The Week That Was - 17 January 2025

For this week's The Week That Was, we have taken a look back at the top construction cases of 2024, including many that were featured in previous TWTW editions.

The case management approach to claims for a contribution by way of Building Liability Orders: Willmott Dixon v Prater and others [2024] EWHC 1190 (TCC)

In March 2024, the Technology and Construction Court ("TCC") considered the question of how the courts should deal with a defendant seeking a contribution from a third party by way of a Building Liability Order ("BLO") under section 13 of the Building Safety Act 2022 ("BSA").

The Claimant had sought £46 million from the Defendants for the cost of replacing defective materials used in the external walls of a mixed-use development in Woolwich, comprising a Tesco Extra and residential units.  After a corporate restructuring left two Defendants (Linder and Prater) with apparently little in the way of assets, a third (AECOM) sought a contribution from other members of their corporate group by way of a BLO.  The criteria for a BLO being granted are extremely broad, with one being available wherever the court considers it 'just and equitable'.  The question arose as to whether this application should be considered alongside the main claim.

Linder and Prater (and their group companies) argued that the question as to whether a BLO should be granted should only be considered after the determination of the principal claim, as to do otherwise would cause the parties to incur substantial costs determining a question which might never become relevant.  Mrs Justice Jefford disagreed.  While the BSA didn't require the party against which a BLO was sought to be joined to the main claim, it would typically make sense to consider both claims at the same time in order to save court time and costs.  Many of the same issues would be relevant to both claims, and insofar as issues considered in the primary claim were not relevant to the BLO claim, the third parties were not required to make submissions on, or attend court for consideration of, those matters.

You can read the full judgment here.

Latest challenge to Stonehenge Tunnel Project unsuccessful: R(on the application of Save Stonehenge World Heritage Site and Andrew Rhind-Tutt) v SS for Transport [2024] EWHC339 (Admin)

The A303 Amesbury to Berwick Down project, which includes a proposed 3.2km tunnel under Stonehenge, now looks closer to proceeding, following the failure of the latest court challenge.

The initial proposal approved in November 2020 was rejected by the High Court in July 2021, following which the proposal was resubmitted. Save Stonehenge World Heritage Site sought judicial review on the more recent consent order.  Apart from a reconsideration of the environmental impact assessment, which will be reconsidered by the courts but will not prevent the development moving forwards, the case was rejected, with most of the allegations found to be "unarguable" by Mr Justice Holgate. 

For the decision – click here. 

Supreme Court holds that collateral warranty is not a construction contract: Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP) [2024] UKSC 23

The Supreme Court unanimously held that most collateral warranties will not be a construction contract for the purposes of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"), overruling the Court of Appeal's decision and also the TCC's decision in Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd [2013] BLR 589 (TCC).

The central issue on appeal was whether the collateral warranty in the underlying dispute was a "construction contract" within the meaning of the Act, which would give rise to a right to adjudication. 

In its judgment, the Supreme Court held that the relevant collateral warranty was not an agreement  "for… the carrying out of construction operations".  The Supreme Court held that, where a collateral warranty merely promises to the beneficiary that the construction operations undertaken under the building contract will be performed, the warranty is not a construction contract for the purposes of the Act.  It is the building contract that gives rise to the carrying out of the construction operations and not the collateral warranty. 

In order for a collateral warranty to be construed as a "construction contract", it must contain a separate or distinct obligation to carry out the construction operations for the beneficiary; not one which is merely derivative and reflective of obligations owed under the building contract.

The Supreme Court set out compelling reasons to support its decision (many of which had been previously voiced by construction practitioners) that collateral warranties are not "construction contracts".  First, various payment-related provisions of the Act are inapplicable to collateral warranties (unless step-in rights are exercised, the beneficiary has no construction-related payment obligations); second, a right to refer a dispute to adjudication under a warranty can be agreed as a right between the parties rather than being imposed by statue; and finally, often a beneficiary under the warranty has no control over how the construction operations are performed (e.g. it cannot instruct how the works are carried out, order variations or suspend or terminate the works).  The beneficiary simply “follows the fortunes” of the employer under the building contract, it is not an employer procuring construction operations in its own right.

This landmark decision gave certainty to the industry.  Most collateral warranties will not be "construction contracts" for the purposes of the Act.  

You can read the judgment here.

Groundbreaking decision on business interruption in COVID-19 coverage case 

In London International Exhibition Centre Plc -v- Allianz Insurance Plc [2024] EWCA CIV 1026, the Claimant was successful in recovering losses that it incurred during the COVID-19 pandemic under its Business Interruption policies.

The case expanded the approach to causation that had been adopted in the landmark FCA Test Case [2021] UKSC 1.  That case had been limited to situations where the business interruption had arisen because of disease occurring within a radius of the Insured's premises.  In the current case, the same approach was adopted where the business interruption had arisen because of disease occurring at the premises. The decision of Jacobs J was upheld by Males, Popplewell and Andrews LJJ in their joint judgment handed down on 6 September 2024.

The trial last year was one of The Lawyer's Top 20 Cases of 2023 and this year's appeal was one of The Lawyer's Top 10 Appeals of 2024.
The judgment can be found here.

