Case notes from Ann Wright

A not so solid bond

This case relates to the renovation of Greenore Harbour on the east coast of Ireland. Work included renewing the quay walls in two sections by piling, constructing a new concrete deck section, removing polychlorinated biphenyls with rock removal and general dredging to increase the harbour depth.

Section A of the work was scheduled to take 14 weeks, Section B 22 weeks and the dredging 24 weeks. Liquidated damages were £2,000/week each for sections A and B and £4,000/week for the dredging.

Greenore let the £3,257,735 contract to SAR Maine & General to start on July 31, 2000. A 10% performance bond was issued by Technical & General Guarantee Company, which explains why the case was heard in London even though the work was in Ireland.

SAR had problems from the start. A crane overturned, equipment broke down, the drilling bit was unsuitable and the piling rig was too small.

The engineer complained about progress and in December SAR drafted its director-designate, Bill Wilcox onto the site. He improved matters but not enough: the engineer only allowed four weeks delay for SAR’s clause 12 claim.

By late April 2001 SAR could not afford to pay its suppliers and Greenore took the payments over and in June it had to pay SAR’s wage bill and hire of site huts to keep the work going.

In May SAR admitted financial difficulties and that the project delays were down to its problems. On July 18, 2001, SAR’s insurances expired and all work ceased. SAR went into administration on July 23.

Greenore brought in another contractor to complete the work and notified Technical & General that it would be claiming under the performance bond. T&G, however, proposed providing its own contractor to complete the work at no cost to Greenore. Greenore refused, preferring to use its known contractor.

By refusing T&G claimed Greenore had repudiated the contract. However, the judge agreed with Greenore, saying that SAR had repudiated the contract on July 18, 2001 when its money and insurances had run out.

The judge ruled that there was no obligation on Greenore to accept T&G’s unknown and untested contractor.

Moral: The other guy needs to repudiate first

Case: Greenore Port v Technical & General Guarantee Company Ltd.

(TCC November 30, 2006)

A mediation muddle

Mediation has become a popular way of resolving construction disputes: with luck it enables the parties to sort out their differences without the time and cost of arbitration or litigation.

Mediation takes place on a ‘without prejudice’ basis and with some limited exceptions its information is privileged – the information cannot be relied on if the mediation fails and a court hearing takes place.

The opposite occurs when a judge orders expert witnesses to produce a joint report: the experts’ discussions may be without prejudice but their final report is intended to be used by the court.

In this case, Prime Meridian had been employed to provide architectural services for Mr and Mrs Aird. Things went wrong and Prime Meridian was accused of negligence and in breach of its professional duty in many detailed respects, which were tabulated in a schedule of damages.

On July 19, 2005, the judge ordered that the parties’ experts prepare a statement of the issues on which they were agreed and those which were in dispute.

The joint statement was to be prepared by September 23, 2005 and intended to be used in a mediation, but the experts were concerned that there was insufficient time to prepare a statement in time for mediation.

The initial drafts were ruled ‘without prejudice’. However, both experts eventually signed the final statement with the words ‘without prejudice’ removed.

The mediation failed and the Airds wanted to change the pleadings in a way that was inconsistent with the joint experts’ report.

The first judge agreed the report was privileged, but the Court of Appeal disagreed, saying that as the parties had allowed the judge to order the experts’ report at an early stage, the report was a court document and the parties would have to live with it.

Moral: Don’t muddle mediation

Case: Robert Aird & Anr v Prime Meridian Ltd.

(Court of Appeal, Dec 2006)

Breaking the code

Edina wanted to erect offices with a workshop and associated works at Lissue Industrial Estate, West Lisburn, with ADD as the architect. The tenders were sent out to a number of contractors. The tender conditions were in The Summary Schedule of Work.

Under the heading ‘A30 Tendering/Subletting/Supply/Main Contract Tendering’, paragraph 120 said: ‘... tendering procedure will be in accordance with the principles of the Code of Procedure for single stage selective tendering 1996.’

The code said that the contractor’s tender price should not be altered without justification. This was repeated at section 7.1 which also said that the NIJCC deplored any practice which sought to arbitrarily reduce any tender submitted in free competition.

Similarly, the NIJCC condemned the reduction of tenders to a figure below the lowest tender. J&A had submitted the lowest of six tenders. But instead of awarding the contract to J&A, Mr Gibbons of Edina and ADD decided they should meet with the three lowest tenderers so they could reduce their prices.

J&A refused to play but after Kylen Construction shaved £25,000 off its price, it was the lowest and was awarded the contract. When J&A claimed damages, the court agreed that there was a binding contract that the Tendering Code would be observed. In the tendering process Edina had breached the code and that contract. J&A was awarded £135,528 in damages.

Moral: Break the code, break the bank

Case: J&A Developments Ltd v Edina Manufacturing Ltd et al

(High Court of Northern Ireland, Queen’s Bench Division Commercial List)