both in terms of number and scope – have been fully appreciated. In comparison to the first edition, the updated iteration of the Yellow Book is longer: the core terms span 108 pages to the first edition’s

63 pages, whilst the word count has grown by some 50%. There are also more defined terms: 90 versus the 58 that appear in the first edition. Putting aside the necessity of those new definitions, what is important is what changes these extra terms are intended to bring and what effect they will have (if adopted) on the international construction industry.

Not all of the amendments introduced by YB2 have been met with universal support. In particular, certain changes to the allocation of risk, such as the definition of Contractor’s Risk as being everything that is not defined as

being Employer’s Risk, have already prompted vigorous objections from organisations representing contractors. The proposed imposition of an all-encompassing indemnity in favour of the Employer combined with new time-bar provisions for the Contractor have also added to concerns that the amendments in YB2 are evidence of a gradual unbalancing of the standard form contract away from the Contractor.

This is an extract of the original article. To access the full analysis, please visit International Construction Law Review at www.i-law.com.

International Construction Law Review, [2017] ICLR 349

International Construction Law Review

Allocating responsibility for concurrent delayIn North Midland Building Ltd v Cyden Homes Ltd [2017] EWHC 2414 (TCC) Fraser J held that contracting parties were entitled to make their own provision for the occurrence of concurrent delay and that the task of the court was to give effect to the agreement which the parties had made. There is no rule of law which prevents parties from agreeing that concurrent delay be dealt with in any particular way. On the facts Fraser J held that the parties had allocated responsibility to the contractor who was not therefore entitled to an extension of time where the delay had been contributed to by a delay for which the contractor was responsible. This conclusion was not affected by the principle of prevention which was held to have no application to the clause in dispute.

The parties entered into a contract for the construction of what was described as a “sizeable house in the Midlands”. The works were delayed and the claimant applied for an extension of time for a number of reasons. In making this application the claimant relied upon a number of Relevant Events.

This is an extract of the original article, published in October 2017. For the full piece, visit Building Law Monthly, www.buildinglawmonthly.com and www.i-law.com.

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Polytec Overseas Ltd and Another v Grand Dragon International Holdings Company Ltd and Another

The first plaintiff BVI company (“POL”) is a wholly owned subsidiary of the second plaintiff BVI company (“PHIL”). The first defendant Hong Kong company (“LHK”) is an associated company of the second defendant PRC company (“LG”); the third defendant is a shareholder of both the first and second defendants.

On 15 April 2008 POL and LHK entered into an agreement known as the Cooperation Framework Agreement (the “BOT”). The BOT set out the terms and conditions of the agreement between POL and LHK to establish a joint venture company in Hong Kong, and to cooperate in their joint venture to develop, construct and operate highways on the Mainland.

Clause 10.1 of the BOT contained an arbitration clause which stated that any dispute between the parties in the implementation or performance of the BOT may be submitted to CIETAC in Huanan for arbitration, if the dispute could not be conciliated.

The third defendant signed written guarantees on 2 December 2008 and 19 March 2009, pursuant to which the third defendant undertook on behalf of himself and LHK various obligations in relation to the Highway Projects.

This is an extract of the original Report headnote. To access the full headnote, Report and commentary, please visit Building Law Reports on www.i-law.com.

Building Law Reports, [2017] BLR 523

[2017] HKCFI 604, High Court of the Hong Kong Special Administrative Region (Court of First Instance), Mimmie Chan J

Arbitration Ordinance – Mandatory stay to arbitration – Construction of contracts.

Construction Law ReporterThe Edinburgh Schools Partnership Ltd v Galliford Try Construction (UK) LtdAdjudication – Title to sue – Effect of assignation – Jurisdiction of the adjudicator – Natural justice.

International Construction Law ReviewCompatibility of FIDIC’s drafting principles with contracting practices in the gulf: a perfect match or a marriage of convenience?This paper considers whether FIDIC’s drafting principles are compatible with contracting prac-tices in the Gulf, how this will be affected if the changes signalled in the Pre-Release second edition of the Yellow Book are adopted throughout the new suite of FIDIC Conditions and whether these changes threaten the popularity of the FIDIC Conditions in the region.

Construction Industry Law LetterImperial Chemical Industries Ltd v Merit Merrell Technologies LtdNEC3 – Identity of independent certifier/project manager – Effect of adjudication decisions on payment.

Commercial LeasesSovereign Property Holdings Ltd v London & Ilford Ltd This is a case on construction of an agreement concerning overage. Such agreements have given rise to a number of issues in recent times. It appears that they present particular draft-ing problems. We highlight this case to raise awareness, because it is a good example of a drafting problem.

Building Law Reports Plus Mediterranean Shipping Co v Sotramron LtdMauritian Civil Code – Doctrine of faute lourde – Gross negligence delict – Whether duplicated by claim in contract – Damages for faute lourde same as for breach of contract.

Building Law Reports Christopher Linnett Ltd and Another v Matthew J Harding (trading as M J Harding Contractors)Adjudication – Adjudicator’s engagement – Adjudicator’s fees – Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013 No 3134) – Whether commercial contract – Interest – Late Payment of Commercial Debts (Interest) Act 1998 – Late Payment of Commercial Debts Regulations 2013 (SI 2013 No 395).

Also new in October to Construction on i-law.com

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