Professional Documents
Culture Documents
involves an authority (1) acting to a time where there are signs of clause) is a common feature in many
suit the purpose of their powers; an increasing number of tender standard form contracts used in
(2) achieving that purpose by means challenges in the UK. This increase the construction and engineering
least burdensome to those affected; may be due to a combination of two industry, such as the appointment
and (3) imposing burdens that are things: first, short-term financial of an architect or an engineer
proportionate to the intended goal. need outweighing the fear for some published by RIBA or ACE, for
The Court found that the of disputing tenders and, secondly, example.
principle of proportionality is accelerated public spending on If there is a problem with a
capable of applying to the projects that risks breaching construction project resulting in a
implementation of a procurement procurement rules (although there loss, this may well be the fault of
process (as well as the selection of are reports that this is stuttering in more than one of the parties
tender criteria). However, the some areas). designing or constructing the
Court made clear that it will not Expect further cases in this project. The party suffering the
intervene on this point unless the developing area. No one involved in loss can sue any of the parties at
decision is unjustifiable. Authorities the procurement of public projects fault and each will be 100 per cent
have a ‘margin of appreciation’ to can afford to be left behind. liable for damages, whatever their
act proportionately (unlike for share of the blame. A net
breaches of the equal treatment, Rupert Choat is an Partner and Solicitor
contribution clause tries to change
non-discrimination and Advocate and Siobhan Costello an this position – it generally states
transparency requirements) so that Associate with CMS Cameron McKenna that the liability of each party will
the court will only disturb an LLP, based in London. This note originally be limited to the amount which
authority’s decision where it has appeared on www.law-now.com. would be apportioned to that party
committed a ‘manifest error’. Reproduced by permission. by a court and/or which it is just
In this case, the Court found that and reasonable for them to pay.
the ITT could not have been Instead of the party who suffered
clearer on the requirement for a the loss suing one party at fault,
The first UK court decision
single upload and submission and leaving it to them to claim
on net contribution clauses
before the deadline – the against any other people jointly
implication being that Devon CC’s Emmanuel Ninos liable, a net contribution clause
decision to reject the claimant’s also puts the onus on the party who
Shadbolt LLP, London
tender was justifiable and it did not has suffered a loss and who wishes
act disproportionately in doing so. The recent Scottish Court of Session to recoup all of its losses to claim
case of Langstane v Riverside & Others against all parties potentially at
[2009] CSOH 52 is the first case in fault.
Acceptance of late submissions
the UK to question whether net It has in the past been argued
The Court noted the lack of clarity contribution clauses are effective. that where a net contribution
in this area. It went on to state that The case looked specifically at clause is included in a standard
there may be circumstances where whether a Housing Association form contract the ‘reasonableness
proportionality will, exceptionally, (Langstane) had appointed a test’ found in the Unfair Contract
require the acceptance of late consulting engineer (Ramsay & Terms Act 1977 would apply,
submission of the whole or Chalmers, who were the second resulting in the net contribution
significant portions of a tender, defendant) on the ACE conditions clause being rendered invalid. This
most obviously where it results from and, if so, which version (1988 or case considered that argument.
fault on the part of the procuring 1998). The distinction is important,
authority. But, in general, even if as the 1998 version contains a net
The facts of the case
there is a discretion to accept late contribution clause. The Court
submissions, there is no requirement found, on the facts, that Ramsay Langstane was seeking to recover
to do so, particularly where, as in was appointed on the 1998 version from Ramsay losses suffered as a
this case, it results from a fault on – so the Court then turned to look result of the partial collapse of a
the part of the tenderer. at the applicability of the net property on which Ramsay had been
contribution clause itself. involved in renovation works and
which arose from an alleged breach
Conclusion
of contract and/or negligence. The
What is a net contribution
Proportionality may provide fertile net contribution clause purported to
clause?
ground for challenging authorities’ restrict the damages that Langstane
selection of tender criteria and A net contribution clause (also could recover from Ramsay.
their implementation. This is at known as a proportional liability
considered this principle. authority must follow before (vii) On 7 March 2007 a repre-
Regulation 47(7) makes it clear entering into a contract with a sentative of Brent told RMP,
that there is a two step process: supplier of goods or services... informally, that Brent’s
‘(7) Proceedings under this It follows that a failure by the insurance would be dealt with
regulation must not be brought contracting authority to comply through LAML. In response
unless – with any step in the required RMP looked at Brent’s website
procedure involves a breach and located the decision of 13
(a) the economic operator
of duty sufficient to support a November 2006;
bringing the proceedings has
claim under the Regulations. (viii) RMP sought formal con-
informed the contracting
Moreover, because the procedure firmation by letter of 19 March
authority... of the breach or
governs the whole process from 2007, and received it by letter
apprehended breach of the duty
the formation of the intention from Brent of 27 March;
owed to it… and of its intention
to procure goods or services to (ix) Brent made payments to LAML
to bring proceedings under this
the award of the contract and is from 16 March onwards;
regulation in respect of it; and
structured in a way that is intended (x) By letter of 4 May 2007 RMP’s
(b) those proceedings are brought to ensure equal treatment and solicitors raised with Brent
promptly and in any event within transparency throughout, a failure the question of breach of the
3 months from the date when the to comply with the procedure at regulations;
grounds for the bringing of the any stage inevitably undermines (xi) Proceedings were begun on 6
proceedings first arose unless the the integrity of all that follows.’ June 2007.
court considers that there is good Brent submitted that grounds for
In doing so, he expressly recognised
reason for extending the period the bringing of proceedings first
the problem that whilst grounds for
within which the proceedings may arose in November 2006 when they
bringing proceedings may exist well
be brought.’ resolved to approve participation
before the procedure reaches the
in LAML or, alternatively, on 18
award of a contract, the Regulations
January 2007 when they became a
Brent London Borough Council v do not expressly identify the point at
member of LAML. Brent said that
Risk Management Partners Ltd which that will occur. The relevant
either time runs or it does not
chronology was as follows:
The Brent case came before the and a claimant cannot (if out of
(i) On 9 October 2006, Brent
English Court of Appeal. Here time from the date a breach has
resolved in principle to
RMP claimed that certain contracts been apprehended) improve his
participate in LAML;
of insurance had been awarded position by waiting for the actual
(ii) On 7 November 2006, the
by Brent Authority to the London breach to occur.