Fiona Trust principles apply to contractual adjudication clauses: BDW Trading Ltd v Ardmore Construction Ltd [2024] EWHC 3235 (TCC)

Just before Christmas, festive feelings abounded as Mrs Justice Joanna Smith determined that the principles set out by the House of Lords in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40 – essentially, that parties to a commercial agreement should be presumed to have intended that all disputes arising out of the agreement may be determined in the same forum – also applied to adjudication clauses.   It followed that the Court did not need to consider the implication of clauses separately purporting to deal with disputes arising 'under the contract', and 'under the contract or in connection therewith'. This contrasted with approaches to interpretation outside the scope of principles set out in the Fiona Trust case, which would likely have begun with the presumption that the choice to use different language implied that the parties intended the two clauses to be interpreted differently.  She therefore found that BDW had been entitled to pursue a claim for the costs of cladding remediation in an adjudication and she ordered Ardmore to pay the sum awarded by the adjudicator (a sum in excess of £14m). Ardmore's submission that there was no crystallised dispute also failed, so BDW were entitled to enforce the adjudicator's decision.

Parties who genuinely wish to have the possibility of different disputes being determined by different authorities must therefore make this clear in their drafting.

You can read the full judgment here.

Secretary of State for Levelling Up, Housing and Communities v Grey GR Limited Partnership (CAM/26UH/HYI/2022/0004)

In May 2024, the Government won a landmark case against Grey GR Ltd Partnership (the freeholder of Vista Tower in Hertfordshire), which results in them needing to address multiple fire safety issues in relation to unsafe cladding in the 16-storey tower block.  

The Department for Levelling Up, Housing and Communities launched legal action against Grey GR in October 2022, after experiencing delays in fixing the issues which were first identified in 2019.  The First-Tier Tribunal Property Chamber ruled in favour of the Government and issued a remediation order which legally requires Grey GR to resolve the issues within a mandated time.  Judges Ruth Wayte and David Wyatt explored the idea that there had been 'delay on both sides' and that the order is a 'backstop to give reassurance' to leaseholders.  

You can read more here.

Triathlon Homes LLP v Stratford Village Development Partnership and Others [2024] UKFTT 26 (PC)  

For the first time in January 2024, the First Tier Tribunal ("FTT") considered applications for a remediation contribution order (RCO) under section 124 of the Building Safety Act 2022 ("BSA").

The applications related to the cost of rectifying fire safety defects in five tower blocks in the former Olympic Village.  The applications were brought by Triathlon Homes LLP, who are the leaseholder of all of the social and affordable housing in "the Blocks".  The Blocks were originally developed by the First Respondent, SVDP, which is a limited partnership ultimately owned (through subsidiaries) by the Second Respondent, Get Living. 

The principal issue between the parties was whether it was just and equitable to make an order for payment of the cost of the remedial work that was currently being carried out.  The ability to apply for a RCO is a new and independent (non-fault based) remedy.  The BSA 2022 states that the primary responsibility for the cost of remediation shall fall to the original developer.  Accordingly, the FTT decided that Triathlon Homes were entitled to RCOs against both SVDP and Get Living for the cost of resolving the defects in the Blocks.

You can read the full judgment here.

Judge rules a final determination unsuitable for Part 8 claim

In ISG Retail Ltd v FK Construction Ltd [2024] EWHC 878 (TCC), ISG Retail claimed that an adjudicator's decision that FK Construction was entitled to an extension of time was subject to a condition precedent of the underlying contract.  Under the CPR, the Part 8 procedure is to be used where a decision is sought on a question that is unlikely to involve a substantial dispute of fact (CPR 8.1(2)).  The Judge determined that, while there was no reason why Part 8 proceedings would be unsuitable for final determination of one part of an adjudicator's decision, they would be unsuitable for these proceedings, given the substantial disputes of fact between the parties.  The Judge reminded the parties of the Court's discretionary powers to order a claim to continue under Part 7 and invited the parties to consider how the claim should proceed.

Click here to read more.

Council's breach of duty in Japanese knotweed control did not cause diminution in value loss in nuisance: Davies v Bridgend County Borough Council [2024] UKSC 15

The Supreme Court unanimously overturned the Court of Appeal's decision concerning Japanese knotweed encroachment from adjoining land.  In short, diminution in value which has already occurred prior to the defendant's breach will not form part of any award.

The landowner claimed damages in nuisance for the residual diminution in value to his property caused by the presence of Japanese knotweed encroaching from the neighbouring land owned by the local authority.  The Court found that the fact that the encroachment had existed when the landowner bought the property, at a time before an actionable tort in private nuisance arose, meant that the Local Authority's failure to treat the knotweed had not in fact materially contributed to the diminution in value.  The application of the "but for" test eliminated the Local Authority's subsequent breach of duty as a causative factor.  The fact that the diminution in value would have occurred in any event meant that there was no causal link between the breach of duty and the diminution in value claimed.

Landowners will be relieved by the Supreme Court's robust stance on causation.  However, there remains potential liability in nuisance where they have not treated the knotweed and it spreads to neighbouring land.

The full judgment can be found here. 

With thanks to: Joe Towse, Catherine Stead, Sky Arklay

Disclaimer: The information in this publication is for guidance purposes only and does not constitute legal advice.  We attempt to ensure that the content is current as at the date of publication, but we do not guarantee that it remains up to date.  You should seek legal or other professional advice before acting or relying on any of the content.