McGee Group Ltd v Galliford Try Building Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Coulson |
| Judgment Date | 26 January 2017 |
| Neutral Citation | [2017] EWHC 87 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 26 January 2017 |
| Docket Number | Case No: HT-2016-000318 |
[2017] EWHC 87 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice,
Rolls Building
Fetter Lane, London, EC4A 1NL
The Hon Mr Justice Coulson
Case No: HT-2016-000318
Simon Hargreaves QC (instructed by Birketts LLP) for the Claimant
Adrian Williamson QC (instructed by CMS Cameron McKenna LLP) for the Defendant
Hearing dates: 25 and 26 January 2017
INTRODUCTION
This is a Part 8 claim, pursuant to which the claimant ("McGee") seeks declarations as to the proper interpretation of their sub-contract with the defendant ("GT"). In essence, McGee seek to argue that the amount of their liability for any financial claims brought by GT for delay and disruption, by operation of clause 2.21B, was capped at 10% of the sub-contract sum, a figure agreed at £1,489,733. GT accept that some of their delay and disruption claims against McGee are caught by clause 2.21B, but maintain that others, worth £2,291,495.53, are not caught by the same cap.
This Judgment is structured as follows. In Section 2, I set out the brief factual background, about which there is no dispute. In Section 3, I identify the relevant terms of the sub-contract. In Section 4, I summarise GT's claims against McGee which have given rise to the dispute about the liability cap. In Section 5, I set out the principles of construction applicable to clauses which seek to limit one party's liability. In Section 6, I identify what I consider to be the natural meaning of Clause 2.21B, the clause which provides the cap. Then, in Section 7, I analyse GT's arguments as to why that cap does not apply to the entirety of their delay and disruption claims. In Section 8, I deal with the most significant of McGee's secondary arguments. There is a brief summary of my conclusions in Section 9. I am very grateful to leading counsel on both sides for their clear and helpful submissions.
FACTUAL BACKGROUND
GT were the main contractors at a site known as Resort's World, in Birmingham. In about February 2013, they engaged McGee as sub-contractors to undertake the design and construction of the earthworks, substructures, drainage, reinforced concrete superstructures and post tensioned slabs and beams.
The sub-contract works started in around February 2013. There was a supplemental agreement in September 2013 which recognised that certain delays had occurred. The formal sub-contract order was eventually dated 17 December 2013. The sub-contract incorporated the JCT Design and Build Sub-Contract agreement (DB Sub/A, 2011 Edition), together with a large swathe of bespoke amendments.
Happily, the terms of the sub-contract relevant to this dispute are not very numerous. They are set out in Section 3 below. On one view, the problem which has arisen in this case is all too common: a potential mismatch between the JCT standard terms and the bespoke amendments.
On 17 June 2014, GT sent McGee four letters setting out cross-claims for delay and disruption. These claims, at that time, came to over £2 million. Thereafter, between September and December 2014, when GT notified McGee of deductions from the sums otherwise due to McGee under the sub-contract, the largest single item notified by GT was what they described as "reimbursement costs loss and expense and costs associated with McGee's failing to regularly and diligently progress their works." Each time, they cross-referred to the letters of 17 June; each time, the figure deducted for these claims was the same, £1,489,733. That was the figure produced by the clause 2.21B cap, being 10% of the sub-contract sum. In other words, until December 2014, it appears that GT expressly accepted that McGee's liability for their financial claims for delay and disruption was limited to 10% of the sub-contract sum, the case advanced in these proceedings by McGee.
In January 2015, GT's description of these claims changed slightly, and thereafter the amount of the deduction sought by GT in respect of delay and disruption increased beyond the 10% cap. At present, the total amount claimed by GT against McGee in relation to delay is £3,318,124.29, of which it is said that claims worth £2,291,495.53 are not affected by the cap.
GT did not notify McGee of the date of practical completion of the sub-contract works until January 2016, when McGee were informed that practical completion of the entirety of the main contract works had been certified as having been achieved on 4 November 2015. Thereafter, in 2016, there were exchanges regarding the McGee final account and the amount of GT's cross-claim for the financial consequences of McGee's alleged delay, which highlighted the applicability or otherwise of the clause 2.21B cap.
THE RELEVANT TERMS OF THE SUB-CONTRACT
I set out below the relevant terms of the sub-contract, identifying each time their source and their setting.
McGee's principal obligations were set out at clauses 2.1–2.5 of the JCT Standard Form. They included the obligation at clause 2.3 to carry out and complete in accordance with the programme details "and reasonably in accordance with the progress of the Main Contract Works"; and the obligation at clause 2.5 which, where applicable, required McGee to observe perform and comply with GT's obligations under the main contract and provide an indemnity in respect of any breach thereof.
The sub-contract period was 53 weeks and the sub-contract completion date was originally 6 February 2014. This date was extended by the supplementary agreement to 5 March 2014. There were also various key dates referred to in appendix 14 of the sub-contract which were also extended by the supplementary agreement.
