The document summarizes three UK construction law cases from 2013: 1) John Grimes Partnership v Gubbins - The Court of Appeal held an engineer liable for damages caused by project delays, including losses from a decline in property values. 2) Parkwood Leisure v Laing O'Rourke - A collateral warranty was deemed a "construction contract" subject to adjudication due to language stating works were still to be completed. 3) Urban I v Ayres - The Court of Appeal found project delays did not entitle buyers to terminate as they were not deprived of the whole contract benefit, overturning a trial decision.

1. 2014 Construction Law Conference:
Case Law Developments over 2013
Thursday, 6 February 2014
Kathryn Noble, Associate
kathryn.noble@olswang.com | +44 20 7067 3343

2. Today’s cases
DAMAGES/REMOTENESS OF LOSS
John Grimes Partnership Limited v Gubbins
[2013] EWCA Civ 37
IS A COLLATERAL WARRANTY A CONSTRUCTION CONTRACT?
Parkwood Leisure Limited v Laing O’Rourke Wales and West Limited
[2013] EWHC 2665
DELAYED COMPLETION / BREACH OF SALE AGREEMENT
Urban I (Blonk Street) Limited v Simon Martin Ayres and Nicola Jane Ayres
[2013] EWCA Civ 816
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3. John Grimes Partnership v
Gubbins
The case is about:
Developer’s recoverability of a loss in rental value following late completion of a
construction project due to delays caused by a consultant
Principle:
Court of Appeal decision: Engineer was held to be liable for damages having
caused a delay in the completion of a development. By the time of completion,
there had been a drop in the market value of the property and the developer loss
suffered because the property was less valuable than if the development had been
completed on schedule.
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4. John Grimes Partnership v
Gubbins
What was agreed:
Mr Gubbins: Land Developer
John Grimes Partnership Limited (JGP): engineering and geological services
Proposed development: development of field for residential purposes (“affordable
dwellings”) - included a road to access the dwellings. The design of the road
required the county council’s approval as it was intended to be adopted by the
highway authority
JGP instructed by Mr Gubbins to design road and drainage for the site and obtain
the council’s approval
Express oral agreement that the works should be completed by March 2007
Parties originally agreed fees of £15,000 to be paid to JGP for the above works
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5. John Grimes Partnership v
Gubbins
What actually happened:
The work remained incomplete at March 2007. An initial part-approval was obtained
in February 2008
April 2008: Mr Gubbins engaged Joint Technical Partnership Limited (JTPL) to
carry out the work that JGP should have completed
June 2008: JTPL redesigned the road and drainage layout and submitted it for
council approval, which was provided on 18 June 2008
JGP had received c.£20,000 in fees but issued an invoice for £2,893 and
commenced proceedings following Mr Gubbins’ refusal to pay
#olswangconstruction
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6. John Grimes Partnership v
Gubbins
Mr Gubbins’ counterclaim:
= for sums previously paid to JGP + damages for JGP’s failure to complete on time
Damages for:
(i)
reduction in market value of the residential dwellings;
(ii)
reduction in offer from Housing Association; and
(iii)
increase in building costs.
First Instance decision:
Delay was caused by JGP’s breach of contract and this resulted in loss to Mr
Gubbins. This loss was reasonably foreseeable to JGP and JGP was “responsible
for loss flowing from the property market decline”
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7. John Grimes Partnership v
Gubbins
Court of Appeal’s decision:
Upheld the first instance decision: JGP liable for damages for losses caused by its
breach of contract and which arose in the context of the decline in property values
Mr Grimes’ losses were not too remote and CA considered there was an implied
responsibility on the parties for reasonably foreseeable losses
CA agreed with Trial Judge that losses arising from movement in the property
market were reasonably foreseeable at the time of contract as a consequence of
delay by JGP
JGP’s delay of 15 months gave rise to a quantifiable loss over a prolonged period
of time
Mr Gubbin’s scale of loss was not disproportionate to the £15,000 fee payable to
JGP
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8. John Grimes Partnership v
Gubbins
Practical considerations in light of this case:
• Considered exclusion/limitation clauses to expressly exclude liability for particular
circumstances or specified events?
