Living in sin: Haden Young vs Laing O'Rourke Midlands

The man standing centre stage asked the audience: “Did the subcontract come into existence?” Those from Laing O’Rourke yelled: “Oh yes it did.” Those from Hayden Young yelled: “Oh no it didn’t.” Titans at loggerheads. Two enterprises that needed each other trying to find a way of living together. Two firms trying to get into contract spent two years trying and still didn’t make it.

Meanwhile, Hayden Young got on with the work and Laing O’Rourke paid. In the end they fell out and nobody could work out whether they’d agreed the rules of the game.

Coventry City football club played its first game at the new Ricoh arena on 20 August 2005. Practical completion was achieved the day before. Mind you, this Laing O’Rourke project was much more than just a soccer venue – it had a hotel, a swish casino, exhibition halls, banqueting suites and a fitness fanatic’s pleasurama. Hardly surprising that the talents of the M&E engineering folk at Hayden Young was vital.

So, why all the fuss about the wedding of main contractor and subcontractor? Well, unlike many a subcontractor, Hayden Young is big enough to share risk, so it’s fair for the likes of Laing O’Rourke to strike a deal that means that if everything goes belly-up at the hands of its specialist subcontractor, then it would pay up to the main contractor and the injured customer.

Living and working together on site? Dear me, yes. Hammering and screwing? Dear me, yes. Come the date of the first football match they had practical completion but still had not wed

For Laing O’Rourke it was essential that the deal would pass on millions of pounds worth of risk and for Hayden Young it was essential that it was not exposed to that risk. That’s sound commercial behaviour. It’s not just big contractors who look carefully at the smallprint nowadays. Many a minnow baulks at tough terms that would blow their outfit out of the water if the blame game gets under way. Even tiddler-sized outfits attempt to limit liability proportionate to the value of the contract. Anyway, Hayden Young said it would do the job only if liability were capped.

The crucial word in all this is “essential”. Hayden Young sent a bid to Laing O’Rourke in June 2003, but soon thereafter Laing O’Rourke tempted the M&E boys to accept liabilities, none of which were out of the ordinary, but none that Laing O’Rourke expected to be accepted lying down.

So they toed and froed. They wrote, they met, they phoned, they wooed. A year into all this wooing (yes, a whole year) Hayden Young commenced work. Yet the toing and froing continued. Laing O’Rourke prepared a new set of contractual documents, which Hayden Young said it was unable to sign. Again the word “essential” popped up. There were essential conditions both parties needed to hammer out before this contract became live.

Meanwhile, no wedding. Living and working together on site? Dear me, yes. Hammering and screwing? Dear me, yes – but still no wedding. Come the date of the first football match in August 2005, they had practical completion, but had still not wed.

Lawyers call these conditions ‘essential terms’. The snag is, the word ‘essential’ can be ambiguous

Credit: Simone Lia

Mind you, when the question “Did the subcontract come into existence?” was asked and we learned no, it was damn near another three years before the answer was given in the High Court. Mr Justice Judge Ramsey, the judge in the case, had to decide what the conditions were in giving life to the contract and whether these were agreed as a matter of law. Lawyers call these conditions “essential terms”. The snag is, the word “essential” can be ambiguous. Sometimes an ingredient is essential to make a contract work. Sometimes one party makes a particular ingredient essential when bidding. An essential term might be an agreement as to a start or finishing date, or signing the contract documents as a specific bundle. Got the idea?

Laing O’Rourke said certain matters were not essential and other matters were, and had been agreed. Hayden Young said not so.

In the end the judge said the subcontract was not concluded. Actually, he said “no subcontract was concluded”. Puzzled? The two parties had at least agreed that Hayden Young would get on with the work until one or the other said enough, and they let that go on for a year. Sounds like a contract to me, but what do I know. Be that as it may, Hayden Young will be entitled to reasonable remuneration under quantum meruit – “as much as deserved”. And if there’s no quarrel about how much is deserved, I’ll eat my hat! Tony Bingham is a barrister and arbitrator