When several issues come along at once…. the Court considers evidence, termination and concurrency in a case regarding the construction of a new bus station

• United Kingdom

• Construction and engineering

04-11-2022

The Judge made comments and decided on a number of key issues in the recent case of Thomas Barnes & Sons PLC (in Administration) .v. Blackburn with Darwen Borough Council [2022] EWHC 2598 (TCC):

• witnesses must ensure they comply with the requirements in PD 57 AC and statements must only contain evidence relating to matters of fact that need to be proved at trial and matters of fact of which a witness has personal knowledge
• the Council was entitled to terminate the contract for the contractor’s default and to accept the contractor’s breaches as repudiatory, despite not following the correct procedure under the contract regarding serving the notice of termination
• the correct approach where there was more than one delay event, was to consider the effective cause of the delay and, if this event was not the contractor’s responsibility, the contractor would be entitled to time and not money

Background

The case concerned a JCT contract for the construction of a new bus station in Blackburn.   There were significant delays to the completion of the works and the Defendant (“the Council”) sought to terminate the Claimant’s employment under the building contract.    The Claimant contractor then brought a claim regarding the validity of the termination, its entitlement to extensions of time (to justify delays to the works) and the proper value of the final account.

Judge Stephen Davies’ judgment commented on a number of issues which are of wider relevance to construction projects and delay as well as litigation in the TCC.

Contract formation

The precise terms of the final contract were not entirely clear because the contractor had returned and signed some, but not all, of the final bundle of contract documents.    The Judge was content to proceed on the basis that the main JCT terms were agreed and not in dispute.  However, the case highlights that not having a final set of contract documents signed by both parties can lead to parties incurring unnecessary costs arguing about the correct terms of the contract.

Experts

Both parties had expert structural engineers, quantity surveyors and delay experts.   The contractor’s structural and delay experts faced some criticism from the Judge because he felt that their reports had not addressed all issues in sufficient detail and had adopted some approaches designed to assist the contractor’s case.  

For example, the structural expert calculated a deflection that was out of tolerance but only by adopting a worst case scenario that assumed snow only on one side of the roof.   The Judge commented that: “There is nothing in the design or construction of the roof or the prevailing conditions in the middle of Blackburn which could justify such an approach and I am satisfied that this was outside the most adverse realistic combination and arrangement of serviceability loads”.

The contractor’s delay expert had not considered certain potential causes of delay at all as those did not assist the contractor’s case.

In both cases, this led, at least in part, to the Judge preferring the evidence of the Council’s experts on those issues.

The salutary lesson is for experts to be encouraged to consider and opine on the full picture and not hope they can avoid difficult issues by simply ignoring them or adopting unrealistic scenarios to come up with the answer that best suits the party they have been instructed for.

Witness statements

The rules for witness statements have changed relatively recently following CPR PD 57AC.  In this case the Judge was scathing of certain of the contractor’s witnesses because they had claimed to address facts “first hand” and then spent large parts of their statements commenting on documents which they had not seen prior to disclosure.   This is a reminder that witnesses of fact should focus on what they can remember themselves and not try to use their statements to comment on contemporaneous documents.

The Judge stated:

“In my view a witness who produces and signs a witness statement, which he or she knew or should have known fails to comply with the certificate of compliance which he or she has signed after the appropriate explanation from the appropriate solicitor, cannot complain if a court takes that into account when assessing his or her credibility. In this case I do take that into account. It is, however, far from being the only, or even the principal, reason why I am unable to place any real weight on the uncorroborated evidence of these witnesses”

The Judge also considered whether adverse inferences should be drawn against the Council because it had not called certain individuals as witnesses.  The Judge was critical of the Council:  “There has indeed been an almost wholesale failure by the defendant to call any relevant witnesses in relation to most of the contested issues in the case”.  However, the Judge also noted that the Council could not have compelled former employees or those of its consultant project manager to give evidence and it was always open to the contractor to call individuals as witnesses if it wished to do so.   The situation was described by the Judge as an intermediate type situation –falling between an entirely justifiable failure to call a witness for reasons outside of a party’s control and the situation where the Court is invited to draw adverse inferences from an entirely unjustified failure to adduce witness evidence on key issues.

In this case the Judge decided that it was only insofar as the contractor had adduced specific oral evidence from a reliable witness of fact on a point which was not adequately covered by the reliable contemporaneous documentary evidence that the Council’s failure to call its own witness on that point could and should be taken into account when making his decision.

Termination

The Council sent the contractor three notices warning it that it was not proceeding regularly and diligently with the works, identifying 13 specific areas of delay and a failure to proceed in accordance with the latest programme.  

Eventually, the Council issued a notice of termination under clause 8.4 of the JCT contract specifically relying on and referring to the third of the warning notices but also, in the alternative, alleging repudiatory breach by the contractor and accepting that repudiatory breach.

Although the termination notice was sent as per the service provisions at clause 1.7.4 of the JCT contract, i.e. to the registered office of the contractor, by hand or registered post and to take effect two business days after sending, on the same day that the termination notice was sent out, it was also sent to site and, on the same day, a representative of the Council attended the site asking the contractor to leave site.

The contractor alleged that the termination notice had not been served correctly when it was sent to site; it was the wrong address, the wrong method of service and it could not take effect for two business days even though the Council sought to implement it immediately. Therefore, the notice was invalid and the service of an invalid notice by the Council amounted to a repudiatory breach by the Council. The Judge agreed that wrongful termination by a party will normally amount to repudiatory breach by that party.

The Judge also agreed that the Council had “jumped the gun” by seeking to take control of the site and treat the contract as terminated before the copy of the termination notice sent in accordance with clause 1.7.4 had taken effect.   However, the Council was entitled to and had accepted the contractor’s repudiatory breach before the contractor could have accepted any repudiatory breach by the Council.   Therefore, it was “saved” by the alternative basis of termination set out in the notice.

The Judge agreed that a defective termination notice could lead to a party being in repudiatory breach but, in this particular case, the Council was not in repudiatory breach. In particular, the Council was in fact entitled to terminate at the time it issued the notice (albeit in an invalid way) and the contractor was no worse off as a result of the Council not giving the contractor control of the site for the two days that it should have been allowed, if clause 1.7.4 had been complied with to the letter, given that the contractor had effectively abandoned work on site by that point in any event.

In this particular case it appears that the Judge was not prepared to allow the contractor off the hook because the Council had “jumped the gun” when in all other respects the Council was entitled to terminate.

A further argument from the contractor, rejected by the Judge, was whether the Council could serve only one “warning notice” under clause 8.3. The Judge decided there was nothing in the JCT contract imposing such a restriction.

Concurrent Delay

Prior to this judgment some commentators have considered that the correct approach to analysing concurrent delay is to look at the strict timing of events or the “first in time” approach;  if an existing event has caused delay to completion, subsequent delay events are determined not to have caused delay unless they increase the delay caused by the earlier event.   Under this approach it is rare for delays to be truly concurrent and of “equal causative potency” because delay events will rarely arise at exactly the same time.

The Judge did not adopt a “first in time” approach and instead relied on a passage in Keating on Construction Contracts that a contractor would be entitled to an extension of time if the event claimed for was “an effective cause of delay even if there was another concurrent cause of the same delay in respect of which the contractor was contractually responsible”.   However, in that situation, the contractor was entitled to an extension of time but not loss and expense because the costs would have been incurred anyway.

Key Takeaways

• witness statements subject to PD 57AC should not seek to comment on contemporaneous documents the witness had not seen at the time
• consideration should be given to calling all relevant witnesses of fact and a decision not to call a particular witness should be reasonable and justifiable
• expert witnesses should try to consider all of the facts, including those which may be unhelpful to the party instructing them.   In addition, experts should take care not to push the bounds of credibility to achieve a calculated result that suits the party instructing them.
• care should be taken when serving a termination notice to ensure it is served strictly in accordance with the contract and only in that manner
• it may be possible to serve more than one “warning” notice under clause 8.4.1 of the JCT contract
• in addition to specific contractual grounds for termination there may be merit in adding in an acceptance of repudiatory breach as an alternative ground for termination when drafting a termination notice
• the “first in time” approach to assessing whether there is concurrent delay is not necessarily correct; instead, the principle set out in Walter Lily v Mackay [2012] EWHC 649 TCC was broadly followed - where the effective cause of delay entitles the contractor to an extension of time this should be granted, regardless of whether there is another delay event for which the contractor was responsible