The completion date for the main contract works was stated as 16 January 2015. The works were divided into various units. Schedule 7 of the sub-contract identified the access target date for each of these units and then went on to identify the sum due by way of liquidated damages if the access target date was not met. Some of these amounts were significant. The access target dates themselves ranged from July to October 2014.
Clauses 2.20 and 2.21 of the JCT Standard Form are set out under the overall heading of 'Practical Completion and Lateness'. Clauses 2.20.1 and 2.20.2 then come under the first sub-heading, 'Date of Practical Completion'. Clause 2.20.1, dealing expressly with the date of practical completion, has been heavily amended, but it is unnecessary to set out those amendments here. It should also be noted that new clauses have been inserted after clause 2.20 dealing with "the achievement of the Access Condition and provision of Access to Tenants", so as to dovetail with schedule 7 (paragraph 12 above). Taken together, these were important provisions because they set out the stages by which McGee was obliged to achieve "the Access Condition for all Units by the relevant Access Target Date".
The amendments to clause 2.20 led to a new clause 2.21A, although clause 2.21 itself was unamended. Clause 2.21B provided the cap. The amended Clause in full provided as follows:
" Failure of Sub-Contractor to complete on time
2.21 If the Sub-Contractor fails to complete the Sub-Contract Works or such works in any Section within the relevant period or periods for completion, and if the Contractor gives notice to that effect to the Sub-Contractor within a reasonable time of the expiry of the period or periods, the Sub-Contractor shall pay or allow to the Contractor the amount of any direct loss and/or expense suffered or incurred by the Contractor and caused by that failure.
Non-achievement of Access Condition by the Access Target date caused by Sub-Contractor
2.21A If the Sub-Contractor fails to complete the Sub-Contract Works or fails to undertake such of the Sub-Contract Works or such works in any Unit within the relevant period or periods such that the Contractor is unable to achieve the Access Condition for the given Unit under the Main Contract by the Access Target Date or such that the Main Contractor incurs loss and expense in meeting the Access Condition by the Access Target Date and if the Contractor gives notice to that effect to the Sub-Contractor the Sub-Contractor shall pay or allow to the Contractor the amount of any direct loss and/or expense suffered or incurred by the Contractor and caused by the Sub-Contractor's failure. The Sub-Contractor acknowledges that under the Main Contract the Contractor is liable to pay the liquidated damages set out in schedule 7 if the Access Condition is not achieved by the Access Target Date for the given Unit.
2.21B Provided always that the Subcontractor's liability for direct loss and/or expense and/or damages shall not exceed 10% (ten percent) of the value of this Subcontract order."
In its unamended form, the JCT Standard Form (at clauses 4.19–4.22 inclusive), includes various provisions under the heading 'Loss and Expense'. Clause 4.19 and 4.20 are concerned with events which might entitle the sub-contractor to an extension of time and loss and expense as a result of delays and disruption occurring for particular reasons. Clause 4.21 is, in some ways, a mirror image of that because it is concerned with claims by the main contractor for loss and expense arising out of the sub-contractor's default affecting the regular progress of the main contract works. In the unamended version, there is also a provision at clause 4.22 which stipulates that these provisions are "without prejudice to any other rights or remedies which the contractor or sub-contractor may possess".
In the completed version of this sub-contract, all of these provisions again were heavily amended, although I note that the headings have remained the same....
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Table of cases
...v Eve NCI Ltd [2002] EWCa Civ 374 III.21.105 McGee v alcorn [2016] IEhC 59 II.10.133 McGee Group Ltd v Galliford Try Building Ltd [2017] EWhC 87 (TCC) I.3.179, II.11.134, II.11.183, II.13.219 McGhee v National Coal Board [1973] 1 WLr 1 II.13.58, II.13.69 McGivney v Golderslea Ltd (1997) 17 ......
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Damages
...679 australian proportionate liability legislation is discussed at paragraph 13.229f. 680 McGee Group Ltd v Galliford Try Building Ltd [2017] EWhC 87 (TCC) at [22]–[25], per Coulson J. 681 George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] aC 803 at 814, per Lord Bridge; Bovis......
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Contract terms
...v Watkins Paciic (Qld) Pty Ltd [1995] 2 Qd R 350 at 360–361, per McPherson JA. Compare McGee Group Ltd v Galliford Try Building Ltd [2017] EWHC 87 (TCC) at [31], per Coulson J, which (without citation of authority) suggests otherwise. 733 See, eg, Scheldebouw BV v St James Homes (Grosvenor ......
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Time
...permits a contractor to recover “direct loss and/or expense” in deined circumstances. 425 McGee Group Ltd v Galliford Try Building Ltd [2017] EWHC 87 (TCC) at [27], per Coulson J. 426 FG Minter Ltd v WHTSO (1980) 13 BLR 1 (CA); Rees & Kirby Ltd v Swansea City Council (1985) 30 BLR 1 (CA); O......