Paul Darling QC

Paul Darling QC is a leading Advocate, Barrister and Queens Counsel

A Happy Christmas to all my readers

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I hope that those who looked at this blog have found it interesting and helpful. In the New Year I am planning to update it weekly and add a new post per week.

In parallel and in response to some suggestions that I have received I am planning to prepare a series of ten articles, to be published again weekly, with some ideas about how to conduct heavy litigation and arbitration.

These are the chapter headings :

  1. Identifying strategies and lines to take.
  2. Pleadings and Statements of Case.
  3. Witness statements.
  4. Expert evidence.
  5. Documents and other  real evidence.
  6. Core bundles and document management at the hearing.
  7. Written opening submissions.
  8. Oral Submissions.
  9. Cross examination and witness handling.
  10. Written closing submissions.

Enjoy Christmas ! And see you in the New Year !!!

Paul

 

THE NEW LAW ON PENALTIES – The effect on sectional completion and partial possession

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Much has been written about the new law of penalties following the decision of the Supreme Court in Cavendish v Makdessi. The new test appears to be whether the clause is a secondary one “which imposes a detriment on the contract breaker out of all proportions to any legitimate interests of the innocent party in the enforcement of the primary obligation”. The fact that a damages clause is not a genuine pre-estimate of loss no longer means that it is penal.

Many of the cases about penalties have been construction cases. I appeared in Tilebox v Alfred McAlpine, a construction case, in which Jackson J identified the anomaly of the common law striking down penalty clauses. The Supreme Court has accepted the anomaly but narrowed it.

One of the old conundrums arose where there were provisions for sectional completion or partial possession but no mechanism for reducing liquidated damages from the figure chosen for the whole of the Works. Keating on Construction Contracts, at 100-006 is quite absolute about the position under the old law.

“Unless there are effective provisions for dividing the single sum between the sections or reducing it in proportion to the part taken into possession, the claim for liquidated damages will fail.“

Under the old law, that was putting it a little high to begin with. What if the figure reserved was £1 and this would not have been extravagant however minor the breach? On analysis the problem was that if you had multiple breaches leading to the same damages it was difficult to see how the sum could be a genuine pre- estimate.  The better view was that the choice of a single sum for multiple breaches created a presumption that the sum was a penalty and shifted the onus onto the party seeking to claim to save the provision. To do so the party would have had to show that the sum reserved was either a genuine estimate, or less, for the least serious breach that was covered.

Where this conundrum stands after Cavendish remains to be seen. Certainly the statement of principle in Keating cannot survive, even if it was right to begin with. As a consequence of the abolition of the requirement that the sum be a genuine pre-estimate of loss the effect of Cavendish is probably to put the matter wholly at large. It seems that in each case it will be necessary to look without preconception and see whether assuming the least serious breach possible the figure does or does not offend against the new test.

Procedural conditions precedent to liquidated damages

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In Henia Investments v Beck Interiors [2015 ] EWHC 2433 (TCC), Akenhead J. decided that under the JCT Form failure on the part of the Contract Administrator to make a decision in respect of a contractually compliant application for an extension of time would not render the Contract Administrator’s Non-Completion Certificate invalid nor prevent the Employer from deducting and/or claiming liquidated damages.

It will be recalled that there are two pre-conditions in the JCT Form in Clause 2.32.1 to the deduction of liquidated damages. One is that the Contract Administrator has issued a Non-Completion Certificate and second, the Employer has notified the Contractor that he may require liquidated damages to be paid by one route or another.

What if the Contractor has made a compliant application for extension of time which the Contract Administrator has not dealt with in accordance with the Contract? What if, for example, the Contract Administrator has simply defiantly ignored the application and indeed said that he was doing so?

Akenhead J. decided that that did not matter.  He appears to have been heavily influenced by the fact that if the Contract Administrator did so behave (and it is possible to think of many scenarios less dramatic than the example I have given), then the Contractor could simply go to adjudication.

Akenhead J. had to consider with an extract from Keating on Construction Contracts:

“Similarly where a contract imposes a duty on the architect to extend time and he fails to perform that duty in accordance with the contract, the employer is unable to claim liquidated damages.”

No authority was cited for that proposition.  It is easy to understand the logic behind it.  The entitlement to liquidated damages arises because “the contractor has failed to complete by the Completion Date.”  That is the starting point and the foundation for an employer’s claim for liquidated damages.  It was either the original date or according to the Contract, such other date as is fixed …. under clause 2.28.”.  Then surely unless the  Contract  Administrator has dealt with the application in accordance with the contract there is no valid date against which to deduct liquidated damages.  The contrary argument that the date remains as originally or previously fixed until changed ignores the fact that the Employer be benefitting then from the Contract Administrator’s wrong.

Equally, the fact that now there is now a speedy mechanism for deciding whether there should be an extension of time – by adjudication – might be thought to miss the point.  The speed of the dispute resolution process cannot be relevant. The short point is that until satisfied the Employer would on the Judge’s finding, have an accrued right to liquidated damages. And that despite the fact that its own agent had, on the extreme facts postulated, deliberately ignored the Contract.

Furthermore, the Contractors right to have the issue decided by the Contract Administrator, familiar with the facts has been ignored. Is the Contractor not entitled to that decision even as a dry run ?

All of what Akenhead J. said was obiter dictum as by the time the case came to court, the point did not arise on the facts. It was good of him to decide it.   It will mean, though, that  the paragraph in Keating will need review.

This is a point to be argued again, at first instance and no doubt in the Court of Appeal.

SPORTS STADIA

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Over the years I’ve done many cases about sports grounds and stadia.

As a result I decided to apply to become Chairman of the Football Licensing Authority, the body set up by Government after the Hillsborough disaster in an attempt to prevent a recurrence of that disaster. I did that job for six years. It was very challenging. Government considered abolishing the authority. In fact it survived and indeed had its remit extended. It is now called the Sports Ground Safety Authority and goes from strength to strength.

I have written an article about my experiences, and my work in that area, in the latest edition of KC legal update which you can access via the following link:

http://www.keatingchambers.co.uk/multimedia/kc-legal-update/kc-legal-update-autumn2015.pdf

I hope you might find it interesting.

 

FRASER J AND THE FUTURE OF THE TCC

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Two stories caught my eye this week. The first was the very welcome news that Peter Fraser QC has been appointed as a High Court Judge. The second was the start of a new Financial Court, staffed by specialist Judges from the Chancery Division and the Commercial Court.

What might those two apparently separate issues have to do with each other? More than might at first sight appear.

The Judiciary has decided to set up a Court specialising in complex financial disputes staffed by specialist experienced Judges. It will serve the equity, derivatives, foreign exchange and commodity markets for claims of over £50 million and for test cases. Clearly this is a pitch for important cases with international ramifications to be dealt with in London. The Court will apparently use a docket system meaning that the benefits of assigned Judges, first pioneered by the ORs and then the Judges of the TCC, will be available. This is obviously sensible. It will cement and enhance London’s position. Why? Because if you are providing the best specialist and experienced Judges with international reputations , making the best decisions, having followed the best procedure, then you will be a world beater. Quite right too.

How does that link in with the appointment of Mr. Justice Fraser? Mr. Justice Fraser is the fifth Judge to be appointed to the Technology and Construction Court. He follows Ramsey J, Akenhead J, Coulson J, and Edwards-Stuart J (‘the Ramsey 4’). Peter was an accomplished practitioner with a heavy and exclusive domestic and international construction practice. Conspicuously able and fair to his bones. He was also, interestingly, appointed a Criminal Recorder as early as 2002. He comes at a time when Sir Vivian Ramsey has been retired for the best part of a year and Akenhead J has sat on his last case before imminent retirement. Edwards-Stuart J reaches statutory retirement in the autumn of next year. So, as things stand, the Court will be staffed by Coulson J and Fraser J, come the autumn of 2016. Of course, there are other Judges ticketed to sit in the TCC. They include Stuart Smith J and Carr J who sit in the TCC with distinction. They had wide ranging commercial practices which included construction and engineering, but they would never have held themselves out as full time brickies.

Does this matter?   I venture to suggest that it does. Veterans will remember the protracted and painful process which led to the TCC being staffed by High Court Judges. That is not to denigrate the many ORs or Senior Circuit Judges who sat in the Court or to dwell on the view of the old Senior Judiciary (happily long ago ………) which thought that building disputes were cases about arguments with your plumber.

The Court needs a cadre of Judges who are world recognised construction and engineering specialists. If the Court is to thrive both at home and abroad, it needs the weight that it had when the Ramsey 4 were in place. A world class Court needs a strong body of world class judges recognised internationally for their experience in this area. One can argue about whether it should be three judges of that weight and experience (almost certainly too few), four (perhaps sufficient but a little light) or five (enough).

There is, obviously, a real shortage, at the moment, of such judges. One can argue about whether it is the restriction of Recorderships to those who specialise in crime (which, whether or not it is intended, is what is in fact happening), or the pensions (impenetrable but a very important drag on recruitment ) or the fact that a generation of construction practitioners was simply not being interested in becoming High Court Judges. It matters not. It may be that in due time the current competition for recruitment of Deputy High Court Judges will help (and indeed may have the side wind consequence that when they are appointed, having done no crime, they will be chained to their desks in the Rolls Building), although the first news from that competition does not generate confidence. The short point is that the TCC needs a high quality cadre of specialist Judges who did that work full time in practice and who have international reputations.

Just like the new Financial Court.

 

Recent Cases

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