RMP were told by Brent’s
Mutual Ltd (LAML) outside of The judge at first instance,
brokers that Brent ‘had
a tender process in which they Stanley Burnton LJ, held that:
committed to going into the
participated. It is important to note ‘In my judgment, therefore, for
Mutual’ but that there was
that RMP were only making a claim the purposes of the Regulations
uncertainty whether it would
for damages. Among other issues, in the present case “grounds for
be ready by the next renewal
Brent said that the claims were the bringing of the proceedings”
date (1 April 2007) and there
started more than three months after first arose when the breach which
would be some insurance that
the date on which the grounds for forms the subject of the claim
would be sought outside it
bringing the proceedings first arose. occurred. It would have been
anyway. Accordingly there was
In particular, Brent submitted that different if the claim were for an
to be a full tender exercise;
grounds for bringing proceedings injunction to restrain a breach of
(iii) At a meeting on 13 November
existed (and that time therefore the Regulations; but it is not.
2006, Brent resolved to approve
started to run) in November 2006
participation in LAML; ‘It is therefore necessar y to
when RMP were told that Brent
(iv) In December 2006 Brent determine when the breach of
was obtaining insurance elsewhere.
invited tenders for cover the Regulations first occurred.
Proceedings were not commenced
generally from 1 April 2007; It seems to me it was when
until 6 June 2007. If Brent was right,
(v) On 18 January 2007, Brent the appellant abandoned the
RMP were well out of time.
began membership with LAML; tender process and awarded
Pill LJ noted that:
(vi) Because incorrect docu- the contracts to LAML. That
“When considering when grounds
mentation had been used, a occurred in March 2007. Until
for proceedings first arose it is
replacement invitation to then, it could have lawfully
necessary to bear in mind that
tender was issued on 1 February awarded the insurance contracts
the Regulations prescribe the
2007. RMP tendered in time; to a company participating in the
procedure which a contracting
LAML did not participate; tender process.’
excluded. It was entitled to gather was anything but prompt. Indeed, Conclusion
what information it could about had it been necessary to consider
Both these cases demonstrate the
the reasons for its exclusion and whether Amaryllis needed any
importance if you intend to make
then balance the results of those extension of time, Mr Justice
a challenge to a publicly procured
researches against the risk of Coulson felt that HMT’s conduct
project, of acting promptly. While
commencing proceedings against during the relevant period was
it is true that both these cases also
a party with whom it had an likely to have been the main cause
suggest that the courts will take a
ongoing commercial relationship. of any delay and that no prejudice
fair and reasonable approach in
Finally no criticism of Amaryllis would have been suffered by HMT
deciding whether the three month
could be made of the period 4 as a consequence of that delay.
time limit has been complied with
June and 16 June 2008, the period Therefore Amaryllis would have
or not, it is important to bear in
where it was awaiting a response to had a real prospect of
mind that they will only do so, if it is
a letter from HMT. demonstrating good reason for any
appropriate in all the circumstances.
In addition, the judge thought it delay, had it been necessary.
fair to compare Amaryllis’ speed of Accordingly, the judge concluded
reaction with HMT’s conduct that Amaryllis was duly entitled to Jeremy Glover is a Partner at Fenwick
during the relevant period. HMT pursue its claim against HMT. Elliott LLP in London.
FROM ICP-NET
a few have had the DAB clause frequently removed by employers,
Deleting DAB Clauses removed.’ although in some countries this is
less likely where the project is
Précis by Elizabeth Slattery Edward invited opinions from
particularly large, complex or
ICP colleagues with experience of
Corbett & Co International Construction prestigious. Those contributors
employers removing DAB clauses,
Lawyers Ltd, London who addressed the enforcement
in particular from those who advise
issue generally took the view that
O n 7 May 2009, Edward
Corbett posted the following
question on ICP-Net in relation
employers on their contracts, asking:
‘Do you think greater
enforceability will lead to more
this situation would not be helped
by greater contractual
enforceability, nor security in
to the enforcement of Dispute frequent deletion? Is the problem
exchange for payment.
Adjudication Board (DAB) on a scale that should make
The experience of Marc Frilet
decisions: FIDIC war y of changing the
from France is that DAB clauses are
‘How many employers will enforcement regime?’
non-existent in domestic French
delete the DAB provision from
Many thoughtful responses were contracts (notwithstanding his own
FIDIC–type contracts if the
received from around the world view that they can be useful in
contract forces them to pay up,
offering differing views and specific situations) and that as a
either by making non-payment
experiences. The overall general rule French contractors
a termination offence or by
impression gained from the are not in favour of a DAB in an
giving the Contractor a right to
contributions is that there is international contract. He says that
a summary award in arbitration?
considerable reluctance on the the position may be different in a
How much difference would it
part of employers (and in some project of great complexity or
make if the Employer has a right
jurisdictions contractors also) to above a certain financial threshold
to security from the Contractor
utilise the DAB provision in a and suggests that the threshold of
in exchange for payment? I see
FIDIC contract. DAB clauses are US$50 million currently advised by
a lot of FIDIC contracts and only