• Demonstrate not responsible for particular types of losses?
• Losses within the consultant’s control?
• Losses suffered over a prolonged period of time
• Increase in claims for damages where property values fall?
#olswangconstruction
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9. Parkwood Leisure Limited v
Laing O’Rourke Wales and
West Limited
The case is about:
Mr Justice Akenhead: “In what circumstances a collateral warranty can amount to a
construction contract for the carrying out of construction operations” for the
purposes of the Housing Grants, Construction and Regeneration Act 1996
(Construction Act)
“Construction Contract” under the Construction Act = subject to statutory
adjudication rules!
Principle:
Surprise result: The collateral warranty in this case was deemed a contract for the
carrying out of construction operations and therefore fell within the Construction Act
#olswangconstruction
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10. Parkwood Leisure Limited v
Laing O’Rourke Wales and
West Limited
The facts:
April 2006: Laing O’Rourke Wales and West Limited entered into a contract as
contractor to design and build a swimming and leisure facility in Cardiff
Around April 2006: Parkwood entered into an Agreement for Lease for the facility
December 2007: Laing O’Rourke entered into a deed of warranty in favour of
Parkwood
January 2008: Parkwood Leisure Limited took a ten year lease of the property
Practical Completion was achieved in 2008
Parkwood took occupation and various Construction and commissioning defects
were complained of once the facility had been opened to the public
Parkwood issued a Pre-Action Protocol Letter of Claim in February 2011
#olswangconstruction
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11. Parkwood Leisure Limited v
Laing O’Rourke Wales and
West Limited
What the Court considered:
Parkwood sought a declaration that the collateral warranty fell within the remit of
the Construction Act for the purpose of bringing adjudication proceedings against
Laing
The wording of the collateral warranty:
Laing “warrants, acknowledges and undertakes that it has carried out and shall
carry out and complete the Works in accordance with the Contract..”
Did the warranty amount to the carrying out of “construction operations”?
#olswangconstruction
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12. Parkwood Leisure Limited v
Laing O’Rourke Wales and
West Limited
Court’s decision:
The collateral warranty was a contract for the carrying out of construction
operations and therefore was a Construction Contract for the purposes of the
Construction Act
• Warranty recognised works were yet to be completed under the contract
• Warranty expressly related to the design, carrying out and completion of the
construction of a pool development
• Warranty was not “merely warranting or guaranteeing a past state of affairs”
BUT…
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13. Parkwood Leisure Limited v
Laing O’Rourke Wales and
West Limited
Not all collateral warranties are construction contracts:
Court’s relevant factors include:
• Wording of the document and factual background
• Is the contractor “undertaking to the beneficiary of the warranty to carry out
operations”?
• Have “all the works completed and the contractor simply warranting a past state
of affairs as reaching a certain level, quality or standard”?
#olswangconstruction
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14. Parkwood Leisure Limited v
Laing O’Rourke Wales and
West Limited
Practical considerations in light of this case:
• Third Party Rights v collateral warranties
• Not all collateral warranties are construction contracts
• Timing of warranties
• Increase in claims under collateral warranties being referred to adjudication
• What about payment/suspension rights that are implied into a Construction
Contract?
• Limitation of warranties entered into?
• NB the position on settlement agreements
#olswangconstruction
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15. Urban I (Blonk Street) Limited v
Simon Martin Ayres & Nicola
Jane Ayres
The case is about:
The consequences of time being (or not being) of the essence in contracts for sale
of land (particularly where a purchase is mortgage funded)
Notices to complete in circumstances where there has been delay in complying with
the terms of the contract for sale
Principle:
The delay in completing a new build apartment caused by the developer did not
entitle the buyer to terminate the agreement between the parties as the buyer was
not substantially deprived of the whole benefit of the contract for the lease of the
apartment.
#olswangconstruction
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16. Urban I (Blonk Street) Limited v
Simon Martin Ayres & Nicola
Jane Ayres
The contract:
25 January 2007: Contract between Urban I (Developer) and Mr & Mrs Ayres for
the purchase of the leasehold of a flat in a mixed commercial and residential
development in Blonk Street, Sheffield
The contract did not specify a fixed completion date but did provide that the
Developer would issue to the buyers a written notice once the development had
completed
Contract provided that a Notice to Complete may be issued by either party at any
time after the completion date and the contract would be completed within ten
working days of the notice. The contract added: “For this purpose, time is of the
essence”
Developer was obliged to take all reasonable steps to prevent any delay arising
#olswangconstruction
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17. Urban I (Blonk Street) Limited v
Simon Martin Ayres & Nicola
Jane Ayres
What happened:
The Developer aimed to start the development on 26 February 2007 and complete
in December 2008
The development started late (March 2007) and quickly fell further behind schedule
after a series of delays
June 2008: Mr & Mrs Ayres were advised that completion would be in December
2008
September 2008: Mr & Mrs Ayres received a mortgage offer of 90% of the
purchase price of the flat (subject to conditions - the mortgage had to be
commenced by 31 December 2008)
October 2008: Buyers were advised that the flat would be completed in February
2009
November/December 2008: Mr & Mrs Ayres lost their 90% mortgage offer
#olswangconstruction
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18. Urban I (Blonk Street) Limited v
Simon Martin Ayres & Nicola
Jane Ayres
What happened next:
January/February 2009: on-going delays with the development but the Developer
thought it may be finished by May 2009
March 2009: Mr & Mrs Ayres terminated the contract on grounds of unreasonable
delay and stated:
• there had been breach of an implied term that the completion would take place
within a reasonable time
• the anticipated completion date had been December 2008
• they had lost their 90% mortgage offer and the decline in property values resulted
in them not being able to obtain another like product
• the Developer was in repudiatory breach of the contract and they requested
repayment of their deposit plus interest
July 2009: the development completed and the Developer served a notice to
complete in September 2009
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19. Urban I (Blonk Street) Limited v
Simon Martin Ayres & Nicola
Jane Ayres
The Claim:
August 2011: The Developer issued a claim for specific performance of the contract
and/or damages for late completion, interest and costs.
August 2011: Mr & Mrs Ayres served a Defence that the Developer had repudiated
the contract and that they had successfully terminated. They served a counterclaim
for their reservation fee/deposit, plus other costs (including legal fees).
First Instance decision:
It was implied that the development would be completed within a reasonable time
The delays to the development overall amounted to a repudiation of the contract
and Mr & Mrs Ayres were entitled to refuse to complete having been served with
the notice to complete by the Developer in September 2009
#olswangconstruction
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20. Urban I (Blonk Street) Limited v
Simon Martin Ayres & Nicola
Jane Ayres
Court of Appeal:
Agreed with the First Instance trial that it was an implied term that completion of the
development and the contract was to be within a reasonable time. What is
reasonable? “A mixed question of fact and law”…
Allowed the Developer’s appeal = a “severe disappointment” to Mr & Mrs Ayres
• The Developer’s breach of contract did not cause Mr & Mrs Ayres’ unfortunate
financial position
• The contract did not have a fixed long-stop date for construction of their
apartment
• Contract did not expressly provide for the buyers to cancel the contract if the
building was not handed over by a specified date
• The delay did not cause Mr & Mrs Ayres to lose substantially the whole benefit of
the contract.
#olswangconstruction
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21. Urban I (Blonk Street) Limited v
Simon Martin Ayres & Nicola
Jane Ayres
Practical considerations in light of this case:
• Buyers’ risks where financing a purchase by way of mortgage
• Consideration of what is a reasonable time for completion of construction where
the contract does not specify a date for completion
• Meaning of substantially depriving a party of the whole of the benefit of a contract
• Provisions relating to timing in contracts
• When a repudiatory breach will be considered to have occurred
#olswangconstruction
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