Previous UK Construction legal cases where there is a dispute between 2 or more parties is a great way to learn how construction contracts could be interpreted by the courts and the potential broader implications on the industry. In turn the outcome of these cases and the key takeaways could assist in the decisions you make and the way you manage your own construction contracts.
This article is going to look at a couple of major disputes from UK Construction legal cases and the key takeaways that arose from the judgements passed.
The case of ICI vs. Merit Merrell Technology (MMT)
In this case, the construction contract used between the parties was an NEC3 option A with z clauses. The dispute, described as ‘long-running, and bitterly fought’, relates to steelworks to be carried out by MMT at a new paint manufacturing facility for ICI in Northumberland.
The court addressed the legal status of a project manager’s assessment of a compensation event and agreements between the contractor (MMT) and the project manager. Looking at the question “is it competent for the employer to challenge assessments or agreements?”
MMT, the defendants, contended that the court lacked the authority to challenge the project manager’s assessments of Compensation Events, asserting that once an agreement was reached between the project manager and the contractor, the employer (ICI in this instance) could not then later contest it. However, the court rejected this, citing the dispute resolution provisions, which, empowers an adjudicator to “review and revise any action or inaction of the project manager.”
The court also examined agreements between the contractor and project manager, to determine if they were intended to be final or interim positions meantime. Emphasising that each agreement was a matter of both law and also, evidence.
Key takeaways of the case:
The judgment provides guidance on challenging compensation events, affirming that a project manager’s assessment can be revisited in dispute resolution. However, a cautionary note was sounded, highlighting that if a compensation event is resolved by agreement between parties and intended to be the final position rather than just an interim, the court is likely to uphold that agreement.
The case of SSE Generation Limited v Hochtief Solutions AG & Another
Fort Augustus was constructed between 2006 and 2008. Shortly after completion and handover, a major collapse occurred, prompting SSE to seek repair costs from Hochtief, the defendants. In April 2018, the Inner House issued a lengthy decision following a reclaiming notion. The Inner House overturned the Lord Ordinary’s decision and held Hochtief liable for repair costs amounting to approximately £107 million in relation to the collapse in the hydro-electric scheme tunnel at Glendoe.
The Lord Ordinary initially ruled in favour of Hochtief, finding no defect as defined in the building contract, asserting that the contractor had exercised reasonable skill and care in the design of the works. However, the Inner House, on the most part, disagreed. They concluded that the tunnel collapse resulted from a defect, not in the design but in the implementation of the design by Hochtief.
Key takeaways of the case:
The distinction between design obligations and workmanship obligations in construction contracts is a tough one to make but was a focal point to this case. The characterisation of the collapse as a failure in implementing the design has contributed to the complexity in an already uncertain area.
With significant sums at stake, this case may not be over and Hochtief could appeal the decision that currently stands to the Supreme Court. This case has broader implications for the construction industry, affecting the terms of professional design appointments and professional indemnity insurance.
UK construction legal cases, as well as other cases from around the world can often set a precedence for disputes that arise in other construction projects, so it is always a good idea to keep on top of decisions that are made within the